10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10 - Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

Commission File Number 000-52584

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Michigan	20-3993452
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

33583 Woodward Avenue, Birmingham, MI 48009

(Address of principal executive offices, including zip code)

(248) 723-7200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (i) 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 (ii) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	þ

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

The number of shares outstanding of the issuer’s Common Stock as of November 10, 2011, was 1,812,662 shares.

INDEX

PART I. FINANCIAL INFORMATION	3
ITEM 1. FINANCIAL STATEMENTS (Unaudited)	3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
ITEM 4. CONTROLS AND PROCEDURES	30
PART II. OTHER INFORMATION	31
ITEM 1. LEGAL PROCEEDINGS	31
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	31
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	31
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	31
ITEM 5. OTHER INFORMATION	31
ITEM 6. EXHIBITS	32
EX-3.1
EX-31.1
EX-31.2
EX-32.1
EX-101

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CONDITION

	(Unaudited) September 30, 2011			December 31, 2010
Assets
Cash and cash equivalents
Cash	$	15,212,448		$	5,300,368
Federal funds sold		—			65,936
Total cash and cash equivalents		15,212,448			5,366,304
Securities, available for sale (Note 2)		4,182,261			3,200,002
Federal Home Loan Bank stock		169,900			160,200
Loans held for Sale		1,232,221			322,500
Loans (Note 3)
Total portfolio loans		102,579,805			100,378,678
Less: allowance for loan losses		(1,499,350	)		(1,448,096	)
Net portfolio loans		101,080,455			98,930,582
Premises & equipment, net		1,446,008			1,359,510
Interest receivable and other assets		1,419,754			995,438
Totals assets	$	124,743,047		$	110,334,536
Liabilities and Shareholders’ Equity
Deposits (Note 4)
Non-interest bearing	$	15,830,438		$	14,190,295
Interest bearing		95,340,302			83,060,199
Total deposits		111,170,740			97,250,494
Secured borrowings		—			1,469,095
Interest payable and other liabilities		516,351			629,422
Total liabilities		111,687,091			99,349,011
Shareholders’ equity
Senior cumulative perpetual preferred stock series A $1,000 liquidation value per share, 5% Authorized, issued and redeemed – 1,635 shares		—			1,635,000
Discount on senior preferred stock series A		—			(61,027	)
Senior cumulative perpetual preferred stock series B $1,000 liquidation value per share, 9% Authorized, issued and outstanding – 82 shares		—			82,000
Premium on preferred stock series B		—			6,634
Senior cumulative perpetual preferred stock series C $1,000 liquidation value per share, 5% Authorized, issued and outstanding – 1,744 shares		—			1,744,000
Senior non-cumulative perpetual preferred stock series D $1,000 liquidation value per share, 1% Authorized, issued and outstanding – 4,621 shares		4,621,000			—
Common stock, no par value Authorized – 4,500,000 shares Issued and outstanding – 1,812,662 and 1,800,000 shares, respectively		17,066,618			17,034,330
Additional paid in capital		493,154			493,154
Accumulated deficit		(9,276,825	)		(10,061,474	)
Accumulated other comprehensive income		152,009			112,908
Total shareholders’ equity		13,055,956			10,985,525
Total liabilities and shareholders’ equity	$	124,743,047		$	110,334,536

See accompanying notes to consolidated financial statements

3

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	For the three months ended September 30,				For the nine months ended September 30,
	2011		2010		2011		2010
Interest Income
Interest and fees on loans	$	1,554,666	$	1,461,027	$	4,644,719	$	4,073,923
Interest on securities		22,472		35,215		75,194		101,270
Interest on fed funds and bank balances		4,940		10,018		15,304		22,582
Total interest income		1,582,078		1,506,260		4,735,217		4,197,775
Interest Expense
Interest on deposits		301,195		336,660		929,127		1,012,639
Interest on fed funds and short-term borrowings		—		—		14,509		—
Total interest expense		301,195		336,660		943,636		1,012,639
Net Interest Income		1,280,883		1,169,600		3,791,581		3,185,136
Provision for loan losses		105,000		255,652		159,000		544,949
Net Interest Income After Provision for Loan Losses		1,175,883		913,948		3,632,581		2,640,187
Non-interest Income
Service charges on deposit accounts		15,208		14,576		39,369		36,654
Mortgage banking activities		108,384		—		167,145		—
SBA loan sales		186,151		—		686,884		—
Other Income		8,808		9,896		30,426		51,718
Total non-interest income		318,551		24,472		923,824		88,372
Non-interest Expense
Salaries and employee benefits		729,641		400,185		1,955,026		1,157,192
Occupancy expense		145,294		109,796		388,979		330,271
Equipment expense		55,722		33,601		133,310		103,670
Advertising and public relations		29,276		24,727		110,019		76,967
Data processing expense		57,379		56,870		166,952		162,000
Professional fees		105,963		81,234		363,403		247,622
Loan origination expense		37,223		18,346		86,273		58,601
Other expenses		156,963		115,721		403,434		330,405
Total non-interest expense		1,317,461		840,480		3,607,396		2,466,728
Net Income Before Federal Income Tax		176,973		97,940		949,009		261,831
Federal income tax		—		—		—		—
Net Income		176,973		97,940		949,009		261,831
Dividend on senior preferred stock		21,801		44,082		109,967		132,495
Accretion of discount on preferred stock		46,194		4,191		54,393		12,436
Net Income Applicable to Common Shareholders	$	108,978	$	49,667	$	784,649	$	116,900
Basic and Diluted Income per Share	$	0.06	$	0.03	$	0.44	$	0.06
Average Shares Outstanding		1,801,652		1,800,000		1,800,557		1,800,000

See notes to consolidated financial statements.

4

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

	Nine Months Ended September  30,
	2011			2010
Total Shareholders’ Equity
Balance at beginning of period	$	10,985,525		$	10,727,933
Net income		949,009			261,831
Other comprehensive income:
Net change in unrealized gains on securities available for sale		39,101			37,592
Total comprehensive income		988,110			299,423
Share based payments expense		32,288			3,695
Preferred dividends		(109,967	)		(132,495	)
Redemption of Preferred Stock		(3,461,000	)		—
Issuance of Preferred Stock		4,621,000			—
Balance at end of period	$	13,055,956		$	10,898,556

See accompanying notes to consolidated financial statements.

5

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	For the Nine Months Ended September 30,
	2011			2010
Cash flows from operating activities
Net income	$	949,009		$	261,831
Share based payment expense		32,208			3,695
Provision for loan losses		159,000			544,949
Gain on sale of loans		(167,145	)		—
Proceeds for sales of loans originated for sale		4,044,977			—
Loans originated for sale		(4,787,553	)		—
Accretion of securities		(2,206	)		(3,865	)
Depreciation expense		167,657			134,157
Net decrease (increase) in other assets		(424,316	)		(278,823	)
Net (decrease) in other liabilities		(113,071	)		(84,743	)
Net cash (used in) provided by operating activities		(141,360	)		577,201
Cash flows from investing activities
Net change in portfolio loans		(2,308,873	)		(14,923,019	)
Purchase of securities		(2,275,437	)		(2,976,260	)
Proceeds from calls or maturities of securities		1,200,000			2,749,000
Principal payments on securities		124,785			140,128
Purchases of premises and equipment		(254,155	)		(12,387	)
Net cash (used) in investing activities		(3,513,680	)		(15,022,538	)
Cash flows from financing activities
Increase in deposits		13,920,246			18,531,821
Net change in short term borrowings		(1,469,095	)		—
Net proceeds from senior preferred stock		1,160,000			—
Dividend on senior preferred stock		(109,967	)		(132,495	)
Net cash provided by financing activities		13,501,184			18,399,326
Increase in cash and cash equivalents		9,846,144			3,953,989
Cash and cash equivalents – beginning of period		5,366,304			7,758,201
Cash and cash equivalents – end of period	$	15,212,448		$	11,712,190
Supplemental Information:
Interest paid	$	997,143		$	980,895
Income tax paid		—			—
Loans transferred to other real estate		297,806			—

See accompanying notes to consolidated financial statements

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 – Summary of Significant Accounting Policies

Basis of Statement Presentation

The accompanying unaudited consolidated interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) with the instructions to Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements are not included herein. The interim financial statements should be read in conjunction with the financial statements of Birmingham Bloomfield Bancshares, Inc. (the “Corporation”) and the notes thereto included in the Corporation’s annual report on Form 10-K for the year ended December 31, 2010.

All adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for a fair presentation of financial position, results of operations, and cash flows, have been made. The results of operations for the nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011.

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.

Principles of Consolidation

The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiary the Bank of Birmingham (the “Bank”). All significant intercompany balances and transactions have been eliminated in consolidation.

Changes in Significant Accounting Policies

Income Recognition on Small Business Administration Loan Sales – On January 28, 2011, the Small Business Administration (“SBA”) released a notice removing the 90-day warranty, or “recourse provision,” on the guaranteed portion of SBA 7(a) loans sold at a premium in the secondary market. This change allowed the Corporation to recognize income from SBA loan sales immediately upon settlement rather than waiting for the expiration of the recourse period. The Corporation had been selling the guaranteed portion of SBA loans to outside investors with a provision whereby the Corporation must rebate the premium received on the sale if a loan prepays or defaults within 90 days of the loan origination (the “recourse provision.”) After the recourse provision expired, the Corporation recognized the outstanding transaction as a sale by decreasing the Corporations loan balance, removing the secured borrowing and recognizing the gain associated with the sale.

Recent Accounting Developments

Accounting Standards Update (ASU) No. 2011-05, “Comprehensive Income (Topic 220)-Presentation of Comprehensive Income” Under the amendments in this ASU, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this ASU should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. The Corporation is evaluating its timing of adoption of ASU 2011-05, but will adopt the ASU retrospectively by the due date.

7

Note 1 – Summary of Significant Accounting Policies – Continued

ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” This ASU represents the converged guidance of the FASB and the IASB (the Boards) on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The amendments to the Codification in this ASU are to be applied prospectively. The amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The impact of adoption of this ASU is not expected to be material.

ASU No. 2011-02, “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (‘TDR’)” In April, 2011, FASB issued ASU No. 2011-02, intended to provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. The amendments in this ASU are effective for the first interim or annual period beginning on or after June 15, 2011, and are to be applied retrospectively to the beginning of the annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. This guidance was adopted in the current quarter with no impact to the financial statements.

Note 2 – Securities

The amortized cost and estimated fair value of securities, with gross unrealized gains and losses, follows (000s omitted):

September 30, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U. S. Government agency securities	$	1,848	$	12	$	—	$	1,860
Municipal securities		711		13		—		724
Mortgage backed securities		1,221		118		—		1,339
Corporate bonds		250		9		—		259
Total securities	$	4,030	$	152	$	—	$	4,182
December 31, 2010
U. S. Government agency securities	$	1,350	$	11	$	—	$	1,361
Municipal securities		650		7		—		657
Mortgage backed securities		837		91		—		928
Corporate bonds		250		4		—		254
Total securities	$	3,087	$	113	$	—	$	3,200

8

Note 2 – Securities – Continued

As of September 30, 2011 and December 31, 2010, all securities are classified as available for sale. Unrealized gains and losses within the investment portfolio are determined to be temporary. The Corporation has performed an analysis of the portfolio for other than temporary impairment and concluded no losses are required to be recognized. Management has no specific intent to sell any securities and it is not more likely than not the Corporation will be required to sell any securities before recovery of the cost basis. Management expects to collect all amounts due according to the contractual terms of the security. The Corporation had no individual securities with gross unrealized losses at September 30, 2011 and December 31, 2010.

Total securities representing $0 and $1,788,000 were pledged to secure public deposits from the State of Michigan as of September 30, 2011 and December 31, 2010.

Federal Home Loan Bank stock is restricted and can only be sold back to the Federal Home Loan Bank. The carrying value of the stock approximates its fair value.

The amortized cost and estimated fair value of all securities at September 30, 2011, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties. The contractual maturities of securities are as follows (000s omitted):

	Amortized cost		Estimated fair value
Due in one year or less	$	1,500	$	1,499
Due in one year through five years		2,046		2,122
Due in five years through ten years		484		561
Due after ten years		—		—
Total	$	4,030	$	4,182

Note 3 – Loans

A summary of the portfolio loan balances as of September 30, 2011 and December 31, 2010 is as follows (000s omitted):

	September 30,			December 31,
	2011			2010
Mortgage loans on real estate:
Residential 1 to 4 family	$	3,584		$	3,380
Multifamily		13,713			12,355
Commercial		49,046			49,029
Construction		3,688			2,024
Second mortgage		113			118
Equity lines of credit		11,192			11,794
Total mortgage loans on real estate		81,336			78,700
Commercial loans		20,308			20,776
Consumer installment loans		1,024			964
Total loans		102,668			100,440
Less: Allowance for loan losses		(1,499	)		(1,448	)
Net deferred loan fees		(88	)		(61	)
Net loans	$	101,081		$	98,931

9

Note 3 – Loans – Continued

An analysis of the allowance for loan losses for the year to date period ended September 30, 2011 and December 31, 2010 (000s omitted):

Nine months ended September 30, 2011

	Commercial			Home Equity			Residential			Consumer			Total			2010
																Total
Allowance for Loan Losses
Beginning balance	$	1,070		$	352		$	14		$	12		$	1,448		$	1,174
Charge-offs		—			(128	)		—			—			(128	)		(341	)
Recoveries		20			—			—			—			20			46
Provision		(25	)		199			(9	)		(6	)		159			545
Ending balance	$	1,065		$	423		$	5		$	6		$	1,499		$	1,424
Percent of principal balance		1.17	%		4.37	%		0.53	%		0.52	%		1.46	%
Ending balance: individually evaluated for impairment	$	56		$	212		$	—		$	—		$	268
Ending balance: collectively evaluated for impairment	$	1,009		$	211		$	5		$	6		$	1,231
Portfolio Loans
Ending unpaid principal balance	$	90,877		$	9,679		$	949		$	1,163		$	102,668
Ending unpaid principal balance: individually evaluated for impairment	$	699		$	590		$	—		$	—		$	1,289
Ending unpaid principal balance: collectively evaluated for impairment	$	90,178		$	9,089		$	949		$	1,163		$	101,379

Year ended December 31, 2010

	Commercial			Home Equity			Residential			Consumer			Total
Allowance for Loan Losses
Beginning balance	$	991		$	166		$	10		$	7		$	1,174
Charge-offs		(141	)		(225	)		—			—			(366	)
Recoveries		46			—			—			—			46
Provision		174			410			4			6			594
Ending balance	$	1,070		$	351		$	14		$	13		$	1,448
Percent of principal balance		1.21	%		3.45	%		1.21	%		1.25	%		1.44	%
Ending balance: individually evaluated for impairment	$	25		$	212		$	—		$	—		$	237
Ending balance: collectively evaluated for impairment	$	1,045		$	139		$	14		$	13		$	1,211
Portfolio Loans
Ending unpaid principal balance	$	88,080		$	10,166		$	1,153		$	1,041		$	100,440
Ending unpaid principal balance: individually evaluated for impairment	$	2,107		$	887		$	—		$	—		$	2,994
Ending unpaid principal balance: collectively evaluated for impairment	$	85,973		$	9,279		$	1,153		$	1,041		$	97,446

10

Note 3 – Loans - continued

Management uses a loan rating system to identify the inherent risk associated with portfolio loans. Loan ratings are based on a subjective definition that describes the conditions present at each level of risk and identifies the important aspect of each loan. The Bank currently uses a 1 to 8 grading scale for commercial loans. Each loan grade corresponds to a specific qualitative classification. All other consumer and mortgage loan types are not graded using the risk rating scale but are internally rated based on various credit quality characteristics using the same qualitative classification. The risk rating classifications included: pass, special mention, substandard, doubtful and loss.

Loans risk-rated as special mention, are considered criticized loans, exhibiting some potential credit weakness that requires additional attention by management and are maintained on the internal watch list and monitored on a regular basis. Loans risk-rated as substandard or higher are considered classified loans exhibiting well-defined credit weakness and are recorded on the problem loan list and evaluated more frequently. The Bank’s credit administration function is designed to provide increased information on all types of loans to identify adverse credit risk characteristics in a timely manner. Total criticized and classified loans increased $797,000 to $11,687,000 at September 30, 2011 from $10,890,000 at December 31, 2010. The change was the result of an increase totaling $1,698,000 in special mention loans and a $901,000 decrease in substandard accounts. The majority of the increase is isolated to commercial loans and represents the weakness of the economic environment of our market area. The Bank has no loans in non-accrual status. There were no loans that were risk rated doubtful or loss at September 30, 2011 or December 31, 2010. Management closely monitors each loan adversely criticized or classified and institutes appropriate measures to eliminate the basis of criticism.

The primary risk elements considered by management regarding each consumer and residential real estate loan are lack of timely payment and loss of real estate values. Management has a reporting system that monitors past due loans and has adopted policies to pursue its creditor’s rights in order to preserve the Bank’s position. The primary risk elements concerning commercial and industrial loans and commercial real estate loans are the financial condition of the borrower, the sufficiency of collateral, and lack of timely payment. Management has a policy of requesting and reviewing periodic financial reporting from its commercial loan customers and verifies existence of collateral and its value.

An analysis of credit quality indicators at September 30, 2011 and December 31, 2010 follows (000s omitted):

September 30, 2011

Commercial Loans     Credit Quality	Commercial Real Estate		Commercial Term		Commercial LOC		Commercial Construction
1 – pass	$	—	$	—	$	—	$	—
2 – pass		332		—		65		—
3 – pass		17,693		3,603		5,021		—
4 – pass		39,598		6,781		5,223		1,831
5 – special mention		3,398		2,210		833		1,858
6 – substandard		1,430		641		360		—
7 – doubtful		—		—		—		—
8 – loss		—		—		—		—
	$	62,451	$	13,235	$	11,502	$	3,689

Consumer Loans     Credit Quality	Home Equity LOC		Residential Mortgage		Home Equity Term		Consumer Installment		Consumer LOC
Pass	$	8,746	$	835	$	114	$	571	$	568
Special mention		343		—		—		24		—
Substandard		590		—		—		—		—
Doubtful		—		—		—		—		—
Loss		—		—		—		—		—
	$	9,679	$	835	$	114	$	595	$	568

11

Note 3 – Loans - continued

December 31, 2010

Commercial Loans     Credit Quality	Commercial Real Estate		Commercial Term		Commercial LOC		Commercial Construction
1 – pass	$	—	$	—	$	—	$	—
2 – pass		392		—		—		—
3 – pass		16,845		3,994		4,416		—
4 – pass		40,348		6,265		5,071		1,250
5 – special mention		2,994		1,249		1,574		774
6 – substandard		1,441		857		610		—
7 - doubtful		—		—		—		—
8 - loss		—		—		—		—
	$	62,020	$	12,365	$	11,671	$	2,024

Consumer Loans     Credit Quality	Home Equity LOC		Residential Mortgage		Home Equity Term		Consumer Installment		Consumer LOC
Pass	$	8,808	$	1,035	$	118	$	335	$	673
Special mention		344		—		—		33		—
Substandard		1,014		—		—		—		—
Doubtful		—		—		—		—		—
Loss		—		—		—		—		—
	$	10,166	$	1,035	$	118	$	368	$	673

A loan is considered a troubled debt restructuring (“TDR”) if the Bank for economic or legal reasons related to the borrower’s financial condition grants a concession to the debtor that the Bank would not otherwise consider. TDRs represent loans where the original terms of the agreement have been modified to provide relief to the borrower and are individually evaluated for impairment. The Bank had one loan classified as a TDR at September 30, 2011 and December 31, 2010. The loan continues to perform according to the modified contractual terms.

Information regarding modified loans as of September 30, 2011 and December 31 (000s omitted):

September 30, 2011

	Number of Contracts		Pre- Modification Investment		Post- Modification Investment
Troubled Debt Restructuring
Commercial Real Estate		1	$	699	$	699
Commercial Term		—		—		—
Commercial LOC		—		—		—
Construction		—		—		—
Home Equity		—		—		—
Residential Mortgage		—		—		—
Consumer		—		—		—

December 31, 2010

Troubled Debt Restructuring
Commercial Real Estate	1	$	699	$	699
Commercial Term	—		—		—
Commercial LOC	—		—		—
Construction	—		—		—
Home Equity	—		—		—
Residential Mortgage	—		—		—
Consumer	—		—		—

12

Note 3 – Loans - continued

A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all principal and interest payments according to the contractual terms of the loan agreement. Characteristics considered by management in determining impairment include delinquency status, collateral value, and known factors adversely affecting the ability of the borrower to satisfy the terms of the agreement. When an individual loan is classified as impaired, the Corporation measures impairment using (1) the present value of expected cash flows discounted at the loans effective interest rate, (2) the loans observable market price, or (3) the fair value of the collateral. The method used is determined on a loan by loan basis, except for a collateral dependent loan. All collateral dependent loans are required to be measured using the fair value of collateral method. If the value of an impaired loan is less than the recorded investment in the loan an impairment reserve is recognized. All modified loans are considered impaired.

Large groups of homogeneous loans are collectively evaluated for impairment. Accordingly, the Corporation does not separately identify individual consumer and residential loans for impairment disclosures, except if modified and considered to be a troubled debt restructuring.

Information regarding impaired loans at September 30, 2011 and December 31, 2010 (000s omitted):

September 30, 2011

	Recorded Investment		Unpaid Principal		Allowance		Average Investment		Year to Date Interest Recognized
Impaired loans
No related allowance recorded:
Home Equity Line of Credit	$	—	$	—	$	—	$	—	$	—
Allowance recorded:
Commercial Line of Credit		—		—		—		—		—
Commercial Real Estate		699		699		56		699		27
Home Equity Line of Credit		590		590		212		590		22
Total:
Commercial	$	699	$	699	$	56	$	699	$	27
Home Equity	$	590	$	590	$	212	$	590	$	22
December 31, 2010
Impaired loans
No related allowance recorded:
Home Equity Line of Credit	$	298	$	298	$	—	$	256	$	—
Allowance recorded:
Commercial Line of Credit		1,407		1,407		17		1,418		99
Commercial Real Estate		699		699		8		117		7
Home Equity Line of Credit		590		590		212		197		10
Total:
Commercial	$	2,107	$	2,107	$	25	$	1,535	$	106
Home Equity	$	887	$	887	$	212	$	453	$	10

13

Note 3 – Loans - continued

As of September 30, 2011 there were no loans more than 30 days past due while at December 31, 2010 loans totaling approximately $298,000 were more than 30 days past due. There were no nonperforming loans, which represents non-accruing loans and loans past due 90 days or more and still accruing interest, at September 30, 2011 while $298,000 was classified nonperforming at December 31, 2010. Loans are placed in non-accrual status when, in the opinion of management, uncertainty exists as to the ultimate collection of principal and interest. Commercial loans are reported as being in non-accrual status if: (a) they are maintained on a cash basis because of deterioration in the financial position of the borrower, (b) payment in full of interest or principal is not expected, or (c) principal or interest has been in default for a period of 90 days or more. If it can be documented that the loan obligation is both well secured and in the process of collection, the loan may remain on accrual status. However, if the loan is not brought current before becoming 120 days past due, the loan is reported as non-accrual. A non-accrual asset may be restored to accrual status when none of its principal or interest is due and unpaid, when it otherwise becomes well secured, or is in the process of collection.

Information regarding past due loans at September 30, 2011 and December 31, 2010 follows (000s omitted):

September 30, 2011

	Loans past due						Total Past Due		Current		Total Loans		Non- Accrual		>90 days Accruing
	30 – 59		60 - 90		Over 90
Commercial real estate	$	—	$	—	$	—	$	—	$	62,451	$	62,451	$	—	$	—
Commercial term		—		—		—		—		13,235		13,235		—		—
Commercial LOC		—		—		—		—		11,502		11,502		—		—
Construction		—		—		—		—		3,689		3,689		—		—
Home equity LOC		—		—		—		—		9,679		9,679		—		—
Residential mortgage		—		—		—		—		835		835		—		—
Home equity term		—		—		—		—		114		114		—		—
Consumer installment				—		—				595		595		—		—
Consumer LOC		—		—		—		—		568		568		—		—
	$	—	$	—	$	—	$	—	$	102,668	$	102,668	$	—	$	—

December 31, 2010

	Loans past due						Total Past Due		Current		Total Loans		Non- Accrual		>90 days Accruing
	30 – 59		60 - 90		Over 90
Commercial real estate	$	—	$	—	$	—	$	—	$	62,020	$	62,020	$	—	$	—
Commercial term		—		—		—		—		12,365		12,365		—		—
Commercial LOC		—		—		—		—		11,671		11,671		—		—
Construction		—		—		—		—		2,024		2,024		—		—
Home equity LOC		—		—		298		298		9,868		10,166		298		—
Residential mortgage		—		—		—		—		1,035		1,035		—		—
Home equity term		—		—		—		—		118		118		—		—
Consumer installment		—		—		—		—		368		368		—		—
Consumer LOC		—		—		—		—		673		673		—		—
	$	—	$	—	$	298	$	298	$	100,142	$	100,440	$	298	$	—

14

Note 4 – Deposits

Deposits are summarized as follows (000s omitted):

	September 30, 2011					December 31, 2010
	Balance		Percentage			Balance		Percentage
Noninterest bearing demand	$	15,831		14.24	%	$	14,190		14.59	%
NOW accounts		8,058		7.25	%		7,897		8.12	%
Money market		10,411		9.36	%		8,179		8.41	%
Savings		18,325		16.48	%		16,521		16.99	%
Time deposits under $100,000		12,881		11.59	%		12,153		12.50	%
Time deposits over $100,000		45,665		41.08	%		38,310		39.39	%
Total deposits	$	111,171		100.0	%	$	97,250		100.0	%

At September 30, 2011, the scheduled maturities of time deposits are as follows (000s omitted):

	<$100,000		>$100,000		Total
2011	$	2,164	$	14,293	$	16,457
2012		7,953		20,948		28,901
2013		1,471		7,659		9,130
2014		757		2,027		2,784
2015		78		—		78
Thereafter		458		738		1,196
Total	$	12,881	$	45,665	$	58,546

Note 5 – Leases and Commitments

The Corporation has entered into a lease agreement for its main office facility. Payments began in February 2005 and the initial term of the lease expires in October 2015. In October 2007, the Corporation exercised its first renewal option on the property which expires in October 2025. The main office lease has one additional ten year renewal option. The Corporation also entered into a lease agreement for its former branch office in Bloomfield Township which provided for lease payments to begin in March 2006 and expire February 2016. The Bloomfield Township branch office lease was terminated effective January 18, 2010 pursuant to an agreement with the leaseholder. The termination agreement called for a one-time payment of $110,000 to the leaseholder to end the lease. In October 2010, the Corporation entered into a one year lease agreement for a lending production office (“LPO”) in Bay City, Michigan. The lease will not be renewed. In March 2011, a new one year lease was signed for additional office space in the building adjacent to the main office at a rate of $2,800 per month. The lease has two, five year renewal options. In May 2011, the Bank began a month-to-month lease for a LPO in Farmington Hills, Michigan that ended during the quarter. In August 2011, the Bank began a month-to-month lease for a LPO in Livonia, Michigan.

Rent expense under these agreements was $73,000 and $59,000 for the three month period ended September 30, 2011 and 2010, respectively. For the nine months ended September 30, 2011 and 2010, rent expense under these agreements was $210,000 and $185,000, respectively.

The following is a schedule of future minimum rental payments under operating leases on a calendar year basis:

2011	$	67,930
2012		242,816
2013		239,098
2014		243,910
2015		248,746
Thereafter		2,726,802
Total	$	3,769,302

15

Note 6 – Fair Value of Financial Instruments

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Corporation’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. FASB ASC 825 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Corporation.

The following methods and assumptions were used by the Corporation in estimating fair value disclosures for financial instruments:

Cash and Cash Equivalents - The carrying values of cash and cash equivalents approximate fair values.

Securities - Fair values of securities are based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities or other observable inputs.

Loans Receivable - For variable-rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Deposit Liabilities - The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Accrued Interest - The carrying value of accrued interest approximates fair value.

Other Financial Instruments - The fair value of other financial instruments, including loan commitments and unfunded letters of credit, based on discounted cash flow analyses, is not material.

The carrying values and estimated fair values of financial instruments at September 30, 2011 and December 31, 2010, are as follows (in thousands):

	September 30, 2011				December 31, 2010
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	15,212	$	15,212	$	5,366	$	5,366
Securities available for sale		4,182		4,182		3,360		3,360
Loans		101,080		101,631		98,931		99,786
Loans held for sale		1,232		1,232		323		323
Accrued interest receivable		471		471		440		440
Financial liabilities:
Deposits		111,170		111,498		97,250		97,688
Secured borrowings		—		—		1,469		1,469
Accrued interest payable		62		62		115		115

16

Note 7 – Fair Value Accounting

Valuation Hierarchy

Accounting standards establish a three-level valuation hierarchy for fair value measurements. The valuation hierarchy prioritizes valuation techniques based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and are the primary method of valuation used by Birmingham Bloomfield Bancshares, Inc. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows.

• Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets which the Corporation can participate.

• Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement, and include inputs that are available in situations where there is little, if any, market activity for the related asset or liability.

Following is a description of the inputs and valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as general classification of those instruments under the valuation hierarchy.

Available-for-sale Securities

Quoted market prices in an active market are used to value securities when such prices are available. Those securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, the fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows using reasonable inputs. Level 2 securities include U.S. Government agency securities, mortgage backed securities, obligations of states and municipalities, and certain corporate securities. Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities, but rather relying on the investment securities’ relationship to other benchmark quoted investment securities. In certain cases where Level 1 or Level 2 inputs are not available, securities would be classified within Level 3 of the hierarchy.

The following table presents the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the valuation hierarchy in which the fair value measurements fall at September 30, 2011 and December 31, 2010 (000s omitted):

September 30, 2011
	Level 1		Level 2		Level 3		Fair Value
U.S. government agency	$	—	$	1,860	$	—	$	1,860
Municipal securities		—		724		—		724
Mortgage backed securities		—		1,339		—		1,339
Corporate bonds		—		259		—		259
Securities available for sale	$	—		4,182		—		4,182
December 31, 2010
U.S. government agency	$	—	$	1,361	$	—	$	1,361
Municipal securities		—		657		—		657
Mortgage backed securities		—		928		—		928
Corporate bonds		—		254		—		254
Securities available for sale	$	—	$	3,200	$	—	$	3,200

17

Note 7 – Fair Value Accounting – continued

Following is a description of the inputs and valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in the accompanying consolidated balance sheets, as well as general classification of those instruments under the valuation hierarchy.

Impaired Loans

Loans for which it is probable the Corporation will not collect all principal and interest due according to the contractual terms are measured for impairment. The fair value of impaired loans is estimated using one of three methods; market value, collateral value, or discounted cash flow. Those impaired loans not requiring an allowance represent loans for which the fair value of collateral exceeds the recorded investment. When the fair value of the collateral is based on an observable market price or current appraised value, the impaired loan is classified within Level 2. When a market value is not available or management applies a discount factor to the appraised value, the Corporation records the impaired loan in Level 3.

Other Real Estate Owned (“ORE”)

Loans on which the underlying collateral has been repossessed are adjusted to fair value less costs to sell upon transfer to repossessed assets. Subsequently, repossessed assets are carried at the lower of carrying value or fair value, less anticipated marketing and selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the repossessed asset as a nonrecurring Level 2 valuation. When a market value is not available or management applies a discount factor to the appraised value, the Corporation records the repossessed asset in Level 3.

The following table presents the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a non-recurring basis and the level within the valuation hierarchy in which the fair value measurements fall at September 30, 2011:

September 30, 2011
	Balance		Level 1		Level 2		Level 3		Losses
Impaired Loans	$	1,289	$	—	$	—	$	1,289	$	—
ORE	$	298	$	—	$	—	$	298	$	—
December 31, 2010
Impaired Loans	$	2,696	$	—	$	—	$	2,696	$	—
ORE	$	—	$	—	$	—	$	—	$	—

18

Note 8 – Minimum Regulatory Capital Requirements

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The prompt corrective action regulations provide four classifications, well capitalized, adequately capitalized, undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required. The Bank was well-capitalized as of September 30, 2011. At September 30, 2011, the Corporation qualifies for an exemption from regulatory capital requirements due to its asset size.

The Bank’s actual capital amounts and ratios as of September 30, 2011 and December 31, 2010 are presented in the following table (000s omitted):

	Actual					For Capital Adequacy Purposes					To be Well-Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2011
Total risk-based capital (to risk weighted assets) Bank of Birmingham	$	12,483		12.3	%	$	8,143		8.0	%	$	10,179		10.0	%
Tier I capital (to risk weighted assets) Bank of Birmingham	$	11,208		11.0	%	$	4,072		4.0	%	$	6,107		6.0	%
Tier I capital (to average assets) Bank of Birmingham	$	11,208		9.2	%	$	4,861		4.0	%	$	6,076		5.0	%
As of December 31, 2010
Total risk-based capital (to risk weighted assets) Bank of Birmingham	$	10,344		10.6	%	$	7,834		8.0	%	$	9,792		10.0	%
Tier I capital (to risk weighted assets) Bank of Birmingham	$	9,117		9.3	%	$	3,917		4.0	%	$	5,875		6.0	%
Tier I capital (to average assets) Bank of Birmingham	$	9,117		8.1	%	$	4,477		4.0	%	$	5,597		5.0	%

Note 9 – Shareholder’s Equity

On July 28, 2011, the Corporation fully redeemed from the Treasury all of the Preferred Shares associated with the Capital Purchase Program for $3,461,000. The redemption was funded by proceeds from the issuance of Preferred Shares to the U.S. Treasury under the Small Business Lending Fund totaling $4,621,000. As a result of the transaction, the Corporation recorded $46,000 in accelerated accretion on the remaining discount of the Capital Purchase Program Preferred stock during the third quarter of 2011, reducing the amount available to common shareholders. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation” for additional preferred stock discussion.

19

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Disclosure Regarding Forward Looking Statements

This report contains forward-looking statements throughout that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation and the Bank. Words such as anticipates, believes, estimates, expects, forecasts, intends, is likely, plans, projects, variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are intended to be covered by the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Actual results and outcomes may materially differ from what may be expressed or forecasted in the forward-looking statements. The Corporation undertakes no obligation to update, amend, or clarify forward looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise.

Future factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; competitive pressures among depository institutions; interest rate movements and their impact on customer behavior and net interest margin; the impact of re-pricing and competitor’s pricing initiatives on loan and deposit products; the ability to adapt successfully to technological changes to meet customers’ needs and development in the market place; our ability to access cost-effective funding; changes in financial markets; changes in economic conditions in general and particularly as related to the automotive and related industries in the Detroit metropolitan area; new legislation or regulatory changes, including but not limited to changes in federal and/or state tax laws or interpretations thereof by taxing authorities; changes in accounting principles, policies or guidelines; and our future acquisitions of other depository institutions or lines of business. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning the Corporation and its business, including additional factors that could materially affect the Corporation’s financial results, is included in its filings with the Securities and Exchange Commission.

20

Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

The Corporation is a Michigan corporation that was incorporated in 2004 to serve as the holding company for a Michigan state bank, Bank of Birmingham (“the Bank”). The Bank is a full service commercial bank headquartered in Birmingham, Michigan. The Bank serves businesses and consumers across Oakland and Macomb counties with a full range of lending, deposit and internet banking services. The net income of the Corporation is derived primarily from net interest income. Net interest income is the difference between interest earned on the Bank’s loan and investment portfolios and the interest paid on deposits and borrowings. The volume, mix and rate of interest-bearing assets and liabilities determine net interest income.

OPERATIONS

The Corporation’s (and the Bank’s) main office is located at 33583 Woodward Avenue, Birmingham, MI 48009. The building is a free-standing one story office building of approximately 8,300 square feet. The main office lease commenced in October 2005 and the Bank exercised its first renewal option resulting in the lease being extended until October 2025. The main office lease has an additional ten year renewal option. See Note 5 of the Notes to Consolidated Financial Statements regarding additional lease information.

The Bank will continue to focus on the lending, deposit and general banking needs in the community it serves. The profile of products available to customers continues to expand as the Bank offers more options for residential mortgage and commercial customers, including SBA products. The Bank will investigate additional product and service offerings and will consider providing those that will be of benefit to our customers and the Bank.

FINANCIAL CONDITION

The Corporation reported net income applicable to common stock of $109,000 or $0.06 per share of common stock for the third quarter of 2011, compared to net income of $50,000 or $0.03 per share for the third quarter of 2010. For the nine months ended September 30, 2011 and 2010, net income applicable to common stock was $785,000 or $0.44 per share and $117,000 or $.06 per share, respectively. The performance is the product of strong net interest margin, an increase in noninterest income, and a reduction in losses on problem loans. The result is a return on average assets before preferred dividends of 1.08% for the year to date period.

The Corporation continues to experience growth as total assets exceeded $124,000,000 as of September 31, 2011, an increase of 13.1% from December 31, 2010. The increase is a result of successfully attracting core deposits to fund loan volume.

Cash and Cash Equivalents

Cash and cash equivalents increased $9,846,000 to $15,212,000 at September 30, 2011. The increase was primarily the result of deposit growth combined with proceeds from SBA loan sales and loan maturities.

21

Investments

Total investments increased $982,000 to $4,182,000 during the nine month period ended September 30, 2011. The increase is the result of purchasing new securities from the proceeds of matured investments and investing excess liquidity to generate additional revenue. The Corporation purchased a total of 4 securities representing $2,275,000 during the year and received $1,200,000 in proceeds from called investments. The Corporation did not hold any held-to-maturity securities as of September 30, 2011 or December 31, 2010. The makeup of the Corporation’s investment portfolio evolves with the changing price and risk structure, and liquidity needs of the Corporation.

Management believes that the unrealized gains and losses within the investment portfolio are temporary, since they are a result of market changes, rather than a reflection of credit quality. Management has no specific intent to sell any securities, although the entire investment portfolio is classified as available for sale. The following chart summaries the portfolio by type at September 30, 2011 and December 31, 2010 (000s omitted):

	September 30, 2011				December 31, 2010				Change
U.S. Government agency securities	$	1,860	44.5	%	$	1,361	42.5	%	$	499
Municipal securities		724	17.3	%		657	20.5	%		67
Mortgage backed securities		1,339	32.0	%		928	29.0	%		411
Corporate bonds		259	6.2	%		254	8.0	%		5
Total securities		4,182	100.0	%		3,200	100.0	%		982

Loans, Credit Quality and Allowance for Loan Losses

The following table summarizes the mix of the Corporation’s portfolio loans at September 30, 2011 and December 31, 2010 (000s omitted):

	September 30, 2011			December 31, 2010			Change
Real estate mortgage	$	77,648		$	76,676		$	972
Construction		3,688			2,024			1,664
Commercial and industrial		20,308			20,776			(468	)
Consumer installment		1,024			964			60
Deferred loan fees and costs		(88	)		(61	)		(27	)
Total loans	$	102,580		$	100,379		$	2,201

Total portfolio loans increased in the first nine months $2,201,000 or 2.2%, to $102,580,000 at September 30, 2011. The categories with the largest dollar increase were construction and real estate mortgage which increased $1,664,000 and $972,000, respectively. The increases were the result of new loans and draws on existing lines. Commercial and industrial, the only category experiencing a reduction, decreased by $468,000 relative to December 31, 2010 as a result of paydowns and payoffs. Management expects marginal loan growth for the remainder of 2011 as a result of the fragile economy.

The allowance for loan losses was relatively flat in the third quarter at $1,499,000, or 1.5% of portfolio loans as of September 30, 2011. There was one charge-off totaling $128,000 during the three months ended September 30, 2011 while there were no charge-offs for the three month period ended September 30, 2010. There were $20,000 in recoveries in the current quarter, while there were no recoveries for the three months ended September 30, 2010. Nonperforming loans, which consist of non-accruing loans and loans past due 90 days or more and still accruing interest, at September 30, 2011 and December 31, 2010, were $0 and $298,000, respectively.

The allowance for loan losses increased in the first nine months by $51,000 to $1,499,000. The increase was driven primarily by growth. There was one charge-off totaling $128,000 during the nine months ended September 30, 2011 while charge-offs totaled $341,000 for the nine month period ended September 30, 2010. Recoveries for the nine months ended September 30, 2011 totaled $20,000 while there were $46,000 in recoveries during the nine month period ended September 30, 2010.

Management evaluates the condition of the loan portfolio on a quarterly basis or more frequently when warranted, to determine the adequacy of the allowance for loans losses. The allowance for loan losses is maintained at a level believed to be adequate to cover losses on individually evaluated loans that are determined to be impaired and on groups of loans with similar risk

22

characteristics that are collectively evaluated for impairment. Estimated credits losses represent the current amount of the loan portfolio that is probable the institution will be unable to collect given the facts and circumstances as of the evaluation date. Management’s evaluation of the allowance is based on consideration of actual loss experience, the present and prospective financial condition of borrowers, adequacy of collateral, industry concentrations within the portfolio, various environmental factors and general economic conditions. Loans individually evaluated for impairment are measured using one of the three standard methods and provided a specific allowance. Management believes that the present allowance is adequate given the size, complexity and risk profile of the current portfolio.

Although management believes that the allowance for credit losses is adequate to absorb losses as they arise, there can be no assurance that the Bank will not sustain losses in any given period that could be substantial in relation to the size of the allowance for credit losses. It must be understood that inherent risks and uncertainties related to the operation of a financial institution require management to depend on estimates, appraisals and evaluations of loans to prepare the Corporation’s financial statements. Changes in economic conditions and the financial prospects of borrowers may result in changes to the estimates, appraisals and evaluations used. In addition, if circumstances and losses differ substantially from management’s assumptions and estimates, the allowance for loan losses may not be sufficient to absorb all future losses and net income could be adversely impacted.

Premises and Equipment

Premises and equipment was $1,446,000 as of September 30, 2011 up from $1,360,000 as of December 31, 2010. The Corporation continues to support further growth of business lines, such as mortgage lending with investments in operating facilities and technology.

Deposits and Short-term Financing

Total deposits increased $13,920,000 or 14.3%, to $111,171,000 at September 30, 2011. While all categories experienced growth, the three categories experiencing the largest dollar increase were time deposit accounts greater than $100,000, money market and savings accounts. Time deposits greater than $100,000 increased $7,355,000 through September 30, 2011 and represents the largest single source of funding for the Bank. The money market category increased $2,232,000 through September 30, 2011. Savings account balances increased $1,804,000 as of the current quarter end as a result of focused business development efforts and improving the acquisition of deposit relationships associated with current loan customers. The Bank does not hold any brokered deposits. The CD balance increase is attributable to participation in an on-line marketing service which facilitates deposit acquisition in the wholesale CD market.

	As of September 30, 2011					As of December 31, 2010
	Balance		Percentage			Balance		Percentage
Non-interest bearing demand	$	15,831		14.24	%	$	14,190		14.59	%
NOW accounts		8,058		7.25	%		7,897		8.12	%
Money market		10,411		9.36	%		8,179		8.41	%
Savings		18,325		16.48	%		16,521		16.99	%
Time deposits < $100,000		12,881		11.59	%		12,153		12.50	%
Time deposits >$100,000		45,665		41.08	%		38,310		39.39	%
Total deposits	$	111,171		100.00	%	$	97,250		100.00	%

At September 30, 2011, the Bank had no secured borrowings outstanding while the balance was $1,469,000 at December 31, 2010. The balance in this category at December 31, 2010 represents the secured liability associated with the sale of two SBA loans in the fourth quarter of 2010. Based on existing accounting guidelines and sale structure of the transaction, the Bank was required to recognize a secured liability on the sale of the guaranteed portion of SBA loans until the redemption period expired. The redemption period term was 90 days. The Bank did not utilize discount window or FHLB advances during the third quarter of 2011.

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RESULTS OF OPERATIONS

The Corporation reported net income of $109,000 applicable to common stock or $0.06 per share of common stock for the third quarter of 2011, an increase of $59,000 compared to the same period of 2010. This represents an annualized Return on Average Assets (“ROA”) before preferred dividends of 0.58% compared to a 0.35% ROA for the same period last year. The improved operating results are attributable to an increase in operating revenue and lower loan loss provision expense. Operating revenue consists of net interest margin and non-interest income. Net interest margin for the current period increased to 4.44% relative to the 4.32% reported for the quarter ended September 30, 2010. The improvement is a result of increased yields, improved asset mix and lower aggregate funding costs. During the third quarter of 2011, the Corporation generated $319,000 in non-interest income, an increase of $295,000 over the prior year. Non-interest income increased as the Corporation was successful in selling SBA loans at a gain and received broker fees for originating residential mortgages. Provision expense declined $151,000 during the current quarter relative to the same period of 2010, however total non-interest expenses increased $477,000 as the Corporation added personnel and made investments in new business opportunities.

The following table present trends in selected financial data for the five most recent quarters:

	Quarter Ended
	September 30, 2011			June 30, 2011			March 31, 2011			December 31, 2010			September 30, 2010
Income Statement
Interest Income	$	1,582		$	1,565		$	1,588		$	1,554		$	1,506
Interest Expense		301			314			329			327			337
Net Interest Income		1,281			1,251			1,259			1,226			1,170
Provision for loan loss		105			15			39			49			256
Non-interest income		319			280			325			37			24
Non-interest expense		1,317			1,207			1,083			1,046			840
Income (loss) before Income Taxes		177			309			462			169			98
Income tax expense		—			—			—			—			—
Net Income (Loss)		177			309			462			169			98
Dividend and accretion on preferred stock		68			48			48			48			48
Net Income (Loss) applicable to common	$	109		$	261		$	414		$	121		$	50
Income (loss) per share - basic & diluted	$	0.06		$	0.15		$	0.23		$	0.07		$	0.03
Performance Measurements
Net interest margin (tax equivalent)		4.44	%		4.51	%		4.49	%		4.46	%		4.41	%
Return on average assets (annualized) (1)		0.58	%		1.06	%		1.62	%		0.60	%		0.35	%
Return on average common equity (annualized) (1)		8.49	%		15.39	%		24.17	%		8.89	%		5.21	%
Efficiency ratio		82.37	%		78.80	%		68.36	%		82.78	%		70.39	%
Tier 1 Leverage Ratio (Bank only)		9.22	%		8.54	%		8.33	%		8.15	%		8.19	%
Equity / Assets		10.47	%		9.86	%		9.79	%		9.96	%		9.80	%
Total loans / Total deposits		92.3	%		94.1	%		93.9	%		103.2	%		94.3	%
Book value per share	$	4.65		$	4.60		$	4.44		$	4.21		$	4.16
Income (loss) per share - basic & diluted	$	0.06		$	0.15		$	0.23		$	0.07		$	0.03
Shares outstanding		1,812,662			1,800,000			1,800,000			1,800,000			1,800,000

(1) Amount is computed on net income before preferred dividends.

Net Interest Income

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Net interest income for the three month period ended September 30, 2011 totaled $1,281,000, an increase of 9.5% compared to the same period in the prior year. The increase was a result of earning assets growth and a reduction in total funding costs. The earning asset growth was concentrated in loan volume, providing the largest benefit to interest income. Total average interest bearing deposit accounts increased $6,002,000 in the third quarter of 2011 over the third quarter of 2010 but total deposit related interest expenses decreased $36,000. The lower cost of funds was achieved by changes in pricing strategy to be more competitive in the local market and the decision by the Federal Reserve to maintain rates at historic lows.

The Corporation’s net interest margin increased 8 basis points to 4.44% for the period ended September 30, 2011 compared to 4.32% for the same period in 2010. Net interest spread, the difference between the yield on earning assets and cost of funds, also increased relative to the third quarter of 2010. The increase in both spread and margin is primarily the result of a reduction in deposit costs, despite lower yields on earning assets. Asset yields declined during the period due to a less profitable mix and a reduction in loan rates. The Corporation has been maintaining higher levels of liquidity given the weak loan environment and limited investment options. Total cost of funds for the third quarter of 2011 was 1.31% compared to 1.57% for the same period of 2010. This was accomplished as a result of the aggressive pricing strategy implemented by management.

The following table presents the Corporation’s consolidated average balances of interest-earning assets, interest-bearing liabilities, and the amount of interest income or interest expense attributable to each category, the average yield or rate for each category, and the net interest margin for the periods ended September 30, 2011, and 2010 (000s omitted). Average loans are presented net of unearned income and the allowance for loan and lease losses. Interest on loans includes loan fees.

	Three Months Ended September 30,
	2011							2010
	Average Balance		Interest		Yield/Rate			Average Balance		Interest		Yield/Rate
Interest-earning assets:
Loans receivable	$	101,577	$	1,555		6.00	%	$	92,522	$	1,461		6.43	%
Securities available for sale		2,729		22		3.30	%		4,410		35		3.19	%
Federal funds sold		—		—		—	%		127		—		0.00	%
Interest-bearing balances with other financial institutions		10,238		5		0.19	%		11,261		10		0.35	%
Total interest-earning assets		114,544		1,582		5.41	%		108,320		1,506		5.66	%
Noninterest-earning assets:
Cash and due from banks		5,640							569
All other assets		1,342							1,202
Total Assets	$	121,526						$	110,091
Interest-bearing liabilities:
NOW accounts	$	7,835	$	8		0.38	%	$	7,442	$	8		0.43	%
Money market		10,495		11		0.43	%		9,558		15		0.64	%
Savings		18,493		26		0.56	%		16,575		40		0.96	%
Time deposits		54,694		256		1.86	%		51,940		274		2.11	%
Short-term borrowing		—		—		—	%		—		—		—	%
Total interest-bearing liabilities:	$	91,517	$	301		1.31	%	$	85,515		337		1.57	%
Non-interest bearing demand deposits		16,997							13,467
All other liabilities		492							249
Total liabilities		109,006							99,231
Shareholders’ Equity		12,520							10,860
Total liabilities and shareholders’ equity	$	121,526						$	110,091
Net Interest Income			$	1,281						$	1,169
Net spread						4.11	%						4.08	%
Net Interest Margin (1)						4.44	%						4.32	%

(1) Net interest earnings divided by average interest-earning assets.

Net Interest Income

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Net interest income for the nine month period ended September 30, 2011 totaled $3,792,000, an increase of $607,000 compared to the same period in the prior year. The improvement in net interest income for the period presented is the result of an increase in the absolute dollar amount of earning assets and a reduction in total funding costs. The earnings asset increase was due principally to growth in loan balances, the highest yielding asset. Total deposit costs decreased $69,000 during the nine month period, despite an increase in average balances. The reduction in deposit costs was the result of the current interest rate environment and pricing strategy of management. The Corporation replaced maturing deposits with lower cost alternatives and reduced other product rates to be more competitive with the local market.

The Corporation’s net interest margin increased 29 basis points to 4.48% for the nine months ended September 30, 2011 compared to 4.19% for the same period in 2010, while spread increased 26 basis points over the same period. The increase in both spread and net interest margin was attributable to a decrease in the cost of funds. Total cost of funds for the nine month period ended September 30, 2011 was 1.39% compared to 1.64% for 2010. The decrease is a result of a reduction in rates on all products. Management implemented an aggressive pricing strategy in 2011 to lower aggregate funding costs. Asset yields improved to 5.52% during the nine month period despite lower loan yields.

The following table presents the Corporation’s consolidated average balances of interest-earning assets, interest-bearing liabilities, and the amount of interest income or interest expense attributable to each category, the average yield or rate for each category, and the net interest margin for the periods ended September 30, 2011, and 2010 (000s omitted). Average loans are presented net of unearned income and the allowance for loan and lease losses. Interest on loans includes loan fees.

	Nine Months Ended September 30,
	2011							2010
	Average Balance		Interest		Yield/Rate			Average Balance		Interest		Yield/Rate
Interest-earning assets:
Loans receivable	$	100,658	$	4,645		6.09	%	$	87,680	$	4,074		6.28	%
Securities available for sale		3,005		75		3.32	%		3,944		101		3.42	%
Federal funds sold		13		—		0.00	%		1,566		1		0.11	%
Interest-bearing balances with other financial institutions		9,523		15		0.21	%		9,794		21		0.29	%
Total interest-earning assets		113,199		4,735		5.52	%		102,984		4,198		5.50	%
Noninterest-earning assets:
Cash and due from banks		3,698							710
All other assets		1,115							1,209
Total Assets	$	118,012						$	104,903
Interest-bearing liabilities:
NOW accounts	$	7,989	$	20		0.35	%	$	7,807	$	29		0.49	%
Money market		9,252		34		0.49	%		9,117		45		0.65	%
Savings		18,215		89		0.65	%		14,990		123		1.10	%
Time deposits		54,596		786		1.92	%		50,551		816		2.15	%
Short-term borrowing		460		15		4.22	%		—		—		—	%
Total interest-bearing liabilities:	$	90,512	$	944		1.39	%	$	82,465		1,013		1.64	%
Non-interest bearing demand deposits		15,169							11,301
All other liabilities		603							352
Total liabilities		106,284							94,118
Shareholders’ Equity		11,728							10,785
Total liabilities and shareholders’ equity	$	118,012						$	104,903
Net Interest Income			$	3,792						$	3,185
Net spread						4.13	%						3.87	%
Net Interest Margin (1)						4.48	%						4.19	%

(1) Net interest earnings divided by average interest-earning assets.

Provision for Loans Losses

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The provision for loan losses was $105,000 and $256,000 for the three months ended September 30, 2011 and 2010, respectively. The decrease from the previous comparable period was due to the pace of portfolio loan growth. The Corporation recorded net charge offs totaling $108,000 during the three months ended September 30, 2011 while there were none in the same period in 2010.

The provision for loan losses was $159,000 and $545,000 for the nine months ended September 30, 2011 and 2010, respectively. The decrease from the prior period was the result of improved credit quality and less recorded charge-offs during the nine month period. The Corporation recorded net charge-offs totaling $108,000 and $295,000 during the nine months ended September 30, 2011 and 2010, respectively.

Non-Interest Income

Non-interest income was $319,000 and $24,000 for the three months ended September 30, 2011 and 2010, respectively. The increase in non-interest income was the result of new revenue from the sale of residential mortgages and premiums recognized on SBA loan sales. The Corporation established a mortgage lending operation in 2010, and generated additional income on loan sales during the quarter totaling $108,000. Additionally, the Corporation originates SBA loans for sale, and generated income of $186,151 during the period. Other income decreased by $1,000 from the same period in the prior year.

Non-interest income was $924,000 and $88,000 for the nine months ended September 30, 2011 and 2010, respectively. Total non-interest income increased as a result of mortgage related income and SBA loan sale revenue. Mortgage bank operations generated income of $167,000 for the nine month period ended September 30, 2011. Mortgage activity includes the sale of residential loans to the secondary market. The loans are sold at a premium and the Corporation does not retain servicing. SBA loans sales activity generated $687,000 in new revenue for the Corporation in 2011, while no sales were recorded in 2010.

The following table presents the Corporation’s non-interest income for the three and nine month periods ending September 30, 2011 and 2010:

	For the Three Months Ended							For the Nine Months Ended
	September 30, 2011		September 30, 2010		Change			September 30, 2011		September 30, 2010		Change
Non-interest income
Service charge income	$	15,208	$	14,576	$	632		$	39,369	$	36,654	$	2,715
Mortgage banking activities		108,384		—		108,384			167,145		—		167,145
SBA loan sales		186,151		—		186,151			686,884		—		686,884
Other income		8,808		9,896		(1,088	)		30,426		51,718		(21,292	)
Total non-interest income	$	318,551	$	24,472	$	294,079		$	923,824	$	88,372	$	835,452

Non-Interest Expense

Non-interest expense for the three months ended September 30, 2011 and 2010 was $1,317,000 and $840,000, respectively. Salaries and benefits comprise the largest percentage of non-interest expense, totaling $730,000 for the current quarter compared to $400,000 for the same period in 2010. The increase is the result of adding staff for the mortgage banking operation and hiring new personnel at the Bank to accommodate future growth. Occupancy and equipment expense totaled $201,000 for the three month period ended September 30, 2011 compared to $143,000 for the same period in 2010. The increase is a result of opening new lending production facilities for the mortgage unit and expanding the professional space for the main office. Data processing expenses of $57,000 for the quarter ended September 30, 2011 were nearly flat from the same period in 2010. Professional fees totaled $106,000 and $81,000 for the third quarter of 2011 and 2010, respectively. The category consists of audit, consulting, legal and director costs. The increase in expenses relative to the prior period are a result of engaging professionals to assist the Corporation in implementing strategic objectives, including SBA loan activity and the mortgage operation, additional costs associated with required audits and a new Director compensation plan. Directors are compensated with both cash and stock awards, with awards made from newly issued shares valued in equity by the stock price at the date of issuance. Loan origination expense totaled $37,000 for the quarter, relative to the $18,000 reported for the previous year. The increase in costs is directly attributable to the additional loan costs associated with the mortgage unit. Other expenses were $157,000 for the quarter ended September 30, 2011, an increase of $116,000 compared to the same period of 2010. The additional expenses are due to an increase in operating costs associated with adding new locations and growth of the organization.

Non-interest expense for the nine month period ended September 30, 2011 was $3,607,000 compared to $2,467,000 for the same period of 2010. The categories experiencing the largest increase were salaries and benefits, occupancy and equipment,

27

professional fees and other expenses. Salaries and benefits totaled $1,955,000 for the year to date period ended September 30, 2011, an increase of $798,000 from the same period of 2010. The increase is a result of hiring new Bank personnel to generate business development activity and adding staff related to the mortgage operation. Total occupancy and equipment expense increased $88,000 during the period relative to the prior period due to the additional office space and new mortgage loan production offices. Professional fees were $363,000 and $248,000 for the nine month periods ended September 30, 2011 and 2010. The increase is attributable to cost associated with new required audits, engaging market professionals to assist the Corporation with SBA loan sales, expenses related to developing the mortgage operation and implementing a new compensation plan for Directors. Other expenses increased $60,000 during the first nine months of 2011, totaling $194,000 for the period. The increase is related to the growth of the organization, including printing, supplies, automobile expense and costs associated with an ORE property. Advertising experienced an increase for the nine month period relative to the prior year as the Bank focuses on business development opportunities.

The following table presents the Corporation’s non-interest expense for the three and nine month periods ending September 30, 2011 and 2010:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2011		September 30, 2010		Change		September 30, 2011		September 30, 2010		Change
Non-interest expense
Salaries and employee benefits	$	729,641	$	400,185	$	329,456	$	1,955,026	$	1,157,192	$	797,834
Occupancy expense		145,294		109,796		35,498		388,979		330,271		58,708
Equipment expense		55,722		33,601		22,121		133,310		103,670		29,640
Advertising		29,276		24,727		4,549		110,019		76,967		33,052
Data processing		57,379		56,870		509		166,952		162,000		4,952
Professional fees		105,963		81,234		24,729		363,403		247,622		115,781
Loan origination expenses		37,223		18,346		18,877		86,273		58,601		27,672
Other expense		156,963		115,721		41,242		403,434		330,405		73,029
Total non-interest expense	$	1,317,461	$	840,480	$	476,981	$	3,607,396	$	2,466,728	$	1,140,668

Income Taxes

No income tax expense or benefit was recognized during the three month period ended September 30, 2011 or 2010 due to the tax loss carry-forward position of the Corporation. An income tax benefit may be booked in future periods when management believes that profitability will be expected for the foreseeable future.

LIQUIDITY AND CAPITAL RESOURCES; ASSET/LIABILITY MANAGEMENT

The management team has responsibility for developing and recommending liquidity and risk management policies including but not limited to the determination of internal operating guidelines, contingency plans, change management and pricing to the Asset/Liability Committee (ALCO) of the Board of Directors. Management ensures that the liquidity of a bank allows it to provide funds to meet its cash flow needs, such as loan requests, outflows of deposits, other investment opportunities and general operating requirements, under multiple operating scenarios. While the current structure of the Corporation and the Bank are not complex, the objective in the management of liquidity and capital resources is to be able to take advantage of business opportunities that may arise. The major sources of liquidity for the Bank have been deposit growth, federal funds sold, and loans which mature within one year. The Bank is also a member of the Federal Home Loan Bank of Indianapolis and has access to funding from the discount window at the Federal Reserve Bank of Chicago. The ALCO committee has also approved alternate funding sources to add flexibility. Large deposit balances which might fluctuate in response to interest rate changes are closely monitored. These deposits consist mainly of certificates of deposit over $100,000. We anticipate that we will have more than sufficient funds available to meet our future commitments. As of September 30, 2011, off balance sheet loan commitments totaled $27,292,000. As a majority of the unused commitments represent commercial and equity lines of credit, the Bank expects, and experience has shown, that only a small portion of the unused commitments will normally be drawn upon.

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The following table presents loan commitments by time period as of September 30, 2011 (000s omitted):

			Amount of commitment expiration by period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Commitments to grant loans	$	12,475	$	12,475	$	—	$	—	$	—
Unfunded commitments under lines of credit		13,814		9,164		1,154		1,198		2,298
Commercial and standby letters of credit		1,003		1,003		—		—		—
Total commitments	$	27,292	$	22,642	$	1,154	$	1,198	$	2,298

Commitments to grant loans are governed by the Corporation’s credit underwriting standards, as established in the Corporation’s Loan Policy. As the above schedule illustrates, in general, it is the Corporation’s practice to grant loan commitments for a finite period of time, usually lasting one year or less. The most significant departure from this practice involves home equity lines of credit (HELOCs). The Corporation’s equity lines have a contractual draw period exceeding 5 years. The Corporation has the ability to suspend the draw privileges on a HELOC where a default situation or other impairment issue is identified.

The largest sources of cash and cash equivalents for the Corporation for the three months ended September 30, 2011, as noted in the Consolidated Statement of Cash Flows, were primarily loan sales and deposit origination.

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The prompt corrective action regulations provide five classifications, well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required. The Bank was well-capitalized as of September 30, 2011. Note 8 to the financial statements is hereby incorporated by reference. At September 30, 2011, the Corporation qualifies for an exemption from regulatory capital requirements due to its asset size.

On July 28, 2011, Birmingham Bloomfield Bancshares, Inc. entered into a Securities Purchase Agreement with the Secretary of the Treasury (the “Treasury”), pursuant to which the Company issued and sold to the Treasury 4,621 shares of its Senior Non-Cumulative Perpetual Preferred Stock, Series D (“Series D Preferred Stock”), having a liquidation preference of $1,000 per share (the “Liquidation Amount”), for aggregate proceeds of $4,621,000. In conjunction with the issuance of the Series D Preferred Stock, the Company has redeemed from the Treasury for $3,461,000, all of the Series A Preferred Shares, Series B Preferred Shares, and Series C Preferred Shares which were issued to the Treasury in 2009 under the Treasury’s Emergency Economic Stabilization Act of 2008 Capital Purchase Program.

The Series D Preferred Stock is entitled to receive non-cumulative dividends payable quarterly, on each January 1, April 1, July 1 and October 1, beginning October 1, 2011. The dividend rate, which is calculated on the aggregate Liquidation Amount, is based upon the current level of “Qualified Small Business Lending”, or “QSBL” (as defined in the Securities Purchase Agreement) by the Company’s wholly owned subsidiary Bank of Birmingham (the “Bank”). The dividend rate for future dividend periods will be set based upon the “Percentage Change in Qualified Lending” (as defined in the Securities Purchase Agreement) between each dividend period and the “Baseline” QSBL level. Such dividend rate may vary from 1% per annum to 5% per annum for the second through tenth dividend periods, from 1% per annum to 7% per annum for the eleventh dividend period through year four and one-half. If the Series D Preferred Stock remains outstanding for more than four and one-half years, the dividend rate will be fixed at 9%. Prior to that time, in general, the dividend rate decreases as the level of the Bank’s QSBL increases. Such dividends are not cumulative, but the Company may only declare and pay dividends on its common stock (or any other equity securities junior to the Series D Preferred Stock) if it has declared and paid dividends for the current dividend period on the Series D Preferred Stock, and will be subject to other restrictions on its ability to repurchase or redeem other securities.

Managing rates on earning assets and interest bearing liabilities focuses on maintaining stability in the net interest margin, an important factor in earnings growth and stability. Emphasis is placed on maintaining a controlled rate sensitivity position to avoid wide swings in margins and to manage risk due to changes in interest rates. Some of the major areas of focus of the Corporation’s Asset Liability Committee (“ALCO”) incorporate the following overview functions: review the interest rate risk sensitivity of the Bank to measure the impact of changing interest rates on the Bank’s net interest income, review the liquidity

29

position through various measurements, review current and projected economic conditions and the corresponding impact on the Bank, ensure that capital and adequacy of the allowance for loan losses are maintained at proper levels to sustain growth, monitor the investment portfolio, recommend policies and strategies to the Board that incorporate a better balance of our interest rate risk, liquidity, balance sheet mix and yield management, and review the current balance sheet mix and proactively determine the future product mix.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Corporation’s primary market risk exposure is interest rate risk and liquidity risk. All of the Corporation’s transactions are denominated in U.S. dollars with no specific foreign exchange exposure. Any impacts that changes in foreign exchange rates would have on interest rates are assumed to be insignificant.

Interest rate risk (IRR) is the exposure of a banking organization’s financial condition to adverse movements in interest rates. Accepting this risk can be an important source of profitability and shareholder value; however, excessive levels of IRR could pose a significant threat to our earnings and capital base. Accordingly, effective risk management that maintains IRR at prudent levels is essential to the Corporation’s safety and soundness. The Board of Directors has instituted a policy setting limits on the amount of interest rate risk that may be assumed. Management provides information to the Board of Directors on a quarterly basis detailing interest rate risk estimates and activities to control such risk.

Evaluating a financial institution’s exposure to changes in interest rates includes assessing both the adequacy of the management process used to control IRR and the organization’s quantitative level of exposure. When assessing the IRR management process, the Corporation seeks to ensure that appropriate policies, procedures, management information systems and internal controls are in place to maintain IRR at prudent levels with consistency and continuity. Evaluating the quantitative level of IRR exposure requires the Corporation to assess the existing and potential future effects of changes in interest rates on its consolidated financial condition, including capital adequacy, earnings, liquidity, and, where appropriate, asset quality. This detailed analysis is performed on a quarterly basis, but is managed daily. The Bank continues to be in a liability sensitive position and management continues to work toward creating a more closely matched portfolio to minimize any potential impact that changing rates could have on earnings in the short term. The institution is well positioned to minimize the impact of rate changes, with the rate shock analysis showing that over the long term, rate changes pose only a minimal risk to our economic value of equity (EVE ratio).

The Corporation has not experienced a material change in its financial instruments that are sensitive to changes in interest rates since December 31, 2010, which information can be located in the Corporation’s annual report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

As of September 30, 2011, we conducted an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Corporation’s “disclosure controls and procedures,” as such term is defined under Exchange Act Rules 13a-15(e) and 15d-15(e).

Based on this evaluation, the Corporation’s chief executive officer and chief financial officer concluded that, as of September 30, 2011, such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and accumulated and communicated to the Corporation’s management, including the Corporation’s chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, the Corporation’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and in reaching a reasonable level of assurance. The Corporation’s management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

There were no changes in the Corporation’s internal controls over financial reporting during the period ended September 30, 2011 that materially affected, or are reasonably likely to materially affect, the Corporation’s internal controls over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

There are no known pending legal proceedings to which the Corporation or the Bank is a party or to which any of its properties are subject; nor are there material proceedings known to the Corporation, in which any director, officer or affiliate or any principal shareholder is a party or has an interest adverse to the Corporation or the Bank.

ITEM 1A. RISK FACTORS.

This item is not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On July 28, 2011, the Corporation completed the sale of 4,621 shares of Series D non-cumulative perpetual preferred stock, liquidation preference of $1,000 per share, to the United States Department of the Treasury (the “U.S. Treasury”) under the Small Business Lending Fund. The issuance of the Series D preferred shares are exempt from the registration as a transaction by an issuer not involving any public offering under Section 4 (2) of the Securities Act of 1933. A portion of the proceeds were used to redeem the $3.4 million investment by the U.S. Treasury under the TARP Capital Purchase Program. The remaining balance will be used to improve the capital levels of the Bank and support future loan growth.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

This item is not applicable.

ITEM 4. [Reserved]

ITEM 5. OTHER INFORMATION.

This item is not applicable.

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ITEM 6. EXHIBITS.

Exhibit Number	Description of Exhibit
3.1	Articles of Incorporation
31.1	Rule 13a-14(a) Certification of Chief Executive Officer.
31.2	Rule 13a-14(a) Certification of Chief Financial Officer.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive Data File.

32

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.

	BIRMINGHAM BLOOMFIELD BANCSHARES, INC.
Date: November 10, 2011	By:	/s/    ROBERT E. FARR
		Robert E. Farr
		Chief Executive Officer

Date: November 10, 2011	By:	/s/    THOMAS H. DORR
		Thomas H. Dorr
		Chief Financial Officer

33

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
3.1	Articles of Incorporation.
31.1	Certification pursuant to Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act
31.2	Certification pursuant to Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act
32.1	Certification pursuant to Rules 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act and 18 U.S.C. §1350
101	Interactive Data File.

34

EX-3.1

Michigan Department of Consumer and Industry Services

Filing Endorsement

This is to Certify that the ARTICLES OF INCORPORATION - PROFIT

for

BIRMINGHAM BLOOMFIELD BANCORP, INC.

ID NUMBER: 10830D

received by facsimile transmission on February 11, 2004 is hereby endorsed filed on February 26, 2004 by the Administrator. The document is effective on the date filed, unless a subsequent effective date within 90 days after received date is stated in the document.

	In testimony whereof, I have hereunto set my hand and affixed the Seal of the Department, In the City of Lansing, this 26th day of February, 2004.
		, Director
	[Illegible]

[ILLEGIBLE]

MICHIGAN DEPARTMENT OF LABOR & ECONOMIC GROWTH BUREAU OF COMMERCIAL SERVICES
Date Received	(FOR BUREAU USE ONLY)
	This document is effective on the date filed, unless a subsequent effective date within 90 days after received date is stated in the document.
Name
David D. Warner
Address
1 Woodward Ave Ste 2400
City	State	ZIP Code
Detroit, MI 48226			Effective Date;

ñ Document will be returned on the name and address you enter above. ñ

If left blank document will be mailed to the registered office.

ARTICLES OF INCORPORATION

For use by Domestic Profit Corporations

(Please read Information and Instructions on the last page)

Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned corporetion executes the following Articles:

ARTICLE I

The name of the corporation is :

Birmingham Bloomfied Bancorp Inc.

ARTICLE II

The purpose or purposes for which the corporation is formed is to engage in any activity within the purposes for which corporations may be formed under the Business Corporation Act of Michigan, including, in particular, being a bank holding company. The corporation will be registered as a bank holding company under the Bank Holding Company Act, being 12 U.S.C. Sections 1841 to 1850.

ARTICLE III

The total authorized shares:

1. Common Shares                                                                          60,000                                                                                              

    Preferred Shares                                                                          None                                                                                                  

2. A statement of all or any of the relative rights, preferences and limitations of the shares of each class is as follows:

ARTICLES IV

1. The address of the registered office is :
1 Woodward Ave Ste 2400, Detroit                                                                                  , Michigan                     48226
(Street Address)	City	(Zip Code)
2. The mailing address of the registered office, If different than above :
, Michigan
(Street Address or P.O.Box)	City	(Zip Code)
3. The name of the resident agent at the registered Office is:                                         David D. Wamer

ARTICLE V

The name(s) and address(es) of the incorporator(s) is(are) as follows:
Name	Residence or Business Address
David D. Warner	1 Woodward Ave Ste 2400, Detroit MI 48226

ARTICLE VI (Optional, Delete if not applicable)

When a compromise or arrangement or a plan of reorganization of this corporation is proposed between this corporation and its creditors or any class of them or between this corporation and its shareholders or any class of them, a court of equity jurisdiction within the state, on application of this corporation or of a creditor or shareholder thereof, or an application of a receiver appointed for the corporation, may order a meeting of the creditor or class of creditors or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or reorganization, to be summoned in such manner as the court directs. If a majority in number representing 3/4 in value of the creditors or class of creditors, or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or a reorganization, agree to a compromise or arrangement or a reorganization of this corporation as a consequence of the compromise or arrangement, the compromise or arrangement and the reorganization, if sanctioned by the court to which the application has been made, shall be binding on all the creditors or class of creditors, or on all the shareholders or class of shareholders and also on this corporation.

ARTICLE VII (Optional, Delete If not applicable)

Any action required or permitted by the Act to be taken at an annual or special meeting of shareholders may be taken without a meeting. Without prior notice, and without a vote, if consents in writing, setting forth the action so taken, are signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote on the action were present and voted. A written consent shall bear the date of signature of the shareholder who signs the consent. Written consents are not effective to take corporate action unless within 60 days after the record date for determining shareholders entitled to express consent to or to dissent from a proposal without a meeting, written consents dated not more than 10 days before the record date and signed by a sufficient number of shareholders to take the action are delivered to the corporation. Delivery shall be to the corporation’s registered office, its principal place of business, or an officer or agent of the corporation having custody of the minutes of the proceedings of its shareholders. Delivery made to a corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.

Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to shareholders who would have been entitled to notice of the shareholder meeting if the action had been taken at a meeting and who have not consented to the action in writing. An electronic transmission consenting to an action must comply with Section 407(3).

[ILLEGIBLE]

The space below for additional Articles or for continuation of previous Articles. Please identify any Articles being continued or added. Attach additional pages if needed.

Article VIII

No director of this corporation shall be personally liable to the corporation or its shareholders for money damages for any action taken or any failure to take any action as a director, except liability for any of the following:

(i) The amount of a financial benefit received by a director to which he or she is not entitled.

(ii) Intentional infliction of harm on the corporation or the shareholders.

(iii) A violation of section 551 of the Michigan Business Corporation Act (the Act).

(iv) An intentional criminal act.

In the event that the Act is hereafter amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Act, as so amended. Any repeal, modification or adoption of any provision in these Articles of Incorporation inconsistent with this Article shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal, modification or adoption.

I, (We), the incorporator(s) sign my (our) name(s) this 29th day of January, 2004.
	David D. Warner, Incorporator

Michigan Department of Labor & Economic Growth

Filing Endorsement

This is to Certify that the RESTATED ARTICLES OF INCORPORATION - PROFIT

for

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

ID NUMBER: 10830D

received by facsimile transmission on September 26, 2005 is hereby endorsed flied on September 27, 2005 by the Administrator. The document is effective on the date flied, unless a subsequent effective date within 90 days after received date is stated in the document.

	In testimony whereof, I have hereunto set my hand and affixed the Seal of the Department, In the City of Lansing, this 28th day of September, 2005.
		, Director
	[Illegible]

BCS/CD.810 (Rev.12/03)

MICHIGAN DEPARTMENT OF LABOR AND ECONOMIC GROWTH BUREAU OF COMMERCIAL SERVICES
Date Received	(FOR BUREAU USE ONLY)
Name Address City                                 State                                  Zip Code	EFFECTIVE DATE:

Document will be returned to the name and address you enter above.

If left blank document will be mailed to the registered office.

RESTATED ARTICLES OF INCORPORATION

For use by Domestic Profit Corporations

Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned corporation executes the following restated articles of incorporation:

1. The present name of the corporation is : Birmingham Bloomfield Bancorp, Inc.

2.      The identification number assigned by the Bureau is : 108-30D

3. All former names of the corporation are : None.

4. The date of filing the original articles of incorporation was: February 26,2004.

*         *         *         *         *

The following restated articles of incorporation supersede the articles of incorporation and shall be the articles of incorporation for the corporation:

ARTICLE I

The name of the corporation is Birmingham Bloomfield Bancshares, Inc.

ARTICLE II

The corporation is organized for the purpose of engaging in any lawful business permitted by the Business Corporation Act of Michigan, as it exists on the date hereof and as it may be amended from time to time hereafter.

ARTICLE III

The total number of shares of all classes of the capital stock which the corporation has authority to issue is 5,000,000, which shall be divided into a class of 4,500,000 shares of common stock and a class of 500,000 shares of preferred stock.

Preferred Stock

Subject to the limitations and restrictions set forth in this Article III, the board of directors is authorized and empowered at any time, and from time to time, to designate and issue any authorized and unissued preferred stock (whether or not previously designated as shares of a particular series, and including preferred stock of any series issued and thereafter acquired by the corporation) as shares of one or more series, hereby or hereafter to be designated. Each different series of preferred stock may vary as to dividend rate, redemption price, liquidation price, voting rights and conversion rights, if any, all of which shall be fixed as hereinafter provided. Each series of preferred stock issued hereunder shall be so designated as to distinguish the shares thereof from the shares of the other series and classes. All preferred stock of any one series shall be alike in every particular.

The rights, qualifications, limitations or restrictions of each series of preferred stock shall be as stated and expressed in the resolution or resolutions adopted by the board of directors which provides for the Issuance of such series, which resolutions shall determine, fix or alter the following:

(1) The distinctive designation and number of shares comprising such series, which number may (except where otherwise provided by the board of directors in creating such series) be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the board of directors;

(2) The rate of the annual dividends thereon and the relation which such dividends shall bear to the dividends payable on any other class of capital stock or on any other series of preferred stock, the terms and conditions upon which and the periods in respect of which dividends shall be payable, whether and upon what conditions such dividends shall be cumulative and if cumulative, the date or dates from which dividends shall accumulate;

(3) The amount per share, if any, which the holders of preferred stock of such series shall be entitled to receive, in addition to any dividends accrued and unpaid thereon, (a) upon the redemption thereof; plus the premium payable upon redemption, if any; or (b) upon the voluntary liquidation, dissolution or winding up of the corporation; or (c) upon the involuntary liquidation, dissolution or winding up of the corporation;

(4) The conversion or exchange rights, if any, of such series, Including without limitation, the price or prices, rate or rates, provisions for the adjustment thereof (including provisions for protection against the dilution or impairment of such rights), and all other terms and conditions upon which preferredstock constituting such series may be convertible into, or exchangeable for shares of any other class or classes or series;

(5) Whether the shares of such series shall be redeemable, and, if redeemable, whether redeemable for cash, property or rights, including securities of any other corporation, at the option of either the holder or the corporation or upon the happening of a specified event the limitations and restrictions with respect to such redemption, the time or times when, the price or prices or rate or rates at which, the adjustments with which and the manner in which such shares shall be redeemable, Including the manner of selecting shares of such series for redemption if less than all shares are to be redeemed;

(6) Whether the shares of such series shall be subject to the operation of a purchase, retirement, or sinking fund, and, if so, whether and upon what conditions such purchase, retirement or sinking fund shall be cumulative or noncumulative, the extent to which and the manner in which such fund shall be applied to the purchase or redemption of the shares of such series for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof;

(7) The voting rights per share, if any, of each such series, and whether and under what conditions the shares of such series (alone or together with the shares of one or more other series) shall be entitled to vote separately as a single class, upon any merger, share exchange or other transaction of the corporation, or upon any other matter, including (without limitation) the elections of one or more additional directors of the corporation in case of dividend arrearage or other specified events;

(8) Whether the issuance of any additional shares of such series, or of any shares of any other series shall be subject to restrictions as to issuance or as to the power, preferences or rights of any such other series; and

(9) Any other preferences, privileges and powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions of such series, as the board of directors may deem advisable and as shall not be inconsistent with the provisions of these articles of Incorporation.

Common Stock

No shares of common stock shall be entitled to any preferences, and each share of common stock shall be equal to every other share of such class of stock in every respect.

After payment or declaration of full cumulative dividends on all shares having priority over the common stock as to dividends, and after making all sinking or retirement fund payments on all series of preferred stock and on any other stock of the corporation ranking as to dividends or assets prior to the common stock providing for the same, dividends on the common stock may be declared and paid, but only when and as determined by the board of directors.

On any dissolution, liquidation or winding up of the corporation, after there shall have been paid to or set aside for the holders of all shares having priority over the common stock the full preferential amounts to which they are respectively entitled, the holders of the common stock shall be entitled to receive pro rate all the remaining assets of the corporation available for distribution to its shareholders.

3

At all meetings of shareholders of the corporation, the holders of the common stock shall be entitled to one vote for each share of common stock held by them of record.

General Provisions

No shareholder of this corporation shall by reason of his holding shares of any class have any preemptive or preferential right to purchase or subscribe to any shares of any class of this corporation, now or hereafter to be authorized, or any notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase shares of any class, now or hereafter to be authorized, whether or not the issuance of any such shares or such notes, debentures, bonds, or other securities, would adversely affect the dividend or voting rights of such shareholder, other than such rights, if any, as the board of directors, In its discretion from time to time may grant and at such price as the board of directors in its discretion may fix and the board of directors may issue shares of any class of this corporation, or any notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase shares of any class, without offering any such shares of any class, either in whole or in part, to the existing shareholders of any class.

ARTICLE IV

The address and the mailing address of the registered office of the corporation is 33583 Woodward Avenue, Birmingham, Michigan 48009.

The name of the resident agent at the registered office is Robert Farr.

ARTICLE V

When a compromise or arrangement or a plan or reorganization of this corporation is proposed between this corporation and its creditors or any class of them or between this corporation and its shareholders or any class of them, a court of equity jurisdiction within the state, on application of this corporation or of a creditor or shareholder thereof, or on application of a receiver appointed for the corporation, may order a meeting of the creditors or class of creditors or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or reorganization, to be summoned In such manner as the court directs. If a majority in number, and representing three-fourths in value of claims, of the creditors or class of creditors, or if the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or a reorganization representing three-fourths of such shares, agree to a compromise or arrangement or a reorganization of this corporation as a consequence of the compromise or arrangement, the compromise or arrangement and the reorganization, if sanctioned by the court to which the application has been made, shall be binding on all the creditors or class of creditors, or on all the shareholders or class of shareholders and also on this corporation.

ARTICLE VI

The corporation shall, to the fullest extent permitted by the provisions of section 450.1561 et seq. of the Michigan Business Corporation Act, as the same may be amended and

4

supplemented, indemnify each director or officer of the corporation from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said provisions.

The expenses of directors and officers incurred as a party to any threatened. pending or completed proceeding, shall be paid by the corporation as they are incurred and in advance of the final disposition of the proceeding; provided, however, that the advance payment of expenses shall be made only upon receipt by the corporation of both a written affirmation from the director or officer of his good faith belief that he has met the standard of conduct necessary for indemnification under the Michigan Business Corporation Act and an undertaking by or on behalf of the director or officer to repay all amounts so advanced in the event that it is ultimately determined by a final decision, order, or decree of a court of competent jurisdiction that the director or officer has not met the required standards of conduct.

The right to indemnification and the payment or advancement of expenses as they are incurred and in advance of the final disposition of an action, suit, or proceeding shall not be exclusive of any other right to which a person may be entitled under these articles of Incorporation, the bylaws, a resolution of shareholders or directors, an agreement, or otherwise; provided, however, that all rights to indemnification and to the payment or advancement of expenses are valid only to the extent that they are consistent with the Michigan Business Corporation Act The right to indemnification shall continue for a person who has ceased to be a director or officer and shall inure to the benefit of his heirs, next of kin, executors, administrators and legal representatives.

The corporation shall not be obligated to reimburse the amount of any settlement unless it has agreed to such settlement. If any person shall unreasonably fail to enter into a settlement of any proceeding within the scope of this Article, offered or assented to by the opposing party or parties and which is acceptable to the corporation, then notwithstanding any other provision of this Article, the indemnification obligation of the corporation in connection with such action, suit, or proceeding shall be limited to the total of the amount at which settlement could have been made and the expenses incurred by such person prior to the time the settlement could reasonably have been effected.

The corporation may, but need not, to the extent authorized from time to time by the board of directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the corporation or to any director, officer, employee or agent of any of its subsidiaries to the fullest extent of the provisions of the Michigan Business Corporation Act and of this Article subject to the imposition of such conditions or limitations as the board of directors of the corporation may deem necessary or appropriate.

The board of directors of the corporation may establish rules and procedures, not inconsistent with the provisions of this Article, to implement the provisions of this Article.

The provisions of this Article are valid only to the extent that they are consistent with, and are limited by, applicable laws and regulations, including, but not limited to 12 U.S.C. 1828(k) and regulations promulgated thereunder from time to time by applicable federal banking agencies. The Invalidity of any provision of this Article will not affect the validity of the remaining provisions of this Article.

5

ARTICLE VII

The number of directors of the corporation shall be such number not less than one (1) as the board of directors shall designate by resolution from time to time, except that in the absence of any such designation, such number shall be sixteen. The board of directors shall be divided into three classes as nearly equal in number as possible. The directors of the first class (Class I) will serve until the 2006 annual meeting of the shareholders, and thereafter the directors of the first class will serve for a term of three years and until their successors are elected and qualified. The directors of the second class (Class II) will serve until the 2007 annual meeting of the shareholders, and thereafter the directors of the second class will serve for a term of three years and until their successors are elected and qualified. The directors of the third class (Class Ill) will serve until the 2008 annual meeting of the shareholders, and thereafter the directors of the third class will serve for a term of three years and until their successors are elected and qualified.

ARTICLE VIII

No director of the corporation shall be personally liable to the corporation or its shareholders for money damages for any action taken or any failure to take any action as a director, except liability for any of the following: (i) the amount of financial benefit received by the director to which the director is not entitled; (ii) Intentional Infliction of harm on the corporation or its shareholders; (iii) a violation of section 551 of the Michigan Business Corporation Act; or (iv) an intentional criminal act. If the Michigan Business Corporation Act hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the corporation, in addition to the limitation on personal liability contained herein, shall be eliminated or limited to the fullest extent permitted by the Michigan Business Corporation Act as so amended. No amendment or repeal of this Article VIII shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to the effective date of any such amendment or repeal.

ARTICLE IX

Notwithstanding any other provisions of these articles of incorporation, no amendment to these articles of incorporation shall amend or repeal any or all of the provisions of Articles VI, VIII or this Article IX of these articles of incorporation, and the shareholders of the corporation shall not have the right to amend or repeal any or all provisions of the bylaws of the corporation, unless so adopted by the affirmative vote of the holders of more than three-fourths of the outstanding shares of stock of the corporation generally entitled to vote in the election of directors, considered for purposes of this Article IX as a class; provided, however, that in the event the board of directors of the corporation shall recommend to the shareholders the adoption of any such amendment of a nature described in this Article IX, the shareholders of record holding a majority of the outstanding shares of stock of the corporation entitled to vote in elections of directors, considered for the purposes of this Article IX as a class, may amend, modify or repeal any or all of such provisions.

* * * * * *

6

These restated articles of incorporation were duly adopted on September 9, 2005, in accordance with the provisions of section 642 of the Michigan Business Corporation Act, and were duly adopted by the sole shareholder of the corporation.

Signed this September 9, 2005.	BIRMINGHAM BLOOMFIELD BANCORP, INC.
	By:
		Robert Farr, President

7

Michigan Department Of Energy, Labor & Economic Growth

Filing Endorsement

This is to Certify that the CERTIFICATE OF AMENDMENT - CORPORATION

for

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

ID NUMBER: 10830D

received by facsimile transmission on April 21, 2009 is hereby endorsed

Filed on April 21, 2009 by the Administrator.

The document is effective on the date filed, unless a

subsequent effective date within 90 days after

received date is stated in the document.

	In testimony whereof, I have hereunto set my hand and affixed the Seal of the Department, In the City of Lansing, this 21ST day of April, 2009.
	. Director

CERTIFICATE OF DESIGNATIONS

OF

FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES A

OF

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

Birmingham Bloomfield Bancshares, Inc., a corporation organized and existing under the laws of the State of Michigan (the “Issuer”), in accordance with the provisions of Section 302 of the Michigan Business Corporation Act, does hereby certify:

The board of directors of the Issuer (the “Board of Directors”), in accordance with the articles of incorporation and bylaws of the Issuer and applicable law, adopted the following resolution on March 16, 2009 creating a series of 1,635 shares of Preferred Stock of the Issuer designated as “Fixed Rate Cumulative Perpetual Preferred Stock, Series A”.

RESOLVED, that pursuant to the provisions of the articles of incorporation and the bylaws of the Issuer and applicable law, a series of Preferred Stock, no par value per share, of the Issuer be and hereby is created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

Part 1. Designation and Number of Shares. There is hereby crested out of the authorized and unissued shares of preferred stock of the Issuer a series of preferred stock designated as the “Fixed Rate Cumulative Perpetual Preferred Stock, Series A” (the “Designated Preferred Stock”). The authorized number of shares of Designated Preferred Stock shall be 1,635.

Part 2. Standard Provisions. The Standard Provisions contained in Schedule A attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part of this Certificate of Designations to the same extent as if such provisions had been set forth in full herein.

Part. 3. Definitions. The following terms are used in this Certificate of Designations (including the Standard Provisions in Schedule A hereto) as defined below:

(a) “Common Stock” means the common stock, no par value per share, of the Issuer.

(b) “Dividend Payment Date” means February 15, May 15, August 15 and November 15 of each year.

1

(c) “Junior Stock” means the Common Stock, and any other class or series of stock of the Issuer the terms of which expressly provide that it ranks junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Issuer.

(d) “Liquidation Amount” means $1,000 per share of Designated Preferred Stock.

(e) “Minimum Amount” means $408,750.

(f) “Parity Stock” means any class or series of stock of the issuer (other than Designated Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Issuer (in each case without regard to whether dividends accrue cumulatively or non-cumulatively). Without limiting the foregoing, Parity Stock shall include the Issuer’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B.

(g) “Signing Date” means the Original Issue Date.

Part. 4. Certain Voting Matters. Holders of shares of Designated Preferred Stock will be entitled to one vote for each such share on any matter on which holders of Designated Preferred Stock are entitled to vote, including any action by written consent.

IN WITNESS WHEREOF, Birmingham Bloomfield Bancshares, Inc. has caused this Certificate of Designations to be signed by Robert E. Farr, its President and Chief Executive Officer, this 21st day of April, 2009.

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.
By:
Name:	Robert E. Farr
Title:	President and Chief Executive Officer

2

Schedule A

STANDARD PROVISIONS

Section 1. General Matters. Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock. The Designated Preferred Stock shall be perpetual subject to the provisions of Section 5 of these Standard Provisions that form a part of the Certificate of Designations. The Designated Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Issuer.

Section 2. Standard Definitions. As used herein with respect to Designated Preferred Stock:

(a) “Applicable Dividend Rate” means (i) during the period from the Original Issue Date to, but excluding, the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 5% per annum and (ii) from and after the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 9% per annum.

(b) “Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Issuer as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.

(c) “Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Issuer’s stockholders.

(d) “Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close.

(e) “Bylaws” means the bylaws of the Issuer, as they may be amended from time to time.

(f) “Certificate of Designations” means the Certificate of Designations or comparable instrument relating to the Designated Preferred Stock of which these Standard Provisions form a part, as it may be amended from time to time.

(g) “Charter” means the Issuer’s certificate or articles of incorporation, articles of association, or similar organizational document.

(h) “Dividend Period” has the meaning set forth in Section 3(a).

(1) “Dividend Record Date” has the meaning set forth in Section 3(a).

(j) “Liquidation Preference” has the meaning set forth in Section 4(a).

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(k) “Original Issue Date” means the date on which shares of Designated Preferred Stock are first issued.

(l) “Preferred Director” has the meaning set forth in Section 7(b).

(m) “Preferred Stock” means any and all series of preferred stock of the Issuer, including the Designated Preferred Stock.

(n) “Qualified Equity Offering” means the sale and issuance for cash by the issuer to persons other than the Issuer or any of its subsidiaries after the Original Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock, that, in each case, qualify as and may be included in Tier 1 capital of the Issuer at the time of issuance under the applicable risk-based capital guidelines of the Issuer’s Appropriate Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or arrangements entered into, or pursuant to financing plans which were publicly announced, on or prior to November 17,2008).

(o) “Standard Provisions” mean these Standard Provisions that form a part of the Certificate of Designations relating to the Designated Preferred Stock.

(p) “Successor Preferred Stock” has the meaning set forth in Section 5(a).

(q) “Voting Parity Stock” means, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified in Sections 7(a) and 7(b) of these Standard Provisions that form a part of the Certificate of Designations, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter.

Section 3. Dividends.

(a) Rate. Holders of Designated Preferred Stock shall be entitled to receive, on each share of Designated Preferred Stock if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, cumulative cash dividends with respect to each Dividend Period (as defined below) at a rate per annum equal to the Applicable Dividend Rate on (i) the Liquidation Amount per share of Designated Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period on such share of Designated Preferred Stock, if any. Such dividends shall begin to accrue and be cumulative from the Original Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Issue Date. In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. The period from and including any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period”, provided that the initial

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Dividend Period shall be the period from and including the Original Issue Date to, but excluding, the next Dividend Payment Date.

Dividends that are payable on Designated Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on Designated Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months and actual days elapsed over a 30-day month.

Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Issuer on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.

Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designations).

(b) Priority of Dividends. So long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Issuer or any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date). The foregoing limitation shall not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or other Junior Stock in connection With the administration of any employee benefit plan in the ordinary course of business and consistent with past practice; (ii) the acquisition by the Issuer or any of its subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Issuer or any of its subsidiaries), including as trustees or custodians; and (iii) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case, solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock.

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When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Designated Preferred Stock and any shares of Parity Stock all dividends declared on Designated Preferred Stock and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Designated Preferred Stock (including, if applicable as provided in Section 3(a) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to each other. If the Board of Directors or a duly authorized committee of the Board of Directors determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Issuer will provide written notice to the holders of Designated Preferred Stock prior to such Dividend Payment Date.

Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends.

Section 4. Liquidation Rights.

(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Issuer, whether voluntary or involuntary, holders of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Issuer or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Issuer, subject to the rights of any creditors of the Issuer, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Issuer ranking junior to Designated Preferred Stock as to such distribution, payment in fill in an amount equal to the sum of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount), whether or not declared, to the date of payment (such amounts collectively, the “Liquidation Preference”).

(b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Issuer or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as

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to such distribution, holders of Designated Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distribution to which they are entitled.

(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as to such distribution has been paid in full, the holders of other stock of the Issuer shall be entitled to receive all remaining assets of the Issuer (or proceeds thereof) according to their respective rights and preferences.

(d) Mergers Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Issuer with any other corporation or other entity including a merger or consolidation in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Issuer, shall not constitute a liquidation, dissolution or winding up of the Issuer.

Section 5. Redemption.

(a) Optional Redemption. Except as provided below, the Designated Preferred Stock may not be redeemed prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date. On or after the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to. but excluding, the date fixed for redemption.

Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of(i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption; provided that (x) the Issuer (Or any successor by Business Combination) has received aggregate gross proceeds of not less than the Minimum Amount (plus the “Minimum Amount” as defined in the relevant certificate of designations for each other outstanding series of preferred stock of such successor that was originally issued to the United States Department of the Treasury (the “Successor Preferred Stock” in connection with the Troubled Asset Relief Program Capital Purchase Program) from one or more Qualified Equity Offerings (including Qualified Equity Offerings of such successor), and (y) the aggregate redemption price of the Designated Preferred Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the

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aggregate net cash proceeds received by the Issuer (or any successor by Business Combination) from such Qualified Equity Offerings (including Qualified Equity Offerings of such successor).

The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Issuer or its agent. Any declared but unpaid dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above.

(b) No Sinking Fund. The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Designated Preferred Stock will have no right to require redemption or repurchase of any shares of Designated Preferred Stock.

(c) Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Issuer. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Designated Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock, Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility. Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(d) Partial Redemption. In case of any redemption of part of the shares of Designated Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions hereof, the Board of Directors or a duly authorized committee thereof shall have fill power and authority to prescribe the terms and conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time, If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption

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have been deposited by the Issuer, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Issuer, after which time the holders of the shares so called for redemption shall look only to the Issuer for payment of the redemption price of such shares.

(f) Status of Redeemed Shares. Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Issuer shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Designated Preferred Stock).

Section 6. Conversion. Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities.

Section 7. Voting Rights.

(a) General. The holders of Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law.

(b) Preferred Stock Directors. Whenever, at any time or times, dividends payable on the shares of Designated Preferred Stock have not been paid for an aggregate of six quarterly Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Issuer shall automatically be increased by two and the holders of the Designated Preferred Stock shall have the right, with holders of shares of any one or more other classes or series of Voting Parity Stock outstanding at the time, voting together as a class, to elect two directors (hereinafter the “Preferred Directors” and each a “Preferred Director”) to fill such newly created directorships at the Issuer’s next annual meeting of stockholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of stockholders until all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been declared and paid in full at which time such right shall terminate with respect to the Designated Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Issuer to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Issuer may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any

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termination of the right of the holders of shares of Designated Preferred Stock and Voting Parity Stock as a class to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the holders a majority of the shares of Designated Preferred Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock, to the extent the voting rights of such holders described above are then exercisable. if the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.

(c) Class Voting Rights as to Particular Matters. So long as any shares of Designated Preferred Stock are outstanding, in addition to any other vote or consent of stock holders required by law or by the Charter, the vote or consent of the holders of at least 66 2/3% of the shares of Designated Preferred Stock at the time outstanding, voting as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of Designations for the Designated Preferred Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Issuer ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation dissolution or winding up of the Issuer;

(ii) Amendment of Designated Preferred Stock. Any amendment, alteration or repeal of any provision of the Certificate of Designations for the Designated Preferred Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 7(c)(iii) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock; or

(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolIdation of the Issuer with another corporation or other entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Issuer is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions

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thereof, of Designated Preferred Stock immediately prior to such consummation, taken as a whole;

provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Issuer to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Issuer will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Designated Preferred Stock.

(d) Changes after Provision for Redemption. No vote or consent of the holders of Designated Preferred Stock shall be required pursuant to Section 7(c) above if, at or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above.

(e) Procedures for Voting and Consents. The rules and procedure for calling and conducting any meeting of the holders of Designated Preferred Stock (including without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the rules of any national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time.

Section 8. Record Holders. To the fullest extent permitted by applicable law, the Issuer and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Issuer nor such transfer agent shall be affected by any notice to the contrary.

Section 9. Notices. All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility.

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Section 10. No Preemptive Rights. No share of Designated Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Issuer, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, maybe designated, issued or granted.

Section 11. Replacement Certificates. The Issuer shall replace any mutilated certificate at the holder’s expense upon sunder of that certificate to the Issuer. The Issuer shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Issuer of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together With any indemnity that may be reasonably required by the Issuer.

Section 12. Other Rights. The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or In the Charter or as provided by applicable law.

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Michigan Department Of Energy, Labor & Economic Growth

Filing Endorsement

This is to Certify that the CERTIFICATE OF AMENDMENT - CORPORATION

for

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

ID NUMBER: 10830D

received by facsimile transmission on April 21, 2009 is hereby endorsed

Filed on April 21, 2009 by the Administrator.

The document is effective on the date filed, unless a

subsequent effective date within 90 days after

received date is stated in the document.

	In testimony whereof, I have hereunto set my hand and affixed the Seal of the Department, In the City of Lansing, this 21ST day of April, 2009.
	, Director

CERTIFICATE OF DESIGNATIONS

OF

FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES B

OF

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

Birmingham Bloomfield Bancshares, Inc., a corporation organized and existing under the laws of the State of Michigan (the “Issuer”) in accordance with the provisions of Section 302 of the Michigan Business Corporation Act, does hereby certify:

The board of directors of the Issuer (the “Board of Directors”), in accordance with the articles of incorporation and bylaws of the Issuer and applicable law, adopted the following resolution on March 16, 2009 creating a series of 82 shares of Preferred Stock of the Issuer designated as “Fixed Rate Cumulative Perpetual Preferred Stock, Series B”.

RESOLVED, that pursuant to the provisions of the articles of incorporation and the bylaws of the Issuer and applicable law, a series of Preferred Stock, no par value per share, of the Issuer be and hereby is created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

Part 1. Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Issuer a series of preferred stock designated as the “Fixed Rate Cumulative Perpetual Preferred Stock, Series B” (the “Designated Preferred Stock”) The authorized number of shares of Designated Preferred Stock shall be 82.

Part 2. Standard Provisions. The Standard Provisions contained in Schedule A attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part of this Certificate of Designations to the same extent as if such provisions had been set forth in full herein.

Part. 3. Definitions. The following terms are used in this Certificate of Designations (including the Standard Provisions in Schedule A hereto) as defined below:

(a) “Common Stock” means the common stock, no par value per share, of the Issuer.

(b) “Dividend Payment Date” means February 15, May 15, August 15 and November 15 of each year.

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(c) “Junior Stock” means the Common Stock, and any other class or series of stock of the Issuer the terms of which expressly provide that it ranks junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Issuer.

(d) “Liquidation Amount” means $1,000 per share of Designated Preferred Stock.

(e) “Minimum Amount” means $20,500.

(f) “Parity Stock” means any class or series of stock of the Issuer (other than Designated Preferred Stock) the terms or which do not expressly provide that such class or series will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Issuer (in each case without regard to whether dividends accrue cumulatively or non-cumulatively). Without limiting the foregoing, Parity Stock shall include the Issuer’s UST Preferred Stock.

(g) “Signing Date” means the Original Issue Date.

(h) “UST Preferred Stock” means the Issuer’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A.

Part 4. Certain Voting Matters. Holders of shares of Designated Preferred Stock will be entitled to one vote for each such share on any matter on which holders of Designated Preferred Stock are entitled to vote, including any action by written consent.

IN WITNESS WHEREOF, Birmingham Bloomfield Bancshares, Inc. has caused this Certificate of Designations to be signed by Robert E. Farr, its President and Chief Executive Officer, this 21st day of April, 2009.

Birmingham Bloomfield Bancshares, Inc.
By:
Name:	Robert E. Farr
Title:	President and Chief Executive Officer

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Schedule A

STANDARD PROVISIONS

Section 1. General Matters. Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock. The Designated Preferred Stock shall be perpetual, subject to the provisions of Section 5 of these Standard Provisions that form a part of the Certificate of Designations. The Designated Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Issuer.

Section 2. Standard Definitions. As used herein with respect to Designated Preferred Stock:

(a) “Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Issuer as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.

(b) “Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Issuer’s stockholders.

(c) “Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close.

(d) “Bylaws” means the bylaws of the Issuer, as they may be amended from time to time.

(e) “Certificate of Designations” means the Certificate of Designations or comparable instrument relating to the Designated Preferred Stock, of which these Standard Provisions form a part, as it may be amended from time to time.

(f) “Charter” means the Issuer’s certificate or articles of incorporation, articles of association, or similar organizational document.

(g) “Dividend Period” has the meaning set forth in Section 3(a).

(h) “Dividend Record Date” has the meaning set forth in Section 3(a).

(i) “Liquidation Preference” has the meaning set forth in Section 4(a).

(j) “Original Issue Date” means the date on which shares of Designated Preferred Stock are first issued.

(k) “Preferred Director” has the meaning set forth in Section 7(b).

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(l) “Preferred Stock” means any and all series of preferred stock of the Issuer, including the Designated Preferred Stock.

(m) “Qualified Equity Offering” means the sale and issuance for cash by the Issuer to persons other than the Issuer or any of its subsidiaries after the Original Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock, that, in each case, qualify as and may be included in Tier 1 capital of the Issuer at the time of issuance under the applicable risk-based capital guidelines of the Issuer’s Appropriate Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or arrangements entered into, or pursuant to financing plans which were publicly announced, on or prior to November 17, 2008).

(n) “Standard Provisions” mean these Standard Provisions that form a part of the Certificate of Designations relating to the Designated Preferred Stock.

(o) “Successor Preferred Stock” has the meaning set forth in Section 5(a).

(p) “Voting Parity Stock” mean, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified in Sections 7(a) and 7(b) of these Standard Provisions that form a part of the Certificate of Designations, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter.

Section 3. Dividends.

(a) Rate. Holders of Designated Preferred Stock shall be entitled to receive, on each share of Designated Preferred Stock if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, cumulative cash dividends with respect to each Dividend Period (as defined below) at a per annum rate of 9.0% on (i) the Liquidation Amount per share of Designated Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period on such share of Designated Preferred Stock, if any. Such dividends shall begin to accrue and be cumulative from the Original Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Issue Date. In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. The period from and including any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period”, provided that the initial Dividend Period shall be the period from and including the Original Issue Date to, but excluding, the next Dividend Payment Date.

Dividends that are payable on Designated Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on Designated Preferred Stock on any date prior to the end of a

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Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month.

Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Issuer on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.

Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designations).

(b) Priority of Dividends. So long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Issuer or any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date). The foregoing limitation shall not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or other Junior Stock in connection with the administration of any employee benefit plan in the ordinary course of business and consistent with past practice; (ii) the acquisition by the Issuer or any of its subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Issuer or any of its subsidiaries), including as trustees or custodians; and (iii) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case, solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock.

When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Designated Preferred Stock and any shares of Parity Stock. All dividends declared on Designated Preferred Stock and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend

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payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Designated Preferred Stock (including, if applicable as provided in Section 3(a) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to each other. If the Board of Directors or a duly authorized committee of the Board of Directors determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Issuer will provide written notice to the holders of Designated Preferred Stock prior to such Dividend Payment Date.

Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends.

Section 4. Liquidation Rights.

(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Issuer, whether voluntary or involuntary, holders of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Issuer or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Issuer, subject to the rights of any creditors of the Issuer, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Issuer ranking junior to Designated Preferred Stock as to such distribution, payment in full in an amount equal to the sum of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount), whether or not declared, to the date of payment (such amounts collectively, the “Liquidation Preference”).

(b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Issuer or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as to such distribution, holders of Designated Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled.

(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as to such

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distribution has been paid in full, the holders of other stock of the Issuer shall be entitled to receive all remaining assets of the Issuer (or proceeds thereof) according to their respective rights and preferences.

(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Issuer with any other corporation or other entity, including a merger or consolidation in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Issuer, shall not constitute a liquidation, dissolution or winding up of the Issuer.

Section 5. Redemption.

(a) Optional Redemption. Except as provided below, the Designated Preferred Stock may not be redeemed prior to the later of (i) first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date; and (ii) the date on which all outstanding shares of UST Preferred Stock have been redeemed, repurchased or otherwise acquired by the Issuer. On or after the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption.

Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency and subject to the requirement that all outstanding shares of UST Preferred Stock shall previously have been redeemed, repurchased or otherwise acquired by the Issuer, may redeem, in whole or in part, at anytime and from time to time, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption; provided that (x) the Issuer (or any successor by Business Combination) has received aggregate gross proceeds of not less than the Minimum Amount (plus the “Minimum Amount” as defined in the relevant certificate of designations for each other outstanding series of preferred stock of such successor that was originally issued to the United States Department of the Treasury (the “Successor Preferred Stock”) in connection with the Troubled Asset Relief Program Capital Purchase Program) from one or more Qualified Equity Offerings (including Qualified Equity Offerings of such successor), and (y) the aggregate redemption price of the Designated Preferred Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the aggregate net cash proceeds received by the Issuer (or any

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successor by Business Combination) from such Qualified Equity Offerings (including Qualified Equity Offerings of such successor).

The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Issuer or its agent. Any declared but unpaid dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above.

(b) No Sinking Fund. The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Designated Preferred Stock will have no right to require redemption or repurchase of any shares of Designated Preferred Stock.

(c) Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Issuer. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Designated Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility. Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(d) Partial Redemption. In case of any redemption of part of the shares of Designated Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions hereof, the Board of Directors or a duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Issuer, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of

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Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shell forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Issuer, after which time the holders of the shares so called for redemption shall look only to the Issuer for payment of the redemption price of such shares.

(f) Status of Redeemed Shares. Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Issuer shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Designated Preferred Stock).

Section 6. Conversion. Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities.

Section 7. Voting Rights.

(a) General. The holders of Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law.

(b) Preferred Stock Directors. Whenever, at any time or times, dividends payable on the shares of Designated Preferred Stock have not been paid for an aggregate of six quarterly Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Issuer shall automatically be increased by two and the holders of the Designated Preferred Stock shall have the right, with holders of shares of any one or more other classes or series of Voting Parity Stock outstanding at the time, voting together as a class, to elect two directors (hereinafter the “Preferred Directors” and each a “Preferred Director”) to fill such newly created directorships at the Issuer’s next annual meeting of stockholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of stockholders until all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been declared and paid in full at which time such right shall terminate with respect to the Designated Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Issuer to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Issuer may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any termination of the right of the holders of shares of Designated Preferred Stock and Voting Parity Stock as a class to vote for directors as provided above, the Preferred Directors shall cease to be

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qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the holders a majority of the shares of Designated Preferred Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock, to the extent the voting rights of such holders described above are then exercisable. If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.

(c) Class Voting Rights as to Particular Matters. So long as any shares of Designated Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter, the vote or consent of the holders of at least 66 2/3% of the shares of Designated Preferred Stock at the time outstanding, voting as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of Designations for the Designated Preferred Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Issuer ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Issuer;

(ii) Amendment of Designated Preferred Stock. Any amendment, alteration or repeal of any provision of the Certificate of Designations for the Designated Preferred Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 7(c)(iii) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock; or

(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolidation of the Issuer with another corporation or other entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Issuer is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Designated Preferred Stock immediately prior to such consummation, taken as a whole;

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provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Issuer to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Issuer will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Designated Preferred Stock.

(d) Changes after Provision for Redemption. No vote or consent of the holders of Designated Preferred Stock shall be required pursuant to Section 7(c) above if, at or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above.

(e) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Designated Preferred Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the rules of any national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time.

Section 8. Record Holders. To the fullest extent permitted by applicable law, the Issuer and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Issuer nor such transfer agent shall be affected by any notice to the contrary.

Section 9. Notices. All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility.

Section 10. No Preemptive Rights. No share of Designated Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Issuer, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

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Section 11. Replacement Certificates. The Issuer shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Issuer. The Issuer shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Issuer of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Issuer.

Section 12. Other Rights. The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof other than as set forth herein or in the Charter or as provided by applicable law.

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Michigan Department of Energy, Labor & Economic Growth

Filing Endorsement

This is to Certify that the CERTIFICATE OF AMENDMENT - CORPORATION

for

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

ID NUMBER: 10830D

received by facsimile transmission on December 15, 2009 is hereby endorsed

Filed on December 15, 2009 by the Administrator.

The document is effective on the date filed, unless a subsequent effective date within 90 days after received date is stated in the document.

	In testimony whereof, I have hereunto set my hand and affixed the Seal of the Department, in the City of Lansing, this 15TH day of December, 2009.

Director

CERTIFICATE OF DESIGNATIONS

OF

FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES C

OF

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

Birmingham Bloomfield Bancshares, Inc., a corporation organized and existing under the laws of the State of Michigan (the “Issuer”), in accordance with the provisions of Section 302 of the Michigan Business Corporation Act, does hereby certify:

The board of directors of the Issuer (the “Board of Directors”), in accordance with the articles of incorporation and bylaws of the Issuer and applicable law, adopted the following resolution on December 14, 2009 creating a series of 1,744 shares of Preferred Stock of the Issuer designated as “Fixed Rate Cumulative Perpetual Preferred Stocks Series C”.

RESOLVED, that pursuant to the provisions of the articles of incorporation and the bylaws of the Issuer and applicable law, a series of Preferred Stock, no par value per share, of the Issuer be and hereby is created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

Part 1. Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Issuer a series of preferred stock designated as the “Fixed Rate Cumulative Perpetual Preferred Stock, Series C” (the “Designated Preferred Stock”). The authorized number of shares of Designated Preferred Stock shall be 1,744.

Part 2. Standard Provisions. The Standard Provisions contained in Schedule A attached hereto are incorporated herein by reference in their entirely and shall be deemed to be a part of this Certificate of Designations to the same extent as if such provisions had been set forth in full herein.

Part 3. Definitions. The following terms are used in this Certificate of Designations (including the Standard Provisions in Schedule A hereto) as defined below:

(a) “Common Stock” means the common stock, no par value per share, of the Issuer.

(b) “Dividend Payment Date” means February 15, May 15, August 15 and November 15 of each year.

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(c) “Junior Stock” means the Common Stock, and any other class or series of stock of the Issuer the terms of which expressly provide that it ranks junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Issuer.

(d) “Liquidation Amount” means $1,000 per share of Designated Preferred Stock.

(e) “Minimum Amount” means $436,000.

(f) “Parity Stock” means any class or series of stock of the Issuer (other than Designated Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Issuer (in each case without regard to whether dividends accrue cumulatively or non-cumulatively). Without limiting the foregoing, Parity Stock shall include the Issuer’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A and Issuer’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B.

(g) “Signing Date” means, the Original Issue Date.

Part 4. Certain Voting Matters. Holders of shares of Designated Preferred Stock will be entitled to one vote for each such share on any matter on which holders of Designated Preferred Stock are entitled to vote, including any action by written consent.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, Birmingham Bloomfield Bancshares, Inc. has caused this Certificate of Designations to be signed by Robert E. Farr, its President and Chief Executive Officer, this 15th day of December, 2009.

BIRMINGHAM BLOOMFIELD
BANCSHARES, INC.
By:
Name:	Robert E. Farr
Title:	President and Chief Executive Officer

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Schedule A

STANDARD PROVISIONS

Section 1. General Matters. Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock. The Designated Preferred Stock shall be perpetual, subject to the provisions of Section 5 of these Standard Provisions that form a part of the Certificate of Designations. The Designated Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Issuer.

Section 2. Standard Definitions. As used herein with respect to Designated Preferred Stock:

(a) “Applicable Dividend Rate” means (i) during the period from the Original Issue Date to, but excluding, the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 5% per annum and (ii) from and after the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 9% per annum.

(b) “Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Issuer as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q), or any successor provision.

(c) “Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Issuer’s stockholders.

(d) “Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close.

(e) “Bylaws” means the bylaws of the Issuer, as they may be amended from time to time.

(f) “Certificate of Designations” means the Certificate of Designations or comparable instrument relating to the Designated Preferred Stock, of which these Standard Provisions form a part, as it may be amended from time to time.

(g) “Charter” means the issuer’s certificate or articles of incorporation, articles of association, or similar organizational document.

(h) “Dividend Period” has the meaning set forth in Section 3(a).

(i) “Dividend Record Date” has the meaning set forth in Section 3(a).

(j) “Liquidation Preference” has the meaning set forth in Section 4(a).

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(k) “Original Issue Date” means the date on which shares of Designated Preferred Stock are first issued.

(l) “Preferred Director” has the meaning set forth in Section 7(b).

(m) “Preferred Stock” means any and all series of preferred stock of the Issuer, including the Designated Preferred Stock.

(n) “Qualified Equity Offering” means the sale and issuance for cash by the Issuer to persons other than the Issuer or any of its subsidiaries after the Original Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock, that, in each case, qualify as and may be included in Tier 1 capital of the Issuer at the time of issuance under the applicable risk-based capital guidelines of the Issuer’s Appropriate Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or arrangements entered into, or pursuant to financing plans which were publicly announced, on or prior to November 17, 2008).

(o) “Standard Provisions” mean these Standard Provisions that form a part of the Certificate of Designations relating to the Designated Preferred Stock.

(p) “Successor Preferred Stock” has the meaning set forth in Section 5(a).

(q) “Voting Parity Stock” means, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified in Sections 7(a) and 7(b) of these Standard Provisions that form a part of the Certificate of Designations, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter.

Section 3. Dividends.

(a) Rate. Holders of Designated Preferred Stock shall be entitled to receive, on each share of Designated Preferred Stock if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, cumulative cash dividends with respect to each Dividend Period (as defined below) at a rate per annum equal to the Applicable Dividend Rate on (i) the Liquidation Amount per share of Designated Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period on such share of Designated Preferred Stock, if any. Such dividends shall begin to accrue and be cumulative from the Original Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Issue Date. In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. The period from and including any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period”, provided that the initial

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Dividend Period shall be the period from and including the Original Issue Date to, but excluding, the next Dividend Payment Date.

Dividends that are payable on Designated Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on Designated Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month.

Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Issuer on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.

Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designations).

(b) Priority of Dividends. So long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Issuer or any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date). The foregoing limitation shall not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or other Junior Stock in connection with the administration of any employee benefit plan in the ordinary course of business and consistent with past practice; (ii) the acquisition by the Issuer or any of its subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Issuer or any of its subsidiaries), including as trustees or custodians; and (iii) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case, solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock.

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When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Designated Preferred Stock and any shares of Parity Stock, all dividends declared on Designated Preferred Stock and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Designated Preferred Stock (including, if applicable as provided in Section 3(a) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to each other. If the Board of Directors or a duly authorized committee of the Board of Directors determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Issuer will provide written notice to the holders of Designated Preferred Stock prior to such Dividend Payment Date.

Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends.

Section 4. Liquidation Rights.

(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Issuer, whether voluntary or involuntary, holders of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Issuer or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Issuer, subject to the rights of any creditors of the Issuer, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Issuer ranking junior to Designated Preferred Stock as to such distribution, payment in full in an amount equal to the sum of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount), whether or not declared, to the date of payment (such amounts collectively, the “Liquidation Preference”).

(b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Issuer or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as

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to such distribution, holders of Designated Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled.

(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as to such distribution has been paid in full, the holders of other stock of the Issuer shall be entitled to receive all remaining assets of the Issuer (or proceeds thereof) according to their respective rights and preferences.

(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Issuer with any other corporation or other entity, including a merger or consolidation, in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Issuer, shall not constitute a liquidation, dissolution or winding up of the Issuer.

Section 5. Redemption.

(a) Optional Redemption. Except as provided below, the Designated Preferred Stock may not be redeemed prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date. On or after the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption.

Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption; provided that (x) the Issuer (or any successor by Business Combination) has received aggregate gross proceeds of not less than the Minimum Amount (plus the “Minimum Amount” as defined in the relevant certificate of designations for each other outstanding series of preferred stock of such successor that was originally issued to the United States Department of the Treasury (the “Successor Preferred Stock”) in connection with the Troubled Asset Relief Program Capital Purchase Program) from one or more Qualified Equity Offerings (including Qualified Equity Offerings of such successor), and (y) the aggregate redemption price of the Designated Preferred

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Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the aggregate net cash proceeds received by the Issuer (or any successor by Business Combination) from such Qualified Equity Offerings (including Qualified Equity Offerings of such successor).

The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Issuer or its agent. Any declared but unpaid dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above.

(b) No Sinking Fund. The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Designated Preferred Stock will have no right to require redemption or repurchase of any shares of Designated Preferred Stock.

(c) Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Issuer. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Designated Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility. Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(d) Partial Redemption. In case of any redemption of part of the shares of Designated Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions hereof, the Board of Directors or a duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption

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have been deposited by the Issuer, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Issuer, after which time the holders of the shares so called for redemption shall look only to the Issuer for payment of the redemption price of such shares.

(f) Status of Redeemed Shares. Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Issuer shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Designated Preferred Stock).

Section 6. Conversion. Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities.

Section 7. Voting Rights.

(a) General. The holders of Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law.

(b) Preferred Stock Directors. Whenever, at any time or times, dividends payable on the shares of Designated Preferred Stock have not been paid for an aggregate of six quarterly Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Issuer shall automatically be increased by two and the holders of the Designated Preferred Stock shall have the right, with holders of shares of any one or more other classes or series of Voting Parity Stock outstanding at the time, voting together as a class, to elect two directors (hereinafter the “Preferred Directors” and each a “Preferred Director”) to fill such newly created directorships at the Issuer’s next annual meeting of stockholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of stockholders until all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been declared and paid in full at which time such right shall terminate with respect to the Designated Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Issuer to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Issuer may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any

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termination of the right of the holders of shares of Designated Preferred Stock and Voting Parity Stock as a class to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the holders a majority of the shares of Designated Preferred Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock, to the extent the voting rights of such holders described above are then exercisable. If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.

(c) Class Voting Rights as to Particular Matters. So long as any shares of Designated Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter, the vote or consent of the holders of at least 66 2/3% of the shares of Designated Preferred Stock at the time outstanding, voting as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of Designations for the Designated Preferred Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of, any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Issuer ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Issuer;

(ii) Amendment of Designated Preferred Stock. Any amendment, alteration or repeal of any provision of the Certificate of Designations for the Designated Preferred Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 7(c)(iii) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock; or

(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolidation of the Issuer with another corporation or other entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Issuer is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate patent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions

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thereof, of Designated Preferred Stock immediately prior to such consummation, taken as a whole;

provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Issuer to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Issuer will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Designated Preferred Stock.

(d) Changes after Provision for Redemption. No vote or consent of the holders of Designated Preferred Stock shall be required pursuant to Section 7(c) above if, at or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above.

(e) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Designated Preferred Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the rules of any national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time.

Section 8. Record Holders. To the fullest extent permitted by applicable law, the Issuer and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Issuer nor such transfer agent shall be affected by any notice to the contrary.

Section 9. Notices. All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility.

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Section 10. No Preemptive Rights. No share of Designated Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Issuer, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

Section 11. Replacement Certificates. The Issuer shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Issuer. The Issuer shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Issuer of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Issuer.

Section 12. Other Rights. The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter or as provided by applicable law.

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Administrator

Bureau of Commercial

CERTIFICATE OF DESIGNATION

OF

SENIOR NON-CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES D

OF

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

Birmingham Bloomfield Bancshares, Inc., a corporation organized and existing under the laws of the Michigan (the “Issuer”), in accordance with the provisions of Section 302 of the Michigan Business Corporation Act, does hereby certify:

The board of directors of the Issuer (the “Board of Directors”) or an applicable committee of the Board of Directors, in accordance with the articles of incorporation of the Issuer and applicable law, adopted the following resolution on July 18, 2011 creating a series of 4,621 shares of Preferred Stock of the Issuer designated as “Senior Non-Cumulative Perpetual Preferred Stock Series D”.

RESOLVED, that pursuant to the provisions of the articles of incorporation and the bylaws of the Issuer and applicable law, a series of Preferred Stock, par value no per share, of the Issuer be and hereby is created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series are as follows:

Part 1. Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Issuer a series of preferred stock designated as the “Senior Non-Cumulative Perpetual Preferred Stock, Series D” (the “Designated Preferred Stock”). The authorized number of shares of Designated Preferred Stock shall be 4,621.

Part 2. Standard Provisions. The Standard Provisions contained in Schedule A attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part of this [Certificate of Designation] to the same extent as if such provisions had been set forth in full herein.

Part 3. Definitions. The following terms are used in this [Certificate of Designation] (including the Standard Provisions in Schedule A hereto) as defined below:

(a) “Common Stock” means the common stock, par value no per share, of the Issuer.

(b) “Definitive Agreement” means that certain Securities Purchase Agreement by and between Issuer and Treasury, dated as of the Signing Date.

(c) “ Junior Stock” means the Common Stock, and any other class or series of stock of the Issuer the terms of which expressly provide that it ranks junior to Designated

Preferred Stock as to dividend and redemption rights and/or as to rights on liquidation, dissolution or winding up of the Issuer.

(d) “Liquidation Amount” means $1,000 per share of Designated Preferred Stock.

(e) “Minimum Amount” means (i) the amount equal to twenty-five percent (25%) of the aggregate Liquidation Amount of Designated Preferred Stock issued on the Original Issue Date or (ii) all of the outstanding Designed Preferred Stock, if the aggregate liquidation preference of the outstanding Designated Preferred Stock is less than the amount set forth in the preceding clause(i).

(f) “Parity Stock” means any class or sense of stock of the Issuer (other than Designated Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution of winding up of the Issuer (in each case without regard to whether dividends accrue cumulatively or non-cumulatively). Without limiting the foregoing, Parity Stock shall include the Issuer’s Fixed Rate Cumulative Preferred Stock, Series A, its Fixed Rate Cumulative Preferred Stock, Series B, and its Fixed Rate Cumulative Preferred Stock, Series C.

(g) “Signing Date” means July 28, 2011.

(h) “Treasury” means the United States Department of the Treasury and any successor in interest thereto.

Part 4. Certain Voting Matters. Holders of shares of Designated Preferred Stock will be entitled to one vote for each such share on any matter on which holders of Designated Preferred Stock are entitled to vote, including any action by written consent.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, Birmingham Bloomfield Bancshares, Inc. has caused this Certificate of Designation to be signed by Robert E. Farr, its President, this 19^th day of July, 2011.

BIRMINGHAM BLOOMFIELD     BANCSHARES, INC.
By:
	Name:	Robert E. Farr
	Title:	President

Schedule A

STANDARD PROVISIONS

Section 1. General Matters. Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock. The Designated Preferred Stock shall be perpetual, subject to the provisions of Section 5 of these Standard Provisions that form a part of the Certificate of Designation. The Designated Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution liquidation or winding up of the Issuer, as set forth below.

Section 2. Standard Definitions. As used herein with respect to Designated Preferred Stock:

(a) “Acquiror” in any Holding Company Transaction, means the surviving or resulting entity or its ultimate parent in the case of a merger or consolidation or the transferee in the case of a sale, lease or other transfer in one transaction or a series of related transactions of all or substantially all of the consolidated assets of the Issuer and its subsidiaries, taken as a whole.

(b) “Affiliate” means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with such other person. For purposes of this definition, “control” (including with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any person, means the possession, directly or indirectly through one or more intermediaries, of the power to cause the direction of management and/or policies of such person, whether through the ownership of voting securities by contract or otherwise.

(c) “Applicable Dividend Rate” has the meaning set forth in Section 3(a).

(d) “Appropriate Federal Banking Agency” means the appropriate Federal banking agency” with respect to the Issuer as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.

(e) “Bank Holding Company” means at company registered a such with the Board of Governors of the Federal Reserve System pursuant to 12 U.S.C. §1842 and the regulations of the Board of Governors of the Federal Reserve System thereunder.

(f) “Baseline” means the “Initial Small Business Lending Baseline” set forth on the Initial Supplemental Report (as defined in the Definitive Agreement), subject to adjustment pursuant to Section 3(a).

(g) ‘Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Issuer’s stockholders.

(h) “Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York or the District of Columbia generally are authorized or required by law or other governmental actions to close.

(i) “Bylaws” means the bylaws of the Issuer, as they may be amended from time to time.

(j) “Call Report” has the meaning set forth in the Definitive Agreement.

(k) “Certificate of Designation” means the Certificate of Designation or comparable instrument relating to the Designated Preferred Stock, of which these Standard Provisions form a part, as it may be amended from time to time.

(l) “Charge-Offs” means the net amount of loans charged off by the Issuer or, if the Issuer is a Bank Holding Company or a Saving and Loan Holding Company by the IDI Subsidiary(ies) during quarters that begin on of after the Signing Date determined as follows:

(i) If the issuer or the applicable IDI Subsidiary is a bank, by subtracting (A) the aggregate dollar amount of recoveries reflected on line RIAD4605 of its Call Reports for such quarters from (B) the aggregate dollar amount of charge-offs reflected on line RIADA4635 of its Call Reports for such quarters (without duplication as a result of such dollar amounts being reported on a year-to-date basis); or

(ii) if the Issuer, or the applicable IDI Subsidiary is a thrift, by subtracting (A) the sum of the aggregate dollar amount of recoveries reflected on line VA140 of its Call Reports for such quarters and the aggregate dollar amount of adjustments reflected on line VA150 of its Call Reports for such quarters from (B) the aggregate dollar amount of charge-offs reflected on line VA160 of its Call Reports for such quarters.

(m) “Charter” means the issuer’s certificate or articles of incorporation, articles of association, or similar organizational document.

(n) “CPP Lending Incentive Fee” has the meaning set forth in Section 3(e)

(o) “Current Period” has the meaning set forth in Section 3(a)(i)(2)

(p) “Dividend Payment Date” means January 1, April 1, July 1, and October 1 of each year.

(q) “Dividend Period” means the period from and including any Dividend Payment Date to, but excluding, the next Dividend Payment Date, provided, however, in initial Dividend period shall be the period from and including the Original Issue Date to but excluding, the next Dividend Payment Date (the “Initial Dividend Period”).

(r) “Dividend Record Date” has the meaning set forth in Section 3(b).

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(s) “Dividend Reference Period” has the meaning set forth in Section 3(a) (i) (2)

(t) “GAAP” means generally accepted accounting principles in the United States

(u) “Holding Company Preferred Stock” has the meaning set forth in Section 7(c)(v),

(v) “Holding Company Transaction” means the occurrence of (a) any transaction (including without limitation any acquisition merger consolidation) the result of which is that a person or group within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended (i) becomes the direct or indirect ultimate beneficial owner as defined in Rule 13d-3 under that Act, of common equity if the Issue representing more than 50% of the voting power of the Outstanding Common Stock or (ii) is otherwise required to consolidate the Issuer of purposes of generally accepted accounting principles in the United States, or (b) any consolidation or merger of the Issuer or similar transaction or any sale lease or other transaction or a series of related transactions of all the substantially all of the consolidates assets of the Issuer’s subsidiaries provided that in the case of either clause(a) or (b), the Issuer or the Acquiror is or become a Bank Holding Company or Savings and Loan Holding Company.

(w) “IDI Subsidiary” means any Issuer subsidiary that is an insured depository institution

(x) “Increase in OSBL” means

(i) with respect to the first (1st) Dividend Period, the difference obtained by subtracting (A) the Baseline from (B) QSBL set forth in the Initial Supplemental Report ( as defined in the Definitive Agreement) and

(ii) with respect to each subsequent Dividend Period, the difference obtained by subtracting(A) the Baseline from (B) QSBL for the Dividend Reference Period in the Current Period.

(y) “Initial Dividend Period” has the meaning set forth in the definition of Dividend period

(z) “Issuer Subsidiary” means any subsidiary of the Issuer

(aa) “Liquidation Preference” has the meaning set forth in Section 4(a)

(bb) “Non Qualifying Portion Percentage” means with respect to any particular Dividend period, the percentage obtained by subtracting the Qualifying Portion Percentage from (1)

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(cc) “Original Issue Date” means the date on which shares of Designated Preferred Stock are first issued.

(dd) “Percentage Change in OSBL” has the meaning set forth in Section 3(a)(ii).

(ee) “Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.

(ff) “Preferred Director” has the meaning set forth in Section 7(c).

(gg) “Preferred Stock” means any and all series of preferred stock of the Issuer, including the Designated Preferred Stock.

(hh) “Previously Acquired Preferred Shares” has the meaning set forth in the Definitive Agreement.

(ii) “Private Capital” means, if the Issuer is Matching Private Investment Supported (as defined in the Definitive Agreement), the equity capital received by the Issuer or the applicable Affiliate of the Issuer from one or more non-governmental investors in accordance with Section 1.3(m) of the Definitive Agreement.

(jj) “Publicly-traded” means a company that (i) has a class of securities that is traded on a national securities exchange and (ii) is required to file periodic reports with either the Securities and Exchange Commission or its primary federal bank regulator.

(kk) “Qualified Small Business Lending” or “OSBL” means, with respect to any particular Dividend Period, the “Quarter-End Adjusted Qualified Small Business Lending” for such Dividend Period set forth in the applicable Supplemental Report.

(ll) “Qualifying Portion Percentage” means, with respect to any particular Dividend Period, the percentage obtained by dividing (i) the Increase in QSBL for such Dividend Period by (ii) the aggregate Liquidation Amount of then-outstanding Designated Preferred Stock.

(mm) “Savings and Loan Holding Company” means acompany registered as such with the Office of Thrift Supervision pursuant to 12 U.S.C. §1467 a(b) and the regulations of the Office of Thrift Supervision promulgated thereunder.

(nn) “Share Dilution Amount” means the increase in the number of diluted share outstanding (determined in accordance with GAAP applied on a consistent basis, and as measured from the date of the Issuer’s most recent consolidated financial statements prior to the Signing Date) resulting from the grant, vesting or exercise of equity-based compensation to employees and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction.

(oo) “Signing Date Tier 1 Capital Amount” means $6,160,125.

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(pp) “Standard Provisions” mean these Standard Provisions that form a part of the Certificate of Designation relating to the Designated Preferred Stock.

(qq) “Supplemental Report” means a Supplemental Report delivered by the Issuer to Treasury pursuant to the Definitive Agreement.

(rr) “Tier 1 Dividend Threshold” means, as of any particular date, the result of the following formula:

((A+B-C) * 0.9) –D

where:

A = Signing Date Tier 1 Capital Amount;

B = the aggregate liquidation Amount of the Designated Preferred Stock issued to Treasury;

C = the aggregate amount of Charge Offs since the Signing Date; and

D = (i) beginning on the first day of the eleventh (11th) Dividend Period, the amount equal to ten percent (10%) of the aggregate Liquidation Amount of the Designated Preferred Stock issued to Treasury as of the Effective Date (without regard to any redemptions of Designated Preferred Stock that may have occurred thereafter) for every one percent (1%) of positive Percentage Change in Qualified Small Business Lending between the ninth (9^th) Dividend Period and the Baseline; and

(ii) zero (0) at all other times.

(ss) “Voting Parity Stock” means, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified in Section 7(d) of these Standard Provisions that form a part of the Certificate of Designation, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter.

Section 3. Dividends.

(a) Rate.

(i) The “Applicable Dividend Rate” shall be determined as follows:

(1) With respect to the Initial Dividend Period, the Applicable Dividend Rate shall be one percent (1%).

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(2) With respect to each of the second (2nd) through the tenth (10th) Dividend Periods, inclusive (in each case, the “Current Period”), the Applicable Dividend Rate shall be:

(A) (x) the applicable rate set forth in column “A” of the table in Section 3(a) (iii), based on the Percentage Change in QSBL between the Dividend Period that was two Dividend Periods prior to the Current Period (the “Dividend Reference Period” and the baseline, multiplied by (y) the Qualifying Portion Percentage plus.

(B) (x) five percent (5%) multiplied by (y) the Non-Qualifying Portion percentage. calculated as of the last day of the ninth (9th) dividend period.

In each such case, the Applicable Dividend Rate shall be determined at the time the issuer delivers a complete and accurate Supplemental Report to Treasury with respect to the Dividend Reference Period.

(3) With respect to the eleventh (11th) through the eighteenth (18th) Dividend Periods, inclusive, and that portion of the nineteenth (19th) Dividend Period prior to but not including , the four and one half (4 ¹/2) years anniversary of the Original Issue Date, the Applicable Dividend Rate shall be:

(A) (x) the applicable rate set forth on column “B” of the table in Section 3(a)(iii) based on the Percentage Change in QSBL between the ninth (9th) Dividend Period and the baseline multiplied by (y) the Qualifying Portion Percentage, calculated as of the last day of the ninth (9th) Dividend Period plus.

(B) (x) five percent (5%) multiplied by (y) the Non-Qualifying Portion Percentage calculated as of the last day of the ninth (9th) Dividend Period.

In such case, the applicable dividend rate shall be at the time the issuer delivers a complete and accurate Supplemental Report to Treasury with respect to the ninth (9th) Dividend Period.

(4) With respect to (A) that portion, of the nineteenth (19th) Dividend Period beginning on the four and one half (4 ¹/2) years anniversary of the Original issue Date and (B) all Dividend Periods thereafter the Applicable Dividend Rate shall be nine percent (9%).

(5) Notwithstanding anything herein to the contrary, if the Issuer fails to submit a Supplemental Report that is due during any of the second (2nd) through tenth (10th)

Dividend Periods on or before the sixtieth (60^th) day of such Dividend Period, the Issuer’s QSBL for the Dividend Period that would have been covered by such Supplemental Report shall be zero (0) for purposes hereof.

(6) Notwithstanding anything herein to the contrary, but subject to Section 3(a)(i)(5) above, if the Issuer fails to submit the Supplemental Report that is due during the tenth (10th) Dividend Period, the Issuer’s QSBL shall be zero (0) for purposes of calculating the Applicable Dividend Rate pursuant to Section 3(a)(i)(3) and (4). The Applicable Dividend Rate shall be re-determined effective as of the first day of the calendar quarter following the date such failure is remedied, provided it is remedied prior to the four and one half (41/2) anniversary of the Original Issue Date.

(7) Notwithstanding anything herein to the contrary, if the issuer fails to submit any of the certificates required by Sections 3.1(d)(ii) 3.1 (d)(iii) of the Definitive Agreement when and as required thereby, the Issuer’s QSBL shall be zero (0) for purposes of calculating the Applicable Dividend Rate pursuant to Section 3(a)(i)(2) or (3) above until such failure is remedied.

(ii) The “Percentage Change in Qualified Lending” between any given Dividend Period and the Baseline shall be the result of the following formula expressed as a percentage:

(	(QSBL for the Dividend Period – Baseline)	)	x	100
	Baseline

(iii) The following table shall be used for determining the Applicable Dividend Rate:

	The Applicable Dividend Rate Shall be
If the percentage change in Qualified Lending is:	Column “A” (each of the 2nd – 10th Dividend Periods)			Column “B” (11th – 18th and the first part of the 19th Dividend Periods)
0% or less		5	%		7	%
More than 0%, but less than 2.5%		5	%		5	%
2.5% or more, but less than 5%		4	%		4	%
5% or more, but less than 7.5%		3	%		3	%
7.5% or more, but less than 10%		2	%		2	%

10% or more 1 %  1 % 

(iv) If the Issuer consummates a Business Combination, a purchase of loans or a purchase of participations in loans and the Designated Preferred Stock remains outstanding thereafter, then the Baseline shall thereafter be the “Quarter-End-Adjusted Small Business Lending Baseline” set forth on the Quarterly Supplemental Report (as defined in the Definitive Agreement).

(b) Payment. Holders of Designated Preferred Stock shall be entitled to receive on each share of Designated preferred Stock if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, non-cumulative cash dividends with respect to:

(i) each Dividend Period (other than the Initial Dividend Period) at a rate equal to one-fourth (1/4) of the Applicable Dividend Rate with respect to each Dividend Period on the Liquidation Amount per share of Designated Preferred Stock, and no more, payable quarterly in arrears on each Dividend payment Date; and

(ii) the Initial Dividend Period, on the first such Dividend payment Date to occur at least twenty (20) calendar days after the Original Issue Date, an amount equal to (A) the Applicable Dividend Rate with respect to the Initial Dividend Period multiplied by (B) the number of days from the Original Issue Date to the last day of the Initial Dividend Period (inclusive) divided by 360.

In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. For avoidance of doubt, “payable quarterly in arrears” means that, with respect to any particular Dividend Period, dividends being accruing on the first day of such Dividend Period and are payable on the first day of the next Dividend Period.

The amount of dividends payable on Designated preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day-year consisting of four 90-day quarters, and actual days elapsed over a 90-day quarter.

Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Issuer on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day;

Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and

payable on Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designation).

(c) Non-Cumulative. Dividends on shares of Designated Preferred Stock shall be non-cumulative. If the Board of Directors or any duly authorized committee of the Board of Directors does not declare a dividend on the Designated Preferred Stock in respect of any Dividend Period:

(i) the holders of Designated Preferred Stock shall have no right to receive any dividend for such Dividend Period, and the Issuer shall have no obligation to pay a dividend for such Dividend Period, whether or not dividends are declared for any subsequent Dividend Period with respect to the Designated Preferred Stock; and

(ii) the Issuer shall, within five (5) calendar days, deliver to the holders of the Designated Preferred Stock a written notice executed by the Chief Executive Officer and the Chief Financial Officer of the Issuer stating the Board of Directors rationale for not declaring dividends.

(d) Priority of Dividends; Restrictions on Dividends.

(i) Subject to Sections 3(d)(ii), (iii) and (v) and any restrictions imposed by the Appropriate Federal Banking Agency or, if applicable, the Issuer’s state bank supervisor (as defined in Section 3(r) of the Federal Deposit Insurance Act (12) U.S.C. § 1813(q)), so long as any share of Designated Preferred Stock remains outstanding, the Issuer may declare and pay dividends on the Common Stock, any other shares of Junior Stock, or Parity Stock, in each case only if (A) after giving effect to such dividend the Issuer’s Tier 1 capital would be at least equal to the Tier 1 Dividend Threshold, and (B) full dividends on all outstanding shares of Designated Preferred Stock for the most recently completed Dividend Period have been or are contemporaneously declared and paid.

(ii) If a dividend is not declared and paid in full on the Designated Preferred Stock in respect of any Dividend Period, then from the last day of such Dividend Period until the last day of the third (3rd) Dividend Period immediately following it, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Party Stock; provided, however, that in any such Dividend Period in which a dividends is declared and paid on the Designated Preferred Stock, dividends may be paid on Parity Stock to the extent necessary to avoid any material breach of a covenant by which the Issuer is bound.

(iii) When dividends have not been, declared and paid in full for an aggregate of four (4) Dividend Periods or more, and during such time the Issuer was not subject to a regulatory determination that prohibits the declaration and payment of dividends the Issuer shall, within five (5) calendar days of each missed payment, deliver to the holders of the Designated Preferred Stock a certificate executed by at least a majority of the Board of Directors stating that Board of Directors used its best efforts

to declare and pay such dividend in a manner consistent with (A) safe and sound banking practices and (B) the directors’ fiduciary obligations.

(iv) Subject to the foregoing and Section 3(e) below and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock , from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends.

(v) If the Issuer is not Publicly-Traded, then after the tenth (10th) anniversary of the Signing Date, so long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock.

(e) Special Lending Incentive Fee Related to CPP. If Treasury held Previously Acquired Preferred Shares immediately prior to the Original Issue Date and the Issuer did not apply to Treasury to redeem such Previously Acquired Preferred Shares prior to December 16, 2010, and if the Issuer’s Supplemental Report with respect to he ninth (9th) Dividend Period reflects an amount of Qualified Small Business Lending that is less than or equal to the Baseline (or if the Issuer fails to timely file a Supplemental Report with respect to the ninth (9th) Dividend Period), then beginning on July 1, 2014 and on all Dividend Payment Dates thereafter ending on April 1,2016 the Issuer shall pay to the Holders of Designated Preferred Stock, on each share of Designated Preferred Stock, but only out of assets legally available therefore, a fee equal to 0.5% of the Liquidation Amount per share of Designated Preferred Stock (“CPP Lending Incentive Fee”). All references in Section 3(d) to “dividends” on the Designated Preferred Stock shall be deemed to include the CPP Lending Incentive Fee.

Section 4. Liquidation Rights.

(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Issuer, whether voluntary or involuntary, holders of Designated preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Issuer , subject to the rights of any creditors of the Issuer, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Issuer ranking junior to Designated Preferred Stock as to such distribution, payment in full in an amount equal to the sum of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends on each such share (such amounts collectively, the “Liquidation Preference”).

(b) Partial Payment. If in any distribution described in Section 4(a) above the asset of the Issuer or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as to such distribution holders of Designated Preferred Stock and the holders of such other

Stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled.

(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as to such distribution has been paid in full, the holders of other stock of the Issuer shall be entitled to receive all remaining assets of the Issuer (or proceeds thereof) according to their respective rights and preferences.

(d) Merger, Consolidation and Sale of Assets Is Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Issuer with any other corporation or other entity, including a merger or consolidation in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Issuer, shall not constitute a liquidation, distribution or winding up of the Issuer.

Section 5. Redemption.

(a) Optional Redemption.

(i) Subject to the other provisions of this Section 5.

(1) The Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding; and

(2) If, after the Signing Date, there is a change in law that modifies the terms of Treasury’s investment in the Designated Preferred Stock or the terms of Treasury’s Small Business Lending Fund program in a materially adverse respect for the Issuer, the Issuer may, after consultation with the Appropriate Federal Banking Agency, redeem all of the shares of Designated Preferred Stock at the time outstanding.

(ii) The per-share redemption price for shares of Designated Preferred Stock shall be equal to the sum of

(1) the Liquidation Amount per share.

(2) the per-share amount of any unpaid dividends for the then current Dividend Period at the Applicable Dividend Rate to, but excluding, the date fixed for redemption (regardless of whether any dividends are actually declared for that Dividend Period, and

(3) the pro rata amount of CPP Lending Incentive Fees for the current Dividend Period.

The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Issuer or its agent. Any declared but unpaid Dividends for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redeem shares on each Dividend date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above.

(b) No Sinking Fund. The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Designated Preferred Stock will have no right to require redemption or repurchase of any shares of Designated Preferred Stock.

(c) Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Issuer. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice in the mailing thereof, to any holder of shares of Designated Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility. Each notice of redemption given to a holder shall state (1) the redemption date; (2) the number of shares of Designated Preferred stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to surrendered for payment of the redemption price.

(d) Partial Redemption. In case of any redemption of part of the shares of Designated Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable, but in any event the shares to be redeemed shall not be, less than the Minimum Amount. Subject to the provisions hereof the Board of Directors or a duly authorized committee thereof shall have full power and authority to prescribe the terms and condition upon which shares of Designated Preferred Stock shall be redeemed from time to time, subject the approval of the Appropriate Federal Banking Agency. If fewer than all the sharers presented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Issuer, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefore, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders there of to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Issuer, after which time the holders of the shares so called for redemption shall look only to the Issuer for payment of the redemption price of such shares.

(f) Status of Redeemed Shares. Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Issuer shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any senses of Preferred stock other than Designated Preferred Stock).

Section 6. Conversion. Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities.

Section 7. Voting Rights.

(a) General. The holders of the Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law.

(b) Board Observation Rights. Whenever, at any time or times, dividends on the shares of Designated Preferred Stock have not been declared and paid in full within five (5) Business Days after each Dividend Payment Date for an aggregate of five (5) Dividend Periods or more, whether or not consecutive, the Issuer shall invite a representative selected by the holders of a majority of the outstanding shares of Designated Preferred Stock, voting as a single class, to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors in connection with such meetings; provided, that the holders of the Designated Preferred Stock shall not be obligated to select such a representative, nor shall such representative, if selected, be obligated to attend any meeting to which he/she is invited. The rights of the holders of the Designated Preferred Stock set forth in this Section 7(b) shall terminate when full dividends have been timely paid on the Designated Preferred Stock for at least four consecutive Dividend Periods, subject to revesting in the event of each and every subsequent default of the character above mentioned.

(c) Preferred Stock Directors. Whenever, at any time or times, (i) dividends on the shares of Designated Preferred Stock have not been declares and paid in full within five

(5) Business Days after each Dividend Payment Date for an aggregate of six (6) Dividend Periods or more, whether or not consecutive, and (ii) the aggregate liquidation preference of the then-outstanding shares of Designated Preferred Stock is greater than or equal to $25,000,000, the authorized number of directors of the Issuer shall automatically be increased by two and the holders of the Designated Preferred Stock, voting as a single class, shall have the right, but not the obligation, to elect two directors (hereinafter the “Preferred Directors” and each a “Preferred Director”) to fill such newly created directorships at the Issuer’s next annual meeting of stockholders (or, if the next annual meeting is not yet scheduled or is scheduled to occur more than thirty days later, the President of the Company shall promptly call a special meeting for that purpose) and at each subsequent annual meeting of stockholders until full dividends have been timely paid on the Designated Preferred Stock for at least four consecutive Dividend Periods, at which time such right shall terminate with respect to the Designated Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Issuer to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Issuer may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any termination of the right of the holders of shares of Designated Preferred Stock to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the holders a majority of the shares of Designated Preferred Stock at the time outstanding voting separately as a class. If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the holders of a majority of the outstanding shares of Designated Preferred Stock, voting as a single class, may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.

(d) Class Voting Rights as to Particular Matters. So long as any shares of Designated Preferred Stock are outstanding in addition to any other vote or consent of stockholders required by law or by the Charter, the written consent of (x) Treasury if Treasury holds any shares of Designated Preferred Stock, or (y) the holders of a majority of the outstanding shares of Designated Preferred Stock, voting as a single class, if Treasury does not hold any shares of Designated Preferred Stock, shall be necessary for effecting or validating.

(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of Designation for the Designated Preferred Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Issuer ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any, liquidation, dissolution or winding up of the Issuer;

(ii) Amendment of Designated Preferred Stock. Any amendment alteration repeal of any provision of the Certificate of Designation for the Designated

Preferred Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 7 (d) (iii) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock;

(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Subject to Section 7(d) (v) below, any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolidation of the Issuer with another corporation of other entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Issuer is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights preferences, privileges and voting powers, and limitations and restrictions thereof that are the same as the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Designated Preferred Stock immediately prior to such consummation, taken as a whole; provided that in all cases, the obligations of the Issuer are assumed (by operation of law or by express written assumption) by the resulting entity or its ultimate parent;

(iv) Certain Asset Sales. Any sale of all, substantially all, or any material portion of, the assets of the Company, if the Designated Preferred Stock will not be redeemed in full contemporaneously with the consummation of such sale and

(v) Holding Company Transactions. Any consummation of a Holding Company Transaction, unless as a result of a Holding Company Transaction each share of Designated Preferred Stock shall be converted into or exchanged for one share with an equal liquidation preference of preference securities of the Issuer or the Acquiror (the “Holding Company Preferred Stock”). Any such Holding Company Preferred Stock shall entitle holders thereof to dividends from the date of issuance of such Holding Company Preferred Stock on terms that are equivalent to the terms set forth herein, and shall have such other rights, preferences, privileges and voting powers, and limitations and restrictions thereof that are the same as the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, ok Designated Preferred Stock immediately prior to such conversion or exchange, taken as a whole;

provided however, that for all purposes of this Section 7(d), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Issuer to other persons prior to the Signing Date, or the creation and issuance or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior or Designated Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Issuer will not be deemed to adversely affect the rights, preferences, privileges and voting powers, and shall not

require the affirmative vote or consent of, the holders of outstanding share of the Designated Preferred Stock.

(e) Changes after Provision for Redemption. No vote or consent of the holders of Designated Preferred Stock shall be required pursuant to Section 7(d) above if, at or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above.

(f) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of holders of Designated Preferred Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any such other aspects or matter with regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the rules of any national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time.

Section 8. Restriction on Redemptions and Repurchases.

(a) Subject to Sections 8(b) and (c), so long as any share of Designated Preferred Stock remains outstanding, the Issuer may repurchase or redeem any Shares of Capital Stock (as defined below), in each case only if (i) after giving effect to such dividend, repurchase or redemption, the Issuer’s Tier 1 capital would be at least equal to the Tier 1 Dividend Threshold and (ii) dividends on all outstanding shares of Designated Preferred Stock for the most recently completed Dividend Period have been or are contemporaneously declared and paid (or have been declared and a sum sufficient for the a payment thereof has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date).

(b) If a dividend is not declared and paid on the Designated Preferred Stock in respect to any Dividend Period, then from the last day of such Dividend Period until the last day of the third (3rd) Dividend Period immediately following it, neither the issuer nor any Issuer Subsidiary shall, redeem, purchase or acquire any shares of Common Stock, Junior Stock, Parity Stock or other capital stock or other equity securities of any kind of the Issuer or any Issuer Subsidiary, or any trust preferred securities issued by the Issuer or any Affiliate of the Issuer (“Capital Stock”), (other than (i) redemptions, purchases, repurchases or other acquisitions of the Designated Preferred Stock and (ii) repurchases of Junior Stock or Common Stock in connection with the administration of any employee benefit plan in the ordinary course of business (including purchases to offset any Share Dilution Amount pursuant to a publicly announced repurchase plan) and consistent with past practice; provided that any purchases to offset the Share Dilution Amount shall in no event exceed the Share Dilution Amount, (iii) the acquisition by the Issuer or any of the Issuer Subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Issuer or any other Issuer Subsidiary,) including as trustees or custodians, (iv) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock or trust preferred securities for or into other

Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case set forth in this clause (iv), solely to the extent required pursuant to binding contractual agreements entered into prior to the Singing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock, (v) redemptions of securities held by the Issuer or any wholly-owned Issuer Subsidiary or (vi) redemptions, purchases or other acquisitions of capital stock or other equity securities of any kind of any Issuer Subsidiary required pursuant to binding contractual agreements entered into prior to (x) if Treasury held Previously Acquired Preferred Shares immediately prior to the Original Issue Date, the original issue date of such Previously Acquired Preferred Shares, or (v) otherwise, the Signing Date).

(c) If the Issuer is not Publicly-Traded, then after the tenth (10th) anniversary of the Singing Date, so long as any share of Designated Preferred Stock remains outstanding, no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Issuer or any of its subsidiaries.

Section 9. No Preemptive Rights. No share of Designated Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Issuer, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

Section 10. References to Line Items of Supplemental Reports. If Treasury modifies the form of Supplemental Report, pursuant to its rights under the Definitive Agreement, and any such, modification includes a change to the caption or number of any line item on the Supplemental Report, then any reference herein to such line item shall thereafter be a reference to such re-captioned or re-numbered line item.

Section 11. Record Holders. To the fullest extent permitted by applicable law, the Issuer and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as the true and lawful owner thereof for all purpose, and neither the Issuer nor such transfer agent shall be affected by any notice to the contrary.

Section 12. Notices. All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Charter of Bylaws or by applicable law. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility.

Section 13. Replacement Certificates. The Issuer shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Issuer. The Issuer shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Issuer of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost together with any indemnity that may be reasonably required by the Issuer.

Section 14. Other Rights. The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter or as provided by applicable law.

Michigan Department of Licensing and Regulatory Affairs

Filing Endorsement

This is to Certify that the CERTIFICATE OF AMENDMENT - CORPORATION

for

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

ID NUMBER: 10830D

received by facsimile transmission on July 29, 2011 is hereby endorsed

Filed on August 1, 2011 by the Administrator.

The document is effective on the date filed, unless a

subsequent effective date within 90 days after

received date is stated in the document.

	In testimony whereof, I have hereunto set my hand and affixed the Seal of the Department, in the City of Lansing, this 1ST day of August, 2011.
	Director

CERTIFICATE ELIMINATING THE CERTIFICATE OF DESIGNATION

WITH RESPECT TO THE FIXED RATE CUMULATIVE PERPETUAL PREFERRED

STOCK, SERIES A, FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK,

SERIES B, AND FIXED RATE PERPETUAL PREFERRED STOCK, SERIES C

OF

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

ID NUMBER 10830D

Pursuant to Section 450.1302 of the Michigan Business Corporation Act

The undersigned DOES HEREBY CERTIFY that:

1. The name of the corporation (hereinafter referred to as the “Corporation”) is Birmingham Bloomfield Bancshares, Inc.

2. The designation of the series of shares of stock of the Corporation to which this certificate relates is Fixed Rate Cumulative Perpetual Preferred Stock, Series A, Fixed Rate Cumulative Perpetual Preferred Stock, Series B, and Fixed Rate Perpetual Preferred Stock, Series C.

3. The voting powers, designations, preferences, rights and the qualifications, limitations and restrictions of each said series of shares of stock were provided for in resolutions adopted by the Board of Directors of the Corporation pursuant to authority expressly vested in it. Certificates setting forth the said resolutions have been heretofore filed with the State of Michigan pursuant to the provisions of Section 450.1302 of the Michigan Business Corporation Act.

4. The Board of Directors of the Corporation has adopted the following resolution:

RESOLVED, that none of the authorized shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, Fixed Rate Cumulative Perpetual Preferred Stock, Series B, and Fixed Rate Perpetual Preferred Stock, Series C are outstanding and there are no other rights, options or warrants issued by the Corporation that could require issuing shares of the series.

FURTHER RESOLVED, that none of the shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, Fixed Rate Cumulative Perpetual Preferred Stock, Series B, and Fixed Rate Perpetual Preferred Stock, Series C will be issued; and

FURTHER RESOLVED, that the proper officers of the Corporation be and hereby authorized to file a certificate setting forth these resolutions with the Michigan Department of Licensing and Regulatory Affairs pursuant to the provisions of Section 450.1302 of the Michigan Business Corporation Act for the purpose of eliminating all reference to the Fixed Rate Cumulative Perpetual Preferred Stock, Series A, Fixed Rate Cumulative Perpetual Preferred Stock, Series B, and Fixed Rate Perpetual Preferred Stock, Series C.

IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its President this 29^th day of July, 2011.

BIRMINGHAM BLOOMFIELD BANCSHARES, INC.
By:
	Robert E. Farr, President

EX-31.1

Exhibit 31.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO

RULES 13A-15(F) AND 15D-15(F) OF THE SECURITIES EXCHANGE ACT

I, Robert E. Farr, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Birmingham Bloomfield Bancshares, Inc.;

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

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

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

Date: November 10, 2011

/s/ Robert E. Farr

Robert E. Farr

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO

RULES 13A-15(F) AND 15D-15(F) OF THE SECURITIES EXCHANGE ACT

I, Thomas H. Dorr, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Birmingham Bloomfield Bancshares, Inc.;

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

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

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

Date: November 10, 2011

/s/ Thomas H. Dorr

Thomas H. Dorr

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO RULES 13A-14(B) OR RULE 15D-14(B) OF THE SECURITIES EXCHANGE

ACT AND 18 U.S.C. §1350

The undersigned hereby certifies, for the purposes of section 1350 of chapter 63 of title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his or her capacity as an officer of Birmingham Bloomfield Bancshares, Inc., that, to his or her knowledge, the Quarterly Report of Birmingham Bloomfield Bancshares, Inc. on Form 10-Q for the period ended September 30, 2011, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of Birmingham Bloomfield Bancshares, Inc. This written statement is being furnished to the Securities and Exchange Commission as an exhibit to such Form 10-Q. A signed original of this statement has been provided to Birmingham Bloomfield Bancshares, Inc. and will be retained by Birmingham Bloomfield Bancshares, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Date: November 10, 2011

/s/ Robert E. Farr

Robert E. Farr

Chief Executive Officer

/s/ Thomas H. Dorr

Thomas H. Dorr

Chief Financial Officer

XML

Consolidated Statements of Condition (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Shareholders' equity
Common stock, par value
Common stock, shares authorized	4,500,000	4,500,000
Common stock, shares issued	1,812,662	1,800,000
Common stock, shares outstanding	1,812,662	1,800,000
Series A Preferred stock
Shareholders' equity
Preferred stock, liquidation value per share	$ 1,000	$ 1,000
Preferred stock, shares authorized	0.05	0.05
Preferred stock, shares issued	1,635	1,635
Preferred stock, shares redeemed	1,635	1,635
Series B Preferred stock
Shareholders' equity
Preferred stock, liquidation value per share	$ 1,000	$ 1,000
Preferred stock, shares authorized	0.09	0.09
Preferred stock, shares issued	82	82
Preferred stock, shares outstanding	82	82
Series C Preferred stock
Shareholders' equity
Preferred stock, liquidation value per share	$ 1,000	$ 1,000
Preferred stock, shares authorized	0.05	0.05
Preferred stock, shares issued	1,744	1,744
Preferred stock, shares outstanding	1,744	1,744
Series D Preferred stock
Shareholders' equity
Preferred stock, liquidation value per share	$ 1,000	$ 1,000
Preferred stock, shares authorized	0.01	0.01
Preferred stock, shares issued	4,621	4,621
Preferred stock, shares outstanding	4,621	4,621

XML

Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Interest Income
Interest and fees on loans	$ 1,554,666	$ 1,461,027	$ 4,644,719	$ 4,073,923
Interest on securities	22,472	35,215	75,194	101,270
Interest on fed funds and bank balances	4,940	10,018	15,304	22,582
Total interest income	1,582,078	1,506,260	4,735,217	4,197,775
Interest Expense
Interest on deposits	301,195	336,660	929,127	1,012,639
Interest on fed funds and short-term borrowings			14,509
Total interest expense	301,195	336,660	943,636	1,012,639
Net Interest Income	1,280,883	1,169,600	3,791,581	3,185,136
Provision for loan losses	105,000	255,652	159,000	544,949
Net Interest Income After Provision for Loan Losses	1,175,883	913,948	3,632,581	2,640,187
Non-interest Income
Service charges on deposit accounts	15,208	14,576	39,369	36,654
Mortgage banking activities	108,384		167,145
SBA loan sales	186,151		686,884
Other Income	8,808	9,896	30,426	51,718
Total non-interest income	318,551	24,472	923,824	88,372
Non-interest Expense
Salaries and employee benefits	729,641	400,185	1,955,026	1,157,192
Occupancy expense	145,294	109,796	388,979	330,271
Equipment expense	55,722	33,601	133,310	103,670
Advertising and public relations	29,276	24,727	110,019	76,967
Data processing expense	57,379	56,870	166,952	162,000
Professional fees	105,963	81,234	363,403	247,622
Loan origination expense	37,223	18,346	86,273	58,601
Other expenses	156,963	115,721	403,434	330,405
Total non-interest expense	1,317,461	840,480	3,607,396	2,466,728
Net Income Before Federal Income Tax	176,973	97,940	949,009	261,831
Federal income tax
Net Income	176,973	97,940	949,009	261,831
Dividend on senior preferred stock	21,801	44,082	109,967	132,495
Accretion of discount on preferred stock	46,194	4,191	54,393	12,436
Net Income Applicable to Common Shareholders	108,978	49,667	784,649	116,900
Basic and Diluted Income per Share	$ 0.06	$ 0.03	$ 0.44	$ 0.06
Average Shares Outstanding	$ 1,801,652	$ 1,800,000	$ 1,800,557	$ 1,800,000

XML

Document and Entity Information (USD $)	9 Months Ended
	Sep. 30, 2011	Nov. 10, 2011	Dec. 31, 2010
Document and Entity Information [Abstract]
Entity Registrant Name	Birmingham Bloomfield Bancshares
Entity Central Index Key	0001335792
Document Type	10-Q
Document Period End Date	Sep. 30, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 4,950,000
Entity Common Stock, Shares Outstanding		1,812,662

XML

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Value of Financial Instruments/Fair Value Accounting [Abstract]

Fair Value of Financial Instruments

Note 6 – Fair Value of Financial Instruments

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Corporation’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. FASB ASC 825 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Corporation.

The following methods and assumptions were used by the Corporation in estimating fair value disclosures for financial instruments:

Cash and Cash Equivalents - The carrying values of cash and cash equivalents approximate fair values.

Securities - Fair values of securities are based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities or other observable inputs.

Loans Receivable - For variable-rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values of nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Deposit Liabilities - The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Accrued Interest - The carrying value of accrued interest approximates fair value.

Other Financial Instruments - The fair value of other financial instruments, including loan commitments and unfunded letters of credit, based on discounted cash flow analyses, is not material.

The carrying values and estimated fair values of financial instruments at September 30, 2011 and December 31, 2010, are as follows (in thousands):

	September 30, 2011				December 31, 2010
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	15,212	$	15,212	$	5,366	$	5,366
Securities available for sale		4,182		4,182		3,360		3,360
Loans		101,080		101,631		98,931		99,786
Loans held for sale		1,232		1,232		323		323
Accrued interest receivable		471		471		440		440
Financial liabilities:
Deposits		111,170		111,498		97,250		97,688
Secured borrowings		—		—		1,469		1,469
Accrued interest payable		62		62		115		115

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Securities

9 Months Ended

Sep. 30, 2011

Securities [Abstract]

Securities

Note 2 – Securities

The amortized cost and estimated fair value of securities, with gross unrealized gains and losses, follows (000s omitted):

September 30, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U. S. Government agency securities	$	1,848	$	12	$	—	$	1,860
Municipal securities		711		13		—		724
Mortgage backed securities		1,221		118		—		1,339
Corporate bonds		250		9		—		259
Total securities	$	4,030	$	152	$	—	$	4,182
December 31, 2010
U. S. Government agency securities	$	1,350	$	11	$	—	$	1,361
Municipal securities		650		7		—		657
Mortgage backed securities		837		91		—		928
Corporate bonds		250		4		—		254
Total securities	$	3,087	$	113	$	—	$	3,200

As of September 30, 2011 and December 31, 2010, all securities are classified as available for sale. Unrealized gains and losses within the investment portfolio are determined to be temporary. The Corporation has performed an analysis of the portfolio for other than temporary impairment and concluded no losses are required to be recognized. Management has no specific intent to sell any securities and it is not more likely than not the Corporation will be required to sell any securities before recovery of the cost basis. Management expects to collect all amounts due according to the contractual terms of the security. The Corporation had no individual securities with gross unrealized losses at September 30, 2011 and December 31, 2010.

Total securities representing $0 and $1,788,000 were pledged to secure public deposits from the State of Michigan as of September 30, 2011 and December 31, 2010.

Federal Home Loan Bank stock is restricted and can only be sold back to the Federal Home Loan Bank. The carrying value of the stock approximates its fair value.

The amortized cost and estimated fair value of all securities at September 30, 2011, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties. The contractual maturities of securities are as follows (000s omitted):

	Amortized cost		Estimated fair value
Due in one year or less	$	1,500	$	1,499
Due in one year through five years		2,046		2,122
Due in five years through ten years		484		561
Due after ten years		—		—
Total	$	4,030	$	4,182

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Minimum Regulatory Capital Requirements

9 Months Ended

Sep. 30, 2011

Deposits/Minimum Regulatory Capital Requirements [Abstract]

Minimum Regulatory Capital Requirements

Note 8 – Minimum Regulatory Capital Requirements

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The prompt corrective action regulations provide four classifications, well capitalized, adequately capitalized, undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required. The Bank was well-capitalized as of September 30, 2011. At September 30, 2011, the Corporation qualifies for an exemption from regulatory capital requirements due to its asset size.

The Bank’s actual capital amounts and ratios as of September 30, 2011 and December 31, 2010 are presented in the following table (000s omitted):

	Actual					For Capital Adequacy Purposes					To be Well-Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2011
Total risk-based capital (to risk weighted assets) Bank of Birmingham	$	12,483		12.3	%	$	8,143		8.0	%	$	10,179		10.0	%
Tier I capital (to risk weighted assets) Bank of Birmingham	$	11,208		11.0	%	$	4,072		4.0	%	$	6,107		6.0	%
Tier I capital (to average assets) Bank of Birmingham	$	11,208		9.2	%	$	4,861		4.0	%	$	6,076		5.0	%
As of December 31, 2010
Total risk-based capital (to risk weighted assets) Bank of Birmingham	$	10,344		10.6	%	$	7,834		8.0	%	$	9,792		10.0	%
Tier I capital (to risk weighted assets) Bank of Birmingham	$	9,117		9.3	%	$	3,917		4.0	%	$	5,875		6.0	%
Tier I capital (to average assets) Bank of Birmingham	$	9,117		8.1	%	$	4,477		4.0	%	$	5,597		5.0	%

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Shareholders Equity

9 Months Ended

Sep. 30, 2011

Shareholder's Equity [Abstract]

Shareholder's Equity

Note 9 – Shareholder’s Equity

On July 28, 2011, the Corporation fully redeemed from the Treasury all of the Preferred Shares associated with the Capital Purchase Program for $3,461,000. The redemption was funded by proceeds from the issuance of Preferred Shares to the U.S. Treasury under the Small Business Lending Fund totaling $4,621,000. As a result of the transaction, the Corporation recorded $46,000 in accelerated accretion on the remaining discount of the Capital Purchase Program Preferred stock during the third quarter of 2011, reducing the amount available to common shareholders. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation” for additional preferred stock discussion.

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Fair Value Accounting

9 Months Ended

Sep. 30, 2011

Fair Value of Financial Instruments/Fair Value Accounting [Abstract]

Fair Value Accounting

Note 7 – Fair Value Accounting

Valuation Hierarchy

Accounting standards establish a three-level valuation hierarchy for fair value measurements. The valuation hierarchy prioritizes valuation techniques based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and are the primary method of valuation used by Birmingham Bloomfield Bancshares, Inc. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows.

• Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets which the Corporation can participate.

• Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement, and include inputs that are available in situations where there is little, if any, market activity for the related asset or liability.

Following is a description of the inputs and valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as general classification of those instruments under the valuation hierarchy.

Available-for-sale Securities

Quoted market prices in an active market are used to value securities when such prices are available. Those securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, the fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows using reasonable inputs. Level 2 securities include U.S. Government agency securities, mortgage backed securities, obligations of states and municipalities, and certain corporate securities. Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities, but rather relying on the investment securities’ relationship to other benchmark quoted investment securities. In certain cases where Level 1 or Level 2 inputs are not available, securities would be classified within Level 3 of the hierarchy.

The following table presents the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the valuation hierarchy in which the fair value measurements fall at September 30, 2011 and December 31, 2010 (000s omitted):

September 30, 2011
	Level 1		Level 2		Level 3		Fair Value
U.S. government agency	$	—	$	1,860	$	—	$	1,860
Municipal securities		—		724		—		724
Mortgage backed securities		—		1,339		—		1,339
Corporate bonds		—		259		—		259
Securities available for sale	$	—		4,182		—		4,182
December 31, 2010
U.S. government agency	$	—	$	1,361	$	—	$	1,361
Municipal securities		—		657		—		657
Mortgage backed securities		—		928		—		928
Corporate bonds		—		254		—		254
Securities available for sale	$	—	$	3,200	$	—	$	3,200

Following is a description of the inputs and valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in the accompanying consolidated balance sheets, as well as general classification of those instruments under the valuation hierarchy.

Impaired Loans

Loans for which it is probable the Corporation will not collect all principal and interest due according to the contractual terms are measured for impairment. The fair value of impaired loans is estimated using one of three methods; market value, collateral value, or discounted cash flow. Those impaired loans not requiring an allowance represent loans for which the fair value of collateral exceeds the recorded investment. When the fair value of the collateral is based on an observable market price or current appraised value, the impaired loan is classified within Level 2. When a market value is not available or management applies a discount factor to the appraised value, the Corporation records the impaired loan in Level 3.

Other Real Estate Owned (“ORE”)

Loans on which the underlying collateral has been repossessed are adjusted to fair value less costs to sell upon transfer to repossessed assets. Subsequently, repossessed assets are carried at the lower of carrying value or fair value, less anticipated marketing and selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the repossessed asset as a nonrecurring Level 2 valuation. When a market value is not available or management applies a discount factor to the appraised value, the Corporation records the repossessed asset in Level 3.

The following table presents the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a non-recurring basis and the level within the valuation hierarchy in which the fair value measurements fall at September 30, 2011:

September 30, 2011
	Balance		Level 1		Level 2		Level 3		Losses
Impaired Loans	$	1,289	$	—	$	—	$	1,289	$	—
ORE	$	298	$	—	$	—	$	298	$	—
December 31, 2010
Impaired Loans	$	2,696	$	—	$	—	$	2,696	$	—
ORE	$	—	$	—	$	—	$	—	$	—

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Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities
Net income	$ 949,009	$ 261,831
Share based payment expense	32,208	3,695
Provision for loan losses	159,000	544,949
Gain on sale of loans	(167,145)
Proceeds for sales of loans originated for sale	4,044,977
Loans originated for sale	(4,787,553)
Accretion of securities	(2,206)	(3,865)
Depreciation expense	167,657	134,157
Net decrease (increase) in other assets	(424,316)	(278,823)
Net (decrease) in other liabilities	(113,071)	(84,743)
Net cash (used in) provided by operating activities	(141,360)	577,201
Cash flows from investing activities
Net change in portfolio loans	(2,308,873)	(14,923,019)
Purchase of securities	(2,275,437)	(2,976,260)
Proceeds from calls or maturities of securities	1,200,000	2,749,000
Principal payments on securities	124,785	140,128
Purchases of premises and equipment	(254,155)	(12,387)
Net cash (used) in investing activities	(3,513,680)	(15,022,538)
Cash flows from financing activities
Increase in deposits	13,920,246	18,531,821
Net change in short term borrowings	(1,469,095)
Net proceeds from senior preferred stock	1,160,000
Dividend on senior preferred stock	(109,967)	(132,495)
Net cash provided by financing activities	13,501,184	18,399,326
Increase in cash and cash equivalents	9,846,144	3,953,989
Cash and cash equivalents - beginning of period	5,366,304	7,758,201
Cash and cash equivalents - end of period	15,212,448	11,712,190
Supplemental Information:
Interest paid	997,143	980,895
Income tax paid	0	0
Loans transferred to other real estate	$ 297,806

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Loans

9 Months Ended

Sep. 30, 2011

Loans [Abstract]

Loans

Note 3 – Loans

A summary of the portfolio loan balances as of September 30, 2011 and December 31, 2010 is as follows (000s omitted):

	September 30,			December 31,
	2011			2010
Mortgage loans on real estate:
Residential 1 to 4 family	$	3,584		$	3,380
Multifamily		13,713			12,355
Commercial		49,046			49,029
Construction		3,688			2,024
Second mortgage		113			118
Equity lines of credit		11,192			11,794
Total mortgage loans on real estate		81,336			78,700
Commercial loans		20,308			20,776
Consumer installment loans		1,024			964
Total loans		102,668			100,440
Less: Allowance for loan losses		(1,499	)		(1,448	)
Net deferred loan fees		(88	)		(61	)
Net loans	$	101,081		$	98,931

An analysis of the allowance for loan losses for the year to date period ended September 30, 2011 and December 31, 2010 (000s omitted):

Nine months ended September 30, 2011

	Commercial			Home Equity			Residential			Consumer			Total			2010
																Total
Allowance for Loan Losses
Beginning balance	$	1,070		$	352		$	14		$	12		$	1,448		$	1,174
Charge-offs		—			(128	)		—			—			(128	)		(341	)
Recoveries		20			—			—			—			20			46
Provision		(25	)		199			(9	)		(6	)		159			545
Ending balance	$	1,065		$	423		$	5		$	6		$	1,499		$	1,424
Percent of principal balance		1.17	%		4.37	%		0.53	%		0.52	%		1.46	%
Ending balance: individually evaluated for impairment	$	56		$	212		$	—		$	—		$	268
Ending balance: collectively evaluated for impairment	$	1,009		$	211		$	5		$	6		$	1,231
Portfolio Loans
Ending unpaid principal balance	$	90,877		$	9,679		$	949		$	1,163		$	102,668
Ending unpaid principal balance: individually evaluated for impairment	$	699		$	590		$	—		$	—		$	1,289
Ending unpaid principal balance: collectively evaluated for impairment	$	90,178		$	9,089		$	949		$	1,163		$	101,379

Year ended December 31, 2010

	Commercial			Home Equity			Residential			Consumer			Total
Allowance for Loan Losses
Beginning balance	$	991		$	166		$	10		$	7		$	1,174
Charge-offs		(141	)		(225	)		—			—			(366	)
Recoveries		46			—			—			—			46
Provision		174			410			4			6			594
Ending balance	$	1,070		$	351		$	14		$	13		$	1,448
Percent of principal balance		1.21	%		3.45	%		1.21	%		1.25	%		1.44	%
Ending balance: individually evaluated for impairment	$	25		$	212		$	—		$	—		$	237
Ending balance: collectively evaluated for impairment	$	1,045		$	139		$	14		$	13		$	1,211
Portfolio Loans
Ending unpaid principal balance	$	88,080		$	10,166		$	1,153		$	1,041		$	100,440
Ending unpaid principal balance: individually evaluated for impairment	$	2,107		$	887		$	—		$	—		$	2,994
Ending unpaid principal balance: collectively evaluated for impairment	$	85,973		$	9,279		$	1,153		$	1,041		$	97,446

Management uses a loan rating system to identify the inherent risk associated with portfolio loans. Loan ratings are based on a subjective definition that describes the conditions present at each level of risk and identifies the important aspect of each loan. The Bank currently uses a 1 to 8 grading scale for commercial loans. Each loan grade corresponds to a specific qualitative classification. All other consumer and mortgage loan types are not graded using the risk rating scale but are internally rated based on various credit quality characteristics using the same qualitative classification. The risk rating classifications included: pass, special mention, substandard, doubtful and loss.

Loans risk-rated as special mention, are considered criticized loans, exhibiting some potential credit weakness that requires additional attention by management and are maintained on the internal watch list and monitored on a regular basis. Loans risk-rated as substandard or higher are considered classified loans exhibiting well-defined credit weakness and are recorded on the problem loan list and evaluated more frequently. The Bank’s credit administration function is designed to provide increased information on all types of loans to identify adverse credit risk characteristics in a timely manner. Total criticized and classified loans increased $797,000 to $11,687,000 at September 30, 2011 from $10,890,000 at December 31, 2010. The change was the result of an increase totaling $1,698,000 in special mention loans and a $901,000 decrease in substandard accounts. The majority of the increase is isolated to commercial loans and represents the weakness of the economic environment of our market area. The Bank has no loans in non-accrual status. There were no loans that were risk rated doubtful or loss at September 30, 2011 or December 31, 2010. Management closely monitors each loan adversely criticized or classified and institutes appropriate measures to eliminate the basis of criticism.

The primary risk elements considered by management regarding each consumer and residential real estate loan are lack of timely payment and loss of real estate values. Management has a reporting system that monitors past due loans and has adopted policies to pursue its creditor’s rights in order to preserve the Bank’s position. The primary risk elements concerning commercial and industrial loans and commercial real estate loans are the financial condition of the borrower, the sufficiency of collateral, and lack of timely payment. Management has a policy of requesting and reviewing periodic financial reporting from its commercial loan customers and verifies existence of collateral and its value.

An analysis of credit quality indicators at September 30, 2011 and December 31, 2010 follows (000s omitted):

September 30, 2011

Commercial Loans     Credit Quality	Commercial Real Estate		Commercial Term		Commercial LOC		Commercial Construction
1 – pass	$	—	$	—	$	—	$	—
2 – pass		332		—		65		—
3 – pass		17,693		3,603		5,021		—
4 – pass		39,598		6,781		5,223		1,831
5 – special mention		3,398		2,210		833		1,858
6 – substandard		1,430		641		360		—
7 – doubtful		—		—		—		—
8 – loss		—		—		—		—
	$	62,451	$	13,235	$	11,502	$	3,689

Consumer Loans     Credit Quality	Home Equity LOC		Residential Mortgage		Home Equity Term		Consumer Installment		Consumer LOC
Pass	$	8,746	$	835	$	114	$	571	$	568
Special mention		343		—		—		24		—
Substandard		590		—		—		—		—
Doubtful		—		—		—		—		—
Loss		—		—		—		—		—
	$	9,679	$	835	$	114	$	595	$	568

December 31, 2010

Commercial Loans     Credit Quality	Commercial Real Estate		Commercial Term		Commercial LOC		Commercial Construction
1 – pass	$	—	$	—	$	—	$	—
2 – pass		392		—		—		—
3 – pass		16,845		3,994		4,416		—
4 – pass		40,348		6,265		5,071		1,250
5 – special mention		2,994		1,249		1,574		774
6 – substandard		1,441		857		610		—
7 - doubtful		—		—		—		—
8 - loss		—		—		—		—
	$	62,020	$	12,365	$	11,671	$	2,024

Consumer Loans     Credit Quality	Home Equity LOC		Residential Mortgage		Home Equity Term		Consumer Installment		Consumer LOC
Pass	$	8,808	$	1,035	$	118	$	335	$	673
Special mention		344		—		—		33		—
Substandard		1,014		—		—		—		—
Doubtful		—		—		—		—		—
Loss		—		—		—		—		—
	$	10,166	$	1,035	$	118	$	368	$	673

A loan is considered a troubled debt restructuring (“TDR”) if the Bank for economic or legal reasons related to the borrower’s financial condition grants a concession to the debtor that the Bank would not otherwise consider. TDRs represent loans where the original terms of the agreement have been modified to provide relief to the borrower and are individually evaluated for impairment. The Bank had one loan classified as a TDR at September 30, 2011 and December 31, 2010. The loan continues to perform according to the modified contractual terms.

Information regarding modified loans as of September 30, 2011 and December 31 (000s omitted):

September 30, 2011

	Number of Contracts		Pre- Modification Investment		Post- Modification Investment
Troubled Debt Restructuring
Commercial Real Estate		1	$	699	$	699
Commercial Term		—		—		—
Commercial LOC		—		—		—
Construction		—		—		—
Home Equity		—		—		—
Residential Mortgage		—		—		—
Consumer		—		—		—

December 31, 2010

Troubled Debt Restructuring
Commercial Real Estate	1	$	699	$	699
Commercial Term	—		—		—
Commercial LOC	—		—		—
Construction	—		—		—
Home Equity	—		—		—
Residential Mortgage	—		—		—
Consumer	—		—		—

A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all principal and interest payments according to the contractual terms of the loan agreement. Characteristics considered by management in determining impairment include delinquency status, collateral value, and known factors adversely affecting the ability of the borrower to satisfy the terms of the agreement. When an individual loan is classified as impaired, the Corporation measures impairment using (1) the present value of expected cash flows discounted at the loans effective interest rate, (2) the loans observable market price, or (3) the fair value of the collateral. The method used is determined on a loan by loan basis, except for a collateral dependent loan. All collateral dependent loans are required to be measured using the fair value of collateral method. If the value of an impaired loan is less than the recorded investment in the loan an impairment reserve is recognized. All modified loans are considered impaired.

Large groups of homogeneous loans are collectively evaluated for impairment. Accordingly, the Corporation does not separately identify individual consumer and residential loans for impairment disclosures, except if modified and considered to be a troubled debt restructuring.

Information regarding impaired loans at September 30, 2011 and December 31, 2010 (000s omitted):

September 30, 2011

	Recorded Investment		Unpaid Principal		Allowance		Average Investment		Year to Date Interest Recognized
Impaired loans
No related allowance recorded:
Home Equity Line of Credit	$	—	$	—	$	—	$	—	$	—
Allowance recorded:
Commercial Line of Credit		—		—		—		—		—
Commercial Real Estate		699		699		56		699		27
Home Equity Line of Credit		590		590		212		590		22
Total:
Commercial	$	699	$	699	$	56	$	699	$	27
Home Equity	$	590	$	590	$	212	$	590	$	22
December 31, 2010
Impaired loans
No related allowance recorded:
Home Equity Line of Credit	$	298	$	298	$	—	$	256	$	—
Allowance recorded:
Commercial Line of Credit		1,407		1,407		17		1,418		99
Commercial Real Estate		699		699		8		117		7
Home Equity Line of Credit		590		590		212		197		10
Total:
Commercial	$	2,107	$	2,107	$	25	$	1,535	$	106
Home Equity	$	887	$	887	$	212	$	453	$	10

As of September 30, 2011 there were no loans more than 30 days past due while at December 31, 2010 loans totaling approximately $298,000 were more than 30 days past due. There were no nonperforming loans, which represents non-accruing loans and loans past due 90 days or more and still accruing interest, at September 30, 2011 while $298,000 was classified nonperforming at December 31, 2010. Loans are placed in non-accrual status when, in the opinion of management, uncertainty exists as to the ultimate collection of principal and interest. Commercial loans are reported as being in non-accrual status if: (a) they are maintained on a cash basis because of deterioration in the financial position of the borrower, (b) payment in full of interest or principal is not expected, or (c) principal or interest has been in default for a period of 90 days or more. If it can be documented that the loan obligation is both well secured and in the process of collection, the loan may remain on accrual status. However, if the loan is not brought current before becoming 120 days past due, the loan is reported as non-accrual. A non-accrual asset may be restored to accrual status when none of its principal or interest is due and unpaid, when it otherwise becomes well secured, or is in the process of collection.

Information regarding past due loans at September 30, 2011 and December 31, 2010 follows (000s omitted):

September 30, 2011

	Loans past due						Total Past Due		Current		Total Loans		Non- Accrual		>90 days Accruing
	30 – 59		60 - 90		Over 90
Commercial real estate	$	—	$	—	$	—	$	—	$	62,451	$	62,451	$	—	$	—
Commercial term		—		—		—		—		13,235		13,235		—		—
Commercial LOC		—		—		—		—		11,502		11,502		—		—
Construction		—		—		—		—		3,689		3,689		—		—
Home equity LOC		—		—		—		—		9,679		9,679		—		—
Residential mortgage		—		—		—		—		835		835		—		—
Home equity term		—		—		—		—		114		114		—		—
Consumer installment				—		—				595		595		—		—
Consumer LOC		—		—		—		—		568		568		—		—
	$	—	$	—	$	—	$	—	$	102,668	$	102,668	$	—	$	—

December 31, 2010

	Loans past due						Total Past Due		Current		Total Loans		Non- Accrual		>90 days Accruing
	30 – 59		60 - 90		Over 90
Commercial real estate	$	—	$	—	$	—	$	—	$	62,020	$	62,020	$	—	$	—
Commercial term		—		—		—		—		12,365		12,365		—		—
Commercial LOC		—		—		—		—		11,671		11,671		—		—
Construction		—		—		—		—		2,024		2,024		—		—
Home equity LOC		—		—		298		298		9,868		10,166		298		—
Residential mortgage		—		—		—		—		1,035		1,035		—		—
Home equity term		—		—		—		—		118		118		—		—
Consumer installment		—		—		—		—		368		368		—		—
Consumer LOC		—		—		—		—		673		673		—		—
	$	—	$	—	$	298	$	298	$	100,142	$	100,440	$	298	$	—

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Deposits

9 Months Ended

Sep. 30, 2011

Deposits/Minimum Regulatory Capital Requirements [Abstract]

Deposits

Note 4 – Deposits

Deposits are summarized as follows (000s omitted):

	September 30, 2011					December 31, 2010
	Balance		Percentage			Balance		Percentage
Noninterest bearing demand	$	15,831		14.24	%	$	14,190		14.59	%
NOW accounts		8,058		7.25	%		7,897		8.12	%
Money market		10,411		9.36	%		8,179		8.41	%
Savings		18,325		16.48	%		16,521		16.99	%
Time deposits under $100,000		12,881		11.59	%		12,153		12.50	%
Time deposits over $100,000		45,665		41.08	%		38,310		39.39	%
Total deposits	$	111,171		100.0	%	$	97,250		100.0	%

At September 30, 2011, the scheduled maturities of time deposits are as follows (000s omitted):

	<$100,000		>$100,000		Total
2011	$	2,164	$	14,293	$	16,457
2012		7,953		20,948		28,901
2013		1,471		7,659		9,130
2014		757		2,027		2,784
2015		78		—		78
Thereafter		458		738		1,196
Total	$	12,881	$	45,665	$	58,546

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Leases and Commitments

9 Months Ended

Sep. 30, 2011

Leases and Commitments [Abstract]

Leases and Commitments

Note 5 – Leases and Commitments

The Corporation has entered into a lease agreement for its main office facility. Payments began in February 2005 and the initial term of the lease expires in October 2015. In October 2007, the Corporation exercised its first renewal option on the property which expires in October 2025. The main office lease has one additional ten year renewal option. The Corporation also entered into a lease agreement for its former branch office in Bloomfield Township which provided for lease payments to begin in March 2006 and expire February 2016. The Bloomfield Township branch office lease was terminated effective January 18, 2010 pursuant to an agreement with the leaseholder. The termination agreement called for a one-time payment of $110,000 to the leaseholder to end the lease. In October 2010, the Corporation entered into a one year lease agreement for a lending production office (“LPO”) in Bay City, Michigan. The lease will not be renewed. In March 2011, a new one year lease was signed for additional office space in the building adjacent to the main office at a rate of $2,800 per month. The lease has two, five year renewal options. In May 2011, the Bank began a month-to-month lease for a LPO in Farmington Hills, Michigan that ended during the quarter. In August 2011, the Bank began a month-to-month lease for a LPO in Livonia, Michigan.

Rent expense under these agreements was $73,000 and $59,000 for the three month period ended September 30, 2011 and 2010, respectively. For the nine months ended September 30, 2011 and 2010, rent expense under these agreements was $210,000 and $185,000, respectively.

The following is a schedule of future minimum rental payments under operating leases on a calendar year basis:

2011	$	67,930
2012		242,816
2013		239,098
2014		243,910
2015		248,746
Thereafter		2,726,802
Total	$	3,769,302

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Condensed Consolidated Statements of Shareholders' Equity (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Total Shareholders' Equity [Abstract]
Balance at beginning of period	$ 10,985,525	$ 10,727,933
Net income	949,009	261,831
Other comprehensive income:
Net change in unrealized gains on securities available for sale	39,101	37,592
Total comprehensive income	988,110	299,423
Share based payments expense	32,288	3,695
Preferred dividends	(109,967)	(132,495)
Redemption of Preferred Stock	(3,461,000)
Issuance of Preferred Stock	4,621,000
Balance at end of period	$ 13,055,956	$ 10,898,556

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2011

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1 – Summary of Significant Accounting Policies

Basis of Statement Presentation

The accompanying unaudited consolidated interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) with the instructions to Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements are not included herein. The interim financial statements should be read in conjunction with the financial statements of Birmingham Bloomfield Bancshares, Inc. (the “Corporation”) and the notes thereto included in the Corporation’s annual report on Form 10-K for the year ended December 31, 2010.

All adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for a fair presentation of financial position, results of operations, and cash flows, have been made. The results of operations for the nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011.

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.

Principles of Consolidation

The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiary the Bank of Birmingham (the “Bank”). All significant intercompany balances and transactions have been eliminated in consolidation.

Changes in Significant Accounting Policies

Income Recognition on Small Business Administration Loan Sales – On January 28, 2011, the Small Business Administration (“SBA”) released a notice removing the 90-day warranty, or “recourse provision,” on the guaranteed portion of SBA 7(a) loans sold at a premium in the secondary market. This change allowed the Corporation to recognize income from SBA loan sales immediately upon settlement rather than waiting for the expiration of the recourse period. The Corporation had been selling the guaranteed portion of SBA loans to outside investors with a provision whereby the Corporation must rebate the premium received on the sale if a loan prepays or defaults within 90 days of the loan origination (the “recourse provision.”) After the recourse provision expired, the Corporation recognized the outstanding transaction as a sale by decreasing the Corporations loan balance, removing the secured borrowing and recognizing the gain associated with the sale.

Recent Accounting Developments

Accounting Standards Update (ASU) No. 2011-05, “Comprehensive Income (Topic 220)-Presentation of Comprehensive Income” Under the amendments in this ASU, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this ASU should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. The Corporation is evaluating its timing of adoption of ASU 2011-05, but will adopt the ASU retrospectively by the due date.

ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” This ASU represents the converged guidance of the FASB and the IASB (the Boards) on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The amendments to the Codification in this ASU are to be applied prospectively. The amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The impact of adoption of this ASU is not expected to be material.

ASU No. 2011-02, “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (‘TDR’)” In April, 2011, FASB issued ASU No. 2011-02, intended to provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. The amendments in this ASU are effective for the first interim or annual period beginning on or after June 15, 2011, and are to be applied retrospectively to the beginning of the annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. This guidance was adopted in the current quarter with no impact to the financial statements.

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Consolidated Statements of Condition (USD $)	Sep. 30, 2011	Dec. 31, 2010
Cash and cash equivalents
Cash	$ 15,212,448	$ 5,300,368
Federal funds sold	0	65,936
Total cash and cash equivalents	15,212,448	5,366,304
Securities, available for sale (Note 2)	4,182,261	3,200,002
Federal Home Loan Bank stock	169,900	160,200
Loans held for Sale	1,232,221	322,500
Loans (Note 3)
Total portfolio loans	102,579,805	100,378,678
Less: allowance for loan losses	(1,499,350)	(1,448,096)
Net portfolio loans	101,080,455	98,930,582
Premises & equipment, net	1,446,008	1,359,510
Interest receivable and other assets	1,419,754	995,438
Totals assets	124,743,047	110,334,536
Deposits (Note 4)
Non-interest bearing	15,830,438	14,190,295
Interest bearing	95,340,302	83,060,199
Total deposits	111,170,740	97,250,494
Secured borrowings	0	1,469,095
Interest payable and other liabilities	516,351	629,422
Total liabilities	111,687,091	99,349,011
Shareholders' equity
Common stock, no par value Authorized - 4,500,000 shares Issued and outstanding - 1,812,662 and 1,800,000 shares, respectively	17,066,618	17,034,330
Additional paid in capital	493,154	493,154
Accumulated deficit	(9,276,825)	(10,061,474)
Accumulated other comprehensive income	152,009	112,908
Total shareholders' equity	13,055,956	10,985,525
Total liabilities and shareholders' equity	124,743,047	110,334,536
Series A Preferred stock
Shareholders' equity
Senior cumulative perpetual preferred stock series $1000 liquidation value per share, authorized, issued and redeemed	0	1,635,000
Discount on senior preferred stock series A	0	(61,027)
Series B Preferred stock
Shareholders' equity
Senior cumulative perpetual preferred stock series $1000 liquidation value per share, authorized, issued and redeemed	0	82,000
Premium on preferred stock series B	0	6,634
Series C Preferred stock
Shareholders' equity
Senior cumulative perpetual preferred stock series $1000 liquidation value per share, authorized, issued and redeemed	0	1,744,000
Series D Preferred stock
Shareholders' equity
Senior cumulative perpetual preferred stock series $1000 liquidation value per share, authorized, issued and redeemed	$ 4,621,000	$ 0