UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)


þQuarterly report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 For the quarterly period
ended March 31, 2010





Or





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


Commission
File Number: 000-30973





MBT
FINANCIAL CORP.


(Exact
name of registrant as specified in its charter)





Michigan
              
              38-3516922(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (I.R.S.
      Employer
                Identification
      No.)





102
E. Front Street


Monroe,
Michigan  48161


(Address
of principal executive offices)


(Zip
Code)





(734)
241-3431


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes þ  No  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈  No
 ̈





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





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





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





As of May
12, 2010, there were 16,225,437 shares of the Company’s Common Stock
outstanding.








Part
I Financial Information


Item
1. Financial Statements





MBT
FINANCIAL CORP.


CONSOLIDATED
BALANCE SHEETS





March
      31, 2010Dollars in thousands
                      
                      (Unaudited)
                      
                      
                      December 31, 2009ASSETSCash
      and Cash EquivalentsCash
      and due from banksNon-interest
      bearing
                      
                      $
                      14,723
                      
                      
                      $
                      18,448Interest
      bearing
                      
                      
                      54,771
                      
                      
                      
                      51,298Total
      cash and cash equivalents
                      
                      
                      69,494
                      
                      
                      
                      69,746Securities
      - Held to Maturity
                      
                      
                      32,100
                      
                      
                      
                      36,433Securities
      - Available for Sale
                      
                      
                      337,165
                      
                      
                      
                      307,346Federal
      Home Loan Bank stock - at cost
                      
                      
                      13,086
                      
                      
                      
                      13,086Loans
      held for sale
                      
                      
                      940
                      
                      
                      
                      931Loans
      – Net
                      
                      
                      798,463
                      
                      
                      
                      824,916Accrued
      interest receivable and other assets
                      
                      
                      50,107
                      
                      
                      
                      50,580Bank
      Owned Life Insurance
                      
                      
                      48,342
                      
                      
                      
                      47,953Premises
      and Equipment - Net
                      
                      
                      31,919
                      
                      
                      
                      32,378Total
      assets
                      
                      $
                      1,381,616
                      
                      
                      $
                      1,383,369LIABILITIESDeposits:Non-interest
      bearing
                      
                      $
                      137,693
                      
                      
                      $
                      135,038Interest-bearing
                      
                      
                      891,228
                      
                      
                      
                      896,753Total
      deposits
                      
                      
                      1,028,921
                      
                      
                      
                      1,031,791Federal
      Home Loan Bank advances
                      
                      
                      228,500
                      
                      
                      
                      228,500Repurchase
      agreements
                      
                      
                      30,000
                      
                      
                      
                      30,000Interest
      payable and other liabilities
                      
                      
                      10,282
                      
                      
                      
                      11,314Total
      liabilities
                      
                      
                      1,297,703
                      
                      
                      
                      1,301,605STOCKHOLDERS'
      EQUITYCommon
      stock (no par value; 30,000,000 shares authorized, 16,222,177 and
      16,210,110 shares issued and outstanding)
                      
                      
                      639
                      
                      
                      
                      593Retained
      Earnings
                      
                      
                      88,744
                      
                      
                      
                      88,396Accumulated
      other comprehensive loss
                      
                      
                      (5,470
                      )
                      
                      
                      (7,225
                      )Total
      stockholders' equity
                      
                      
                      83,913
                      
                      
                      
                      81,764Total
      liabilities and stockholders' equity
                      
                      $
                      1,381,616
                      
                      
                      $
                      1,383,369





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


-2-





MBT
FINANCIAL CORP.


CONSOLIDATED
STATEMENTS OF INCOME - UNAUDITED





Three
      Months Ended March 31,Dollars
      in thousands, except per share data
                        
                        2010
                        
                        
                        2009Interest
      IncomeInterest
      and fees on loans
                        
                        $
                        11,949
                        
                        
                        $
                        13,600Interest
      on investment securities-Tax-exempt
                        
                        
                        638
                        
                        
                        
                        877Taxable
                        
                        
                        2,689
                        
                        
                        
                        4,500Interest
      on balances due from banks
                        
                        
                        38
                        
                        
                        
                        15Total
      interest income
                        
                        
                        15,314
                        
                        
                        
                        18,992Interest
      ExpenseInterest
      on deposits
                        
                        
                        3,353
                        
                        
                        
                        5,524Interest
      on borrowed funds
                        
                        
                        2,556
                        
                        
                        
                        3,255Total
      interest expense
                        
                        
                        5,909
                        
                        
                        
                        8,779Net
      Interest Income
                        
                        
                        9,405
                        
                        
                        
                        10,213Provision
      For Loan Losses
                        
                        
                        2,200
                        
                        
                        
                        4,200Net
      Interest Income AfterProvision
      For Loan Losses
                        
                        
                        7,205
                        
                        
                        
                        6,013Other
      IncomeIncome
      from wealth management services
                        
                        
                        962
                        
                        
                        
                        914Service
      charges and other fees
                        
                        
                        1,271
                        
                        
                        
                        1,356Net
      gain on sales of securities
                        
                        
                        295
                        
                        
                        
                        606Other
      Than Temporary Impairments on securities
                        
                        
                        -
                        
                        
                        
                        (6,400
                        )Portion
      of OTTI loss recognized in other comprehensive income (before
      taxes)
                        
                        
                        -
                        
                        
                        
                        5,631-
                        
                        
                        
                        (769
                        )Origination
      fees on mortgage loans sold
                        
                        
                        132
                        
                        
                        
                        109Bank
      owned life insurance income
                        
                        
                        389
                        
                        
                        
                        369Other
                        
                        
                        992
                        
                        
                        
                        746Total
      other income
                        
                        
                        4,041
                        
                        
                        
                        3,331Other
      ExpensesSalaries
      and employee benefits
                        
                        
                        5,069
                        
                        
                        
                        5,434Occupancy
      expense
                        
                        
                        805
                        
                        
                        
                        914Equipment
      expense
                        
                        
                        840
                        
                        
                        
                        848Marketing
      expense
                        
                        
                        248
                        
                        
                        
                        242Professional
      fees
                        
                        
                        480
                        
                        
                        
                        458Collection
      expenses
                        
                        
                        94
                        
                        
                        
                        463Net
      loss on other real estate owned
                        
                        
                        1,036
                        
                        
                        
                        1,856Other
      real estate owned expenses
                        
                        
                        751
                        
                        
                        
                        299FDIC
      Deposit Insurance Assessment
                        
                        
                        631
                        
                        
                        
                        436Other
                        
                        
                        944
                        
                        
                        
                        1,047Total
      other expenses
                        
                        
                        10,898
                        
                        
                        
                        11,997Income
      (Loss) Before Income Taxes
                        
                        
                        348
                        
                        
                        
                        (2,653
                        )Income
      Tax Expense (Benefit)
                        
                        
                        -
                        
                        
                        
                        (1,286
                        )Net
      Income (Loss)
                        
                        $
                        348
                        
                        
                        $
                        (1,367
                        )Basic
      Earnings (Loss) Per Common Share
                        
                        $
                        0.02
                        
                        
                        $
                        (0.08
                        )Diluted
      Earnings (Loss) Per Common Share
                        
                        $
                        0.02
                        
                        
                        $
                        (0.08
                        )Common
      Stock Dividends Declared Per Share
                        
                        $
                        -
                        
                        
                        $
                        0.01





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


-3-





MBT
FINANCIAL CORP.


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED





AccumulatedOtherCommon
                          
                          
                          Retained
                          
                          
                          ComprehensiveDollars
      in thousands
                          
                          Stock
                          
                          
                          Earnings
                          
                          
                          Income (Loss)
                          
                          
                          TotalBalance
      - January 1, 2010
                          
                          $
                          593
                          
                          
                          $
                          88,396
                          
                          
                          $
                          (7,225
                          )
                          
                          $
                          81,764Issuance
      of Common Stock (12,067 shares)
                          
                          
                          20
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          20Equity
      Compensation
                          
                          
                          26
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          26Comprehensive
      income:Net
      income
                          
                          
                          -
                          
                          
                          
                          348
                          
                          
                          
                          -
                          
                          
                          
                          348Change
      in net unrealized gain on securities available for sale - Net of tax
      effect of $(1,021)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,896
                          
                          
                          
                          1,896Reclassification
      adjustment for gains included in net income - Net of tax effect of
      $103
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (192
                          )
                          
                          
                          (192
                          )Change
      in postretirement benefit obligation Net of tax effect of
      $(27)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          51
                          
                          
                          
                          51Total
      Comprehensive Income
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          2,103Balance
      - March 31, 2010
                          
                          $
                          639
                          
                          
                          $
                          88,744
                          
                          
                          $
                          (5,470
                          )
                          
                          $
                          83,913





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


-4-





MBT
FINANCIAL CORP.


CONSOLIDATED
STATEMENTS OF CASH FLOWS - UNAUDITED





Three
      Months Ended March 31,Dollars
      in thousands
                    
                    2010
                    
                    
                    2009Cash
      Flows from Operating ActivitiesNet
      Income (Loss)
                    
                    $
                    348
                    
                    
                    $
                    (1,367
                    )Adjustments
      to reconcile net income (loss) to net cash from operating
      activitiesProvision
      for loan losses
                    
                    
                    2,200
                    
                    
                    
                    4,200Depreciation
                    
                    
                    549
                    
                    
                    
                    565(Increase)
      decrease in net deferred Federal income tax asset
                    
                    
                    -
                    
                    
                    
                    (1,649
                    )Net
      (accretion) amortization of investment premium and
discount
                    
                    
                    335
                    
                    
                    
                    (62
                    )Writedowns
      of Other Real Estate Owned
                    
                    
                    820
                    
                    
                    
                    1,829Net
      increase (decrease) in interest payable and other
    liabilities
                    
                    
                    (954
                    )
                    
                    
                    (2,368
                    )Net
      increase in interest receivable and other assets
                    
                    
                    (3,510
                    )
                    
                    
                    (4,189
                    )Equity
      based compensation expense
                    
                    
                    17
                    
                    
                    
                    40Net
      gain on sale/settlement of securities
                    
                    
                    (295
                    )
                    
                    
                    (606
                    )Other
      Than Temporary Impairment of investment securities
                    
                    
                    -
                    
                    
                    
                    769Increase
      in cash surrender value of life insurance
                    
                    
                    (389
                    )
                    
                    
                    (369
                    )Net
      cash used for operating activities
                    
                    $
                    (879
                    )
                    
                    $
                    (3,207
                    )Cash
      Flows from Investing ActivitiesProceeds
      from maturities and redemptions of investment securities held to
      maturity
                    
                    $
                    4,752
                    
                    
                    $
                    5,318Proceeds
      from maturities and redemptions of investment securities available for
      sale
                    
                    
                    25,567
                    
                    
                    
                    58,407Proceeds
      from sales of investment securities available for sale
                    
                    
                    18,492
                    
                    
                    
                    29,259Net
      decrease in loans
                    
                    
                    24,244
                    
                    
                    
                    16,838Proceeds
      from sales of other real estate owned
                    
                    
                    974
                    
                    
                    
                    403Proceeds
      from sales of other assets
                    
                    
                    1,261
                    
                    
                    
                    38Purchase
      of investment securities held to maturity
                    
                    
                    (417
                    )
                    
                    
                    -Purchase
      of investment securities available for sale
                    
                    
                    (71,306
                    )
                    
                    
                    (64,770
                    )Purchase
      of bank premises and equipment
                    
                    
                    (90
                    )
                    
                    
                    (307
                    )Net
      cash provided by investing activities
                    
                    $
                    3,477
                    
                    
                    $
                    45,186Cash
      Flows from Financing ActivitiesNet
      decrease in deposits
                    
                    $
                    (2,870
                    )
                    
                    $
                    (69,192
                    )Proceeds
      from issuance of common stock
                    
                    
                    20
                    
                    
                    
                    79Dividends
      paid
                    
                    
                    -
                    
                    
                    
                    (1,453
                    )Net
      cash used for financing activities
                    
                    $
                    (2,850
                    )
                    
                    $
                    (70,566
                    )Net
      Decrease In Cash and Cash Equivalents
                    
                    $
                    (252
                    )
                    
                    $
                    (28,587
                    )Cash
      and Cash Equivalents at Beginning Of Period
                    
                    
                    69,746
                    
                    
                    
                    50,786Cash
      And Cash Equivalents At End Of Period
                    
                    $
                    69,494
                    
                    
                    $
                    22,199





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


-5-


MBT
FINANCIAL CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





1. BASIS
OF PRESENTATION AND ACCOUNTING POLICIES


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




The
accounting and reporting policies of the Bank conform to practice within the
banking industry and are in accordance with accounting principles generally
accepted in the United States. Preparation of financial statements in conformity
with generally accepted accounting principles requires Management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates. Material estimates that are particularly susceptible to significant
changes in the near term are the determination of the allowance for loan losses
and the valuation of other real estate owned.




The
accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. However, such
information reflects all adjustments (consisting of normal recurring
adjustments), which are, in the opinion of Management, necessary for fair
statement of results for the interim periods.




The
significant accounting policies are as follows:




PRINCIPLES
OF CONSOLIDATION


The
consolidated financial statements include the accounts of the Company and its
subsidiary. All material intercompany transactions and balances have been
eliminated.




COMPREHENSIVE
INCOME


Accounting
principles generally require that revenue, expenses, gains, and losses be
included in net income. Certain changes in assets and liabilities, however, such
as unrealized gains and losses on securities available for sale and amounts
recognized related to postretirement benefit plans (gains and losses, prior
service costs, and transition assets or obligations), are reported as a direct
adjustment to the equity section of the balance sheet. Such items, along with
net income, are components of comprehensive income.




BUSINESS
SEGMENTS


While the
Company's chief decision makers monitor the revenue streams of various products
and services, operations are managed and financial performance is evaluated on a
company wide basis. Accordingly, all of the Company’s operations are considered
by management to be aggregated in one reportable segment.




FAIR
VALUE


In
February 2007, the Financial Accounting Standards Board “FASB” issued “The Fair
Value Option for Financial Assets and Financial Liabilities” This permits
companies to elect on an instrument by instrument basis to fair value certain
financial assets and financial liabilities with changes in fair value recognized
in earnings as they occur. The election to fair value is generally irrevocable.
In April 2007, the Corporation elected early adoption as of January 1, 2007. The
Corporation did not select any financial assets or financial liabilities for
fair value measurement, but elected early adoption in order to be able to apply
the fair value option to financial assets and financial liabilities that may be
acquired prior to the effective date of the statements.


-6-


The
Corporation measures or monitors many of its assets and liabilities on a fair
value basis. Fair value is used on a recurring basis for assets and liabilities
that are elected to be accounted for under The Fair Value Option as well as for
certain assets and liabilities in which fair value is the primary basis of
accounting. Examples of these include derivative instruments and available for
sale securities. Additionally, fair value is used on a non-recurring basis to
evaluate assets or liabilities for impairment or for disclosure purposes.
Examples of these non-recurring uses of fair value include certain loans held
for sale accounted for on a lower of cost or market basis. Fair value is defined
as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. Depending on the nature of the asset or liability, the
Corporation uses various valuation techniques and assumptions when estimating
fair value.




The
Corporation applied the following fair value hierarchy:




Level 1 – inputs to the valuation
methodology are quoted prices (unadjusted) for identical assets or liabilities
in active markets. The Corporation’s U.S. government agency securities,
government sponsored mortgage backed securities, and mutual fund investments
where quoted prices are available in an active market generally are classified
within Level 1 of the fair value hierarchy.




Level 2 – Inputs to the valuation
methodology include quoted prices for similar assets and liabilities in active
markets and inputs that are observable for the asset or liability, either
directly or indirectly, for substantially the full term of the financial
instrument. The Corporation’s borrowed funds and investments in obligations of
states and political subdivisions are generally classified in Level 2 of the
fair value hierarchy. Fair values for these instruments are estimated using
pricing models, quoted prices of securities with similar characteristics, or
discounted cash flows.




Level 3 – Inputs to the valuation
methodology are unobservable and significant to the fair value
measurement.  Private equity investments and trust preferred
collateralized debt obligations are classified within Level 3 of the fair value
hierarchy. Fair values are initially valued based on transaction price and are
adjusted to reflect exit values.




When
determining the fair value measurements for assets and liabilities required or
permitted to be recorded at and/or marked to fair value, the Corporation
considers the principal or most advantageous market in which it would transact
and considers assumptions that market participants would use when pricing the
asset or liability. When possible, the Corporation looks to active and
observable markets to price identical assets or liabilities. When identical
assets and liabilities are not traded in active markets, the Corporation looks
to market observable data for similar assets or liabilities. Nevertheless,
certain assets and liabilities are not actively traded in observable markets and
the Corporation must use alternative valuation techniques to derive a fair value
measurement.


-7-


ACCOUNTING
PRONOUNCEMENTS


In June
2009, the FASB issued “The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles.” The FASB Accounting
Standards Codification (the Codification) is the single source of authoritative
nongovernmental GAAP. All existing accounting standard documents, such as FASB,
American Institute of Certified Public Accountants, Emerging Issues Task Force
and other related literature, excluding guidance from the Securities and
Exchange Commission, have been superseded by the Codification. All other
non-grandfathered, non-SEC accounting literature not included in the
Codification has become nonauthoritative. The Codification is effective for
interim or annual periods ending after September 15, 2009. There have been no
changes to the content of our financial statements or disclosures as a result of
implementing the Codification. However, as a result of implementation of the
Codification, previous references to new accounting standards and literature are
no longer applicable. All future references to authoritative accounting
literature in our consolidated financial statements will be referenced in
accordance with the Codification.




2.
EARNINGS PER SHARE




The
calculation of net income per common share for the three months ended March 31,
2010 and 2009 are as follows:


2010
                                    
                                    
                                    2009BasicNet
      income (loss)
                                    
                                    $
                                    348,000
                                    
                                    
                                    $
                                    (1,367,000
                                    )Net
      income (loss) applicable to common stock
                                    
                                    $
                                    348,000
                                    
                                    
                                    $
                                    (1,367,000
                                    )Average
      common shares outstanding
                                    
                                    
                                    16,216,177
                                    
                                    
                                    
                                    16,165,841Earnings
      (loss) per common share - basic
                                    
                                    $
                                    0.02
                                    
                                    
                                    $
                                    (0.08
                                    )2010
                                    
                                    
                                    2009DilutedNet
      income
                                    
                                    $
                                    348,000
                                    
                                    
                                    $
                                    (1,367,000
                                    )Net
      income applicable to common stock
                                    
                                    $
                                    348,000
                                    
                                    
                                    $
                                    (1,367,000
                                    )Average
      common shares outstanding
                                    
                                    
                                    16,216,177
                                    
                                    
                                    
                                    16,165,841Stock
      option adjustment
                                    
                                    
                                    531
                                    
                                    
                                    
                                    -Average
      common shares outstanding - diluted
                                    
                                    
                                    16,216,708
                                    
                                    
                                    
                                    16,165,841Earnings
      per common share - diluted
                                    
                                    $
                                    0.02
                                    
                                    
                                    $
                                    (0.08
                                    )





3. STOCK
BASED COMPENSATION


Stock Options -The following
table summarizes the options that have been granted to non-employee directors
and certain key executives in accordance with the Long-Term Incentive
Compensation Plan that was approved by shareholders at the Annual Meeting of
Shareholders on April 6, 2000.





Weighted
      AverageShares
                      
                      
                      Exercise PriceOptions
      Outstanding, January 1, 2010
                      
                      
                      489,075
                      
                      
                      $
                      17.35Granted
                      
                      
                      -
                      
                      
                      
                      -Exercised
                      
                      
                      -
                      
                      
                      
                      -Forfeited
                      
                      
                      -
                      
                      
                      
                      -Options
      Outstanding, March 31, 2010
                      
                      
                      489,075
                      
                      
                      $
                      17.35Options
      Exercisable, March 31, 2010
                      
                      
                      489,075
                      
                      
                      $
                      17.35





On
January 4, 2010, Stock Only Stock Appreciation Rights (SOSARs) were awarded to
certain directors in exchange for a portion of their retainer in accordance with
the MBT 2008 Stock Incentive Plan that was approved by shareholders on May 1,
2008. The SOSARs have a term of ten years and vest on December 31, 2010. SOSARs
granted under the plan are structured as fixed grants with the exercise price
equal to the market value of the underlying stock on the date of the
grant.


-8-


The fair
value of $0.45 for the SOSARs was estimated at the date of the grant, using the
Black-Scholes option pricing model, with the following assumptions: expected
option lives of 7 years, expected volatility of 35.7%, a risk free rate of 3.36%
and dividend yield of 3.00%. The following table summarizes the SOSARs that have
been granted:





Weighted
      AverageShares
                            
                            
                            Exercise PriceSOSARs
      Outstanding, January 1, 2010
                            
                            
                            221,500
                            
                            
                            $
                            5.23Granted
                            
                            
                            16,000
                            
                            
                            
                            1.52Exercised
                            
                            
                            -
                            
                            
                            
                            -Forfeited
                            
                            
                            1,000
                            
                            
                            
                            3.03SOSARs
      Outstanding, March 31, 2010
                            
                            
                            236,500
                            
                            
                            $
                            4.99SOSARs
      Exercisable, March 31, 2010
                            
                            
                            124,682
                            
                            
                            $
                            5.63





The total
expense for equity based compensation was $17,000 in the first quarter of 2010
and $40,000 in the first quarter of 2009.





4.
LOANS


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




Loans
consist of the following (000s omitted):




March
      31,
                        
                        
                        December
      31,2010
                        
                        
                        2009Residential
      real estate loans
                        
                        $
                        362,718
                        
                        
                        $
                        374,970Non-farm,
      non-residential real estate loans
                        
                        
                        342,575
                        
                        
                        
                        351,256Loans
      to finance agricultural production andother
      loans to farmers
                        
                        
                        7,854
                        
                        
                        
                        7,113Commercial
      and industrial loans
                        
                        
                        89,266
                        
                        
                        
                        93,786Loans
      to individuals for household, family,and
      other personal expenditures
                        
                        
                        20,554
                        
                        
                        
                        22,071All
      other loans (including overdrafts)
                        
                        
                        370
                        
                        
                        
                        574Total
      loans, gross
                        
                        
                        823,337
                        
                        
                        
                        849,770Less:
      Deferred loan fees
                        
                        
                        762
                        
                        
                        
                        791Total
      loans, net of deferred loan fees
                        
                        
                        822,575
                        
                        
                        
                        848,979Less:
      Allowance for loan losses
                        
                        
                        24,112
                        
                        
                        
                        24,063$
                        798,463
                        
                        
                        $
                        824,916





Loans are
placed in a nonaccrual status when, in the opinion of Management, the collection
of additional interest is doubtful. All loan relationships over $250,000 that
are classified by Management as nonperforming as well as selected performing
accounts and all renegotiated loans are reviewed for impairment. Allowances for
loans determined to be impaired are included in the allowance for loan losses.
All cash received on nonaccrual loans is applied to the principal balance.
Nonperforming assets consist of nonaccrual loans, loans 90 days or more past
due, restructured loans, and other real estate owned. Other real estate owned
includes real estate that has been acquired in full or partial satisfaction of
loan obligations or upon foreclosure and real estate that the bank has purchased
but no longer intends to use for bank premises.


-9-


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




March
      31,
                    
                    
                    December
      31,2010
                    
                    
                    2009Nonaccrual
      loans
                    
                    $
                    61,722
                    
                    
                    $
                    56,992Loans
      90 days past due
                    
                    
                    53
                    
                    
                    
                    20Restructured
      loans
                    
                    
                    28,042
                    
                    
                    
                    29,102Total
      nonperforming loans
                    
                    $
                    89,817
                    
                    
                    $
                    86,114Other
      real estate owned
                    
                    
                    19,611
                    
                    
                    
                    17,502Other
      assets
                    
                    
                    23
                    
                    
                    
                    1,330Nonperforming
      investment securities
                    
                    
                    4,740
                    
                    
                    
                    4,740Total
      nonperforming assets
                    
                    $
                    114,191
                    
                    
                    $
                    109,686Nonperforming
      assets to total assets
                    
                    
                    8.27
                    %
                    
                    
                    7.93
                    %Allowance
      for loan losses tononperforming
      loans
                    
                    
                    26.85
                    %
                    
                    
                    27.94
                    %




5.
ALLOWANCE FOR LOAN LOSSES


Activity
in the allowance for loan losses during the quarter ended March 31 was as
follows (000’s omitted):





March 31, 2010
                  
                  
                  March 31, 2009Balance
      beginning of quarter
                  
                  $
                  24,063
                  
                  
                  $
                  18,528Provision
      for loan losses
                  
                  
                  2,200
                  
                  
                  
                  4,200Loans
      charged off
                  
                  
                  (2,362
                  )
                  
                  
                  (1,575
                  )Recoveries
                  
                  
                  211
                  
                  
                  
                  600Balance
      end of period
                  
                  $
                  24,112
                  
                  
                  $
                  21,753




For each
period, the provision for loan losses in the income statement is based on
Management’s estimate of the amount required to maintain an adequate Allowance
for Loan Losses.




To serve
as a basis for making this provision, the Bank maintains an extensive credit
risk monitoring process that considers several factors including: current
economic conditions affecting the Bank’s customers, the payment performance of
individual loans and pools of homogeneous loans, portfolio seasoning, changes in
collateral values, and detailed reviews of specific loan relationships. For
loans deemed to be impaired due to an expectation that all contractual payments
will probably not be received, impairment is measured by comparing the Bank’s
recorded investment in the loan to the present value of expected cash flows
discounted at the loan’s effective interest rate, or the fair value of the
collateral, or the loan’s observable market price.




The
provision for loan losses increases the Allowance for Loan Losses, a valuation
account which is netted against loans on the consolidated statements of
condition. When it is determined that a customer will not repay a loan, the loan
is charged off, reducing the Allowance for Loan Losses. If, subsequent to a
charge off, the Bank is able to collect additional amounts from the customer or
sell collateral worth more than earlier estimated, a recovery is
recorded.





6. INVESTMENT
SECURITIES




The
following is a summary of the Bank’s investment securities portfolio as of March
31, 2010 and December 31, 2009 (000’s omitted):




-10-




Held
      to MaturityMarch
      31, 2010Gross
                
                
                Gross
                
                
                EstimatedAmortized
                
                
                Unrealized
                
                
                Unrealized
                
                
                MarketCost
                
                
                Gains
                
                
                Losses
                
                
                ValueObligations
      of U.S. Government Agencies
                
                $
                6
                
                
                $
                -
                
                
                $
                -
                
                
                $
                6Obligations
      of States and Political Subdivisions
                
                
                32,094
                
                
                
                323
                
                
                
                (285
                )
                
                
                32,132$
                32,100
                
                
                $
                323
                
                
                $
                (285
                )
                
                $
                32,138




Available
      for SaleMarch
      31, 2010Gross
                
                
                Gross
                
                
                EstimatedAmortized
                
                
                Unrealized
                
                
                Unrealized
                
                
                MarketCost
                
                
                Gains
                
                
                Losses
                
                
                ValueObligations
      of U.S. Government Agencies
                
                $
                301,609
                
                
                $
                1,672
                
                
                $
                (1,150
                )
                
                $
                302,131Obligations
      of States and Political Subdivisions
                
                
                24,030
                
                
                
                314
                
                
                
                (121
                )
                
                
                24,223Trust
      Preferred CDO Securities
                
                
                6,610
                
                
                
                -
                
                
                
                (3,165
                )
                
                
                3,445Corporate
      Debt Securities
                
                
                5,462
                
                
                
                -
                
                
                
                (470
                )
                
                
                4,992Other
      Securities
                
                
                2,553
                
                
                
                91
                
                
                
                (270
                )
                
                
                2,374$
                340,264
                
                
                $
                2,077
                
                
                $
                (5,176
                )
                
                $
                337,165




Held
      to MaturityDecember
      31, 2009Gross
                
                
                Gross
                
                
                EstimatedAmortized
                
                
                Unrealized
                
                
                Unrealized
                
                
                MarketCost
                
                
                Gains
                
                
                Losses
                
                
                ValueObligations
      of U.S. Government Agencies
                
                $
                6
                
                
                $
                -
                
                
                $
                -
                
                
                $
                6Obligations
      of States and Political Subdivisions
                
                
                36,427
                
                
                
                336
                
                
                
                (352
                )
                
                
                36,411$
                36,433
                
                
                $
                336
                
                
                $
                (352
                )
                
                $
                36,417





Available
      for SaleDecember
      31, 2009Gross
                
                
                Gross
                
                
                EstimatedAmortized
                
                
                Unrealized
                
                
                Unrealized
                
                
                MarketCost
                
                
                Gains
                
                
                Losses
                
                
                ValueObligations
      of U.S. Government Agencies
                
                $
                256,483
                
                
                $
                602
                
                
                $
                (2,457
                )
                
                $
                254,628Obligations
      of States and Political Subdivisions
                
                
                35,117
                
                
                
                667
                
                
                
                (147
                )
                
                
                35,637Trust
      Preferred CDO Securities
                
                
                10,293
                
                
                
                -
                
                
                
                (3,078
                )
                
                
                7,215Corporate
      Debt Securities
                
                
                8,383
                
                
                
                -
                
                
                
                (874
                )
                
                
                7,509Other
      Securities
                
                
                2,553
                
                
                
                74
                
                
                
                (270
                )
                
                
                2,357$
                312,829
                
                
                $
                1,343
                
                
                $
                (6,826
                )
                
                $
                307,346





The
investment securities portfolio is evaluated for impairment throughout the year.
Impairment is recorded against individual securities, unless the decrease in
fair value is attributable to interest rates or the lack of an active market,
and Management determines that the Company does not intend to sell the
investments and it is not more likely than not that the Company will be required
to sell the investments before a recovery of their amortized costs bases, which
may be maturity. The following table shows the gross unrealized losses and fair
value of the Company’s investments with unrealized losses that are not deemed to
be other than temporarily impaired (in thousands), aggregated by investment
category and length of time that individual securities have been in a continuous
unrealized loss position at March 31, 2010 and December 31,
2009.


-11-





March
      31, 2010Less than 12 months
                      
                      
                      12 months or longer
                      
                      
                      TotalAggregate
                        Fair Value
                      
                      
                      Gross
                        Unrealized
                        Losses
                      
                      
                      Aggregate
                        Fair Value
                      
                      
                      Gross
                        Unrealized
                        Losses
                      
                      
                      Aggregate
                        Fair Value
                      
                      
                      Gross
                        Unrealized
                        LossesObligations
      of United StatesGovernment
      Agencies
                      
                      $
                      93,408
                      
                      
                      $
                      1,150
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      93,408
                      
                      
                      $
                      1,150Obligations
      of States andPolitical
      Subdivisions
                      
                      
                      11,562
                      
                      
                      
                      215
                      
                      
                      
                      4,349
                      
                      
                      
                      191
                      
                      
                      
                      15,911
                      
                      
                      
                      406Trust
      Preferred CDO Securities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,575
                      
                      
                      
                      3,165
                      
                      
                      
                      1,575
                      
                      
                      
                      3,165Corporate
      Debt Securities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4,992
                      
                      
                      
                      470
                      
                      
                      
                      4,992
                      
                      
                      
                      470Equity
      Securities
                      
                      
                      270
                      
                      
                      
                      270
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      270
                      
                      
                      
                      270$
                      105,240
                      
                      
                      $
                      1,635
                      
                      
                      $
                      10,916
                      
                      
                      $
                      3,826
                      
                      
                      $
                      116,156
                      
                      
                      $
                      5,461





December
      31, 2009Less than 12 months
                      
                      
                      12 months or longer
                      
                      
                      TotalAggregate
                        Fair Value
                      
                      
                      Gross
                        Unrealized
                        Losses
                      
                      
                      Aggregate
                        Fair Value
                      
                      
                      Gross
                        Unrealized
                        Losses
                      
                      
                      Aggregate
                        Fair Value
                      
                      
                      Gross
                        Unrealized
                        LossesObligations
      of United StatesGovernment
      Agencies
                      
                      $
                      170,584
                      
                      
                      $
                      2,457
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      170,584
                      
                      
                      $
                      2,457Obligations
      of States andPolitical
      Subdivisions
                      
                      
                      14,616
                      
                      
                      
                      299
                      
                      
                      
                      5,058
                      
                      
                      
                      200
                      
                      
                      
                      19,674
                      
                      
                      
                      499Trust
      Preferred CDO Securities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,662
                      
                      
                      
                      3,078
                      
                      
                      
                      1,662
                      
                      
                      
                      3,078Corporate
      Debt Securities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      7,509
                      
                      
                      
                      874
                      
                      
                      
                      7,509
                      
                      
                      
                      874Equity
      Securities
                      
                      
                      270
                      
                      
                      
                      270
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      270
                      
                      
                      
                      270$
                      185,470
                      
                      
                      $
                      3,026
                      
                      
                      $
                      14,229
                      
                      
                      $
                      4,152
                      
                      
                      $
                      199,699
                      
                      
                      $
                      7,178





The
amount of investment securities issued by government agencies, states, and
political subdivisions with unrealized losses and the amount of unrealized
losses on those investment securities are primarily the result of market
interest rates and not the result of the credit quality of the issuers of the
securities. Because the Company does not intend to sell the investments and it
is not more likely than not that the Company will be required to sell the
investments before recovery of their amortized cost bases, which may be
maturity, the Company does not consider those investments to be other than
temporarily impaired at March 31, 2010.





The Trust
Preferred CDO Securities are issued by companies in the financial services
industry, including banks, thrifts, and insurance companies. Each of the three
securities owned by the Company is in an unrealized loss position. The main
reasons for the impairment are the overall decline in market values for
financial industry securities and the lack of an active market for these types
of securities in particular. In determining whether the impairment is not
other-than-temporary, the Company analyzed each security’s expected cash flows.
The assumptions used in the cash flow analysis were developed following a review
of the financial condition of the individual obligors in the pools. The analysis
concluded that disruption of our cash flows due to defaults by issuers was
currently not expected to occur in one of the three securities owned. As a
result of uncertainties in the market place affecting companies in the financial
services industry, it is at least reasonably possible that a change in the
estimate will occur in the near term. Because the Company does not intend to
sell the investment and it is not more likely than not that the Company will be
required to sell the investment before recovery of its amortized cost basis,
which may be maturity, the Company does not consider this investment to be other
than temporarily impaired at  March 31, 2010.


-12-


The Other
Than Temporary Impairment (OTTI) analysis of two of the three Trust Preferred
CDO securities indicated that their impairment most likely is not temporary.
Accounting regulations require entities to split OTTI charges between credit
losses, which are charged to earnings, and other impairment, which is charged to
Other Comprehensive Income (OCI). The CDOs that have OTTI have an amortized cost
of $4.823 million and a fair value of $1.87 million. The impairment of $2.953 is
other impairment that was charged to OCI. Credit losses of $1.663 million were
charged to earnings in 2009.





The
Corporate Debt Securities consist of senior unsecured debt issued by two
regional bank holding companies. The market values for these securities have
declined over the last several months due to larger credit spreads on financial
sector debt. The Company owns two bonds with maturities in January, 2017 to
February, 2019. The Company monitors the financial condition of each issuer by
reviewing financial statements and industry analyst reports, and believes that
each of the issuers will be able to fulfill the obligations of these securities.
The unrealized losses on investment securities are primarily the result of
increases in market interest rates and not the result of credit quality of the
issuers of the securities. Because the Company does not intend to sell the
investments and it is not more likely than not that the Company will be required
to sell the investments before recovery of their amortized cost bases, which may
be maturity, the company does not consider those investments to be other than
temporarily impaired at March 31, 2010.




7.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS




Certain
of the Bank’s assets and liabilities are financial instruments that have fair
values that differ from their carrying values in the accompanying consolidated
balance sheets.  These fair values, along with the methods and
assumptions used to estimate such fair values, are discussed
below.  The fair values of all financial instruments not discussed
below (Cash and cash equivalents, Federal funds sold, Federal Home Loan Bank
stock, Accrued interest receivable and other assets, Bank Owned Life Insurance,
Federal funds purchased, and Interest payable and other liabilities) are
estimated to be equal to their carrying amounts as of March 31, 2010 and
December 31, 2009.




INVESTMENT
SECURITIES




Fair
value for the Bank’s investment securities was determined using the market value
in active markets, where available. When not available, fair values are
estimated using the fair value hierarchy. In the fair value hierarchy, Level 2
fair values are determined using observable inputs other than Level 1 market
prices, such as quoted prices for similar assets. Level 3 values are determined
using unobservable inputs, such as discounted cash flow projections. These
Estimated Market Values are disclosed in Note 6. The fair value disclosures
required are in Note 8.




LOANS,
NET




The fair
value of all loans is estimated by discounting the future cash flows associated
with the loans, using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities.


-13-


OTHER
TIME DEPOSITS




The fair
value of other time deposits, consisting of fixed maturity certificates of
deposit, is estimated by discounting the related cash flows using the rates
currently offered for deposits of similar remaining maturities.




FHLB
ADVANCES AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS




A portion
of the Federal Home Loan Bank advances in the accompanying consolidated balance
sheets were written with a put option that allows the Federal Home Loan Bank to
require repayment or conversion to a variable rate advance. The fair value of
these putable Federal Home Loan Bank advances is estimated using the binomial
lattice option pricing method.




The fair
value of fixed and variable rate Federal Home Loan Bank advances and Securities
Sold under Repurchase Agreements, is estimated by discounting the related cash
flows using the rates currently available for borrowings of similar remaining
maturities.




OFF-BALANCE-SHEET
FINANCIAL INSTRUMENTS




The fair
values of commitments to extend credit and standby letters of credit and
financial guarantees written are estimated using the fees currently charged to
engage into similar agreements.  The fair values of these instruments
are not significant.




The
carrying amounts and approximate fair values as of March 31, 2010 and December
31, 2009 are as follows (000’s omitted):




March 31, 2010
                  
                  
                  December 31, 2009Carrying
                  
                  
                  Estimated
                  
                  
                  Carrying
                  
                  
                  EstimatedValue
                  
                  
                  Fair Value
                  
                  
                  Value
                  
                  
                  Fair ValueFinancial
      Assets:Cash
      and due from banks
                  
                  $
                  69,494
                  
                  
                  $
                  69,494
                  
                  
                  $
                  69,746
                  
                  
                  $
                  69,746Securities
                  
                  
                  369,265
                  
                  
                  
                  369,303
                  
                  
                  
                  343,779
                  
                  
                  
                  343,763Federal
      Home Loan Bank Stock
                  
                  
                  13,086
                  
                  
                  
                  13,086
                  
                  
                  
                  13,086
                  
                  
                  
                  13,086Loans,
      net
                  
                  
                  798,463
                  
                  
                  
                  807,234
                  
                  
                  
                  824,916
                  
                  
                  
                  838,965Financial
      Liabilities:Demand,
      NOW, savings and money market savings deposits
                  
                  
                  640,258
                  
                  
                  
                  640,258
                  
                  
                  
                  630,065
                  
                  
                  
                  630,065Other
      time deposits
                  
                  
                  388,663
                  
                  
                  
                  395,103
                  
                  
                  
                  401,726
                  
                  
                  
                  408,516Borrowed
      fundsVariable
      Rate FHLB Advances
                  
                  
                  110,000
                  
                  
                  
                  116,173
                  
                  
                  
                  110,000
                  
                  
                  
                  116,938Fixed
      Rate FHLB Advances
                  
                  
                  3,500
                  
                  
                  
                  3,658
                  
                  
                  
                  3,500
                  
                  
                  
                  3,688Putable
      FHLB Advances
                  
                  
                  115,000
                  
                  
                  
                  118,529
                  
                  
                  
                  115,000
                  
                  
                  
                  119,700Repurchase
      Agreements
                  
                  
                  30,000
                  
                  
                  
                  34,523
                  
                  
                  
                  30,000
                  
                  
                  
                  34,896




8. FAIR
VALUE MEASUREMENTS




The
following tables present information about the Company’s assets measured at fair
value on a recurring basis at March 31, 2010, and the valuation techniques used
by the Company to determine those fair values.




In
general, fair values determined by Level 1 inputs use quoted prices in active
markets for identical assets that the Company has the ability to
access.




Fair
values determined by Level 2 inputs use other inputs that are observable, either
directly or indirectly. These Level 2 inputs include quoted prices for similar
assets in active markets, and other inputs such as interest rates and yield
curves that are observable at commonly quoted intervals.


-14-


Level 3
inputs are unobservable inputs, including inputs that are available in
situations where there is little, if any, market activity for the related
asset.




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




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




Quoted Prices in
                  Active Marketsfor
                  IdenticalAssets
                  (Level 1)
                
                
                SignificantOther
                  ObservableInputs
                  (Level 2)
                
                
                Significant
                  Unobservable
                  Inputs (Level 3)
                
                
                Balance at
                  March 31,Investment
      Securities - Available for Sale - 2010
                
                $
                309,227
                
                
                $
                24,493
                
                
                $
                3,445
                
                
                $
                337,165Investment
      Securities - Available for Sale - 2009
                
                $
                313,801
                
                
                $
                50,721
                
                
                $
                13,155
                
                
                $
                377,677




The
changes in Level 3 assets measured at fair value on a recurring basis were
(000’s omitted):




Investment Securities -
                  Available for Sale2010
                
                
                2009Balance
      at prior year end
                
                $
                7,215
                
                
                $
                19,746Total
      realized and unrealized gains (losses) included in income
                
                
                -
                
                
                
                (769
                )Total
      unrealized gains (losses) included in other comprehensive
      income
                
                
                150
                
                
                
                (5,822
                )Net
      purchases, sales, calls and maturities
                
                
                (3,920
                )
                
                
                -Net
      transfers in/out of Level 3
                
                
                -
                
                
                
                -Balance
      at March 31
                
                $
                3,445
                
                
                $
                13,155




Of the
Level 3 assets that were held by the Company at March 31, 2010, the unrealized
gain for the three months ended March 31, 2010 was $150,000, which is recognized
in other comprehensive income in the consolidated statements of financial
condition. The Company did not have any sales or purchases of Level 3 available
for sale securities during the period.




Both
observable and unobservable inputs may be used to determine the fair value of
positions classified as Level 3 assets. As a result, the unrealized gains and
losses for these assets presented in the tables above may include changes in
fair value that were attributable to both observable and unobservable
inputs.




The
Company owns pooled Trust Preferred Securities (“TRUPs”) with a fair value of
$3,445,000 as of March 31, 2010. Trading of these types of securities has
increased recently but is primarily conducted on a distress sale or forced
liquidation basis. As a result, the Company measures the fair values of these
assets using Level 3 inputs, specifically discounted cash flow
projections.




The
Company also has assets that under certain conditions are subject to measurement
at fair value on a nonrecurring basis. These assets include loans and Other Real
Estate Owned. The Company estimated the fair values of these assets using Level
3 inputs, specifically discounted cash flow projections.


-15-


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




Balance at
                  March 31,2010
                
                
                Quoted Prices in
                  Active Marketsfor
                  IdenticalAssets
                  (Level 1)
                
                
                SignificantOther
                  ObservableInputs
                  (Level 2)
                
                
                Significant
                  Unobservable
                  Inputs (Level 3)
                
                
                Total Lossesfor
                  the threemonths
                  endedMarch 31,
                  2010Impaired
      loans
                
                $
                76,964
                
                
                $
                -
                
                
                $
                -
                
                
                $
                76,964
                
                
                $
                2,151Other
      Real Estate Owned
                
                $
                19,611
                
                
                $
                -
                
                
                $
                19,611
                
                
                $
                -
                
                
                $
                1,036





Balance at
                  March 31, 2009
                
                
                Quoted Prices in
                  Active Markets for
                  Identical Assets
                  (Level 1)
                
                
                Significant Other
                  Observable Inputs
                  (Level 2)
                
                
                Significant
                  Unobservable
                  Inputs (Level 3)
                
                
                Total Losses for
                  the three months
                  ended March 31,
                  2009Impaired
      loans
                
                $
                47,582
                
                
                $
                -
                
                
                $
                -
                
                
                $
                47,582
                
                
                $
                975Other
      Real Estate Owned
                
                $
                20,722
                
                
                $
                -
                
                
                $
                20,722
                
                
                $
                -
                
                
                $
                1,856




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




9.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK




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




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




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


Contractual
      AmountMarch
      31,
                    
                    
                    December
      31,2010
                    
                    
                    2009Commitments
      to extend credit:Unused
      portion of commercial lines of credit
                    
                    $
                    63,423
                    
                    
                    $
                    64,096Unused
      portion of credit card lines of credit
                    
                    
                    5,252
                    
                    
                    
                    4,286Unused
      portion of home equity lines of credit
                    
                    
                    16,603
                    
                    
                    
                    16,034Standby
      letters of credit and financial guarantees written
                    
                    
                    4,786
                    
                    
                    
                    5,008All
      other off-balance sheet assets
                    
                    
                    3,100
                    
                    
                    
                    2,986


-16-


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




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




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




Introduction




MBT
Financial Corp. (the “Company) is a bank holding company with one subsidiary,
Monroe Bank & Trust (“the Bank”). The Bank is a commercial bank with two
wholly owned subsidiaries, MBT Credit Company, Inc. and MB&T Financial
Services. MBT Credit Company, Inc. conducts lending operations for the Bank and
MB&T Financial Services is an insurance agency which sells insurance
policies to the Bank. The Bank operates 18 branch offices in Monroe County,
Michigan and 7 offices in Wayne County, Michigan. The Bank’s primary source of
income is interest income on its loans and investments and its primary expense
is interest expense on its deposits and borrowings.





The
national economic recovery is gaining strength, but the conditions in southeast
Michigan are weak. Local unemployment rates remain high and property values
remain low, but we are beginning to see some signs of stability. Our total
problem assets, which include non performing loans, other real estate owned, non
accrual investments, and performing loans that are internally classified as
potential problems, only increased $4.2 million, or 2.7% compared to a year ago.
During the same period we increased our Allowance for Loan and Lease Losses
(ALLL) $2.4 million, or 10.8%. Although local property values and the
unemployment rate have been stable for three consecutive quarters, we do not
anticipate a significant recovery in our local markets this year. We will
continue to focus our efforts on improving asset quality, maintaining liquidity,
strengthening capital, and controlling expenses.





Net
Interest Income decreased $808,000 compared to the first quarter of 2009 even
though the net interest margin increased from 3.04% to 3.11% as the average
earning assets decreased $143.8 million, or 10.2%. The provision for loan losses
decreased from $4.2 million in the first quarter of 2009 to $2.2 million in 2010
as the recent stability in the local economic conditions lessened the need to
build the ALLL. Non interest income increased $710,000 compared to last year as
each source of non interest income increased except for NSF fees, which
decreased due to a significant decrease in overdraft activity. Our ongoing
efforts to control costs continue to produce results, and our non interest
expenses decreased $1.1 million, or 9.2% compared to the first quarter of 2009.
We expect credit related expenses, including the costs of carrying a high level
of Other Real Estate Owned (OREO), to remain high, but we should continue to see
meaningful expense improvement in most other areas.




Our
capital ratios remain above the regulatory minimums required to be considered a
“well capitalized” under bank regulatory guidelines.  As of March 31,
2010 our total capital was $83,913,000.  We believe that we have
sufficient liquidity to meet the needs of our qualified loan customers, and we
continue to maintain a financially sound and solvent balance sheet. We suspended
the payment of dividends in the third quarter of 2009 due to losses and to
preserve capital. Our board does not expect to reinstate the dividend until it
believes that earnings and capital have returned to levels that support ongoing
payment of dividends.


-17-


In May,
2009 the Bank agreed to an informal memorandum of understanding with its
regulators to establish, among other things, reporting regularly to the
regulators about our operations, financial condition, and efforts to mitigate
risks.  As a part of this informal program the Bank undertook certain
actions to improve the Bank's credit administration and developed a written plan
to attain a minimum Tier 1 Leverage Capital ratio of 8% that was approved by the
Company's Board and timely submitted to its regulatory agencies.  The
Bank has not achieved the capital target and it is likely that the Bank will be
subject to a more formal regulatory action.  If this occurs, the Bank
will become classified as “adequately capitalized” even though its ratios remain
above the “well capitalized” minimums. The Bank’s Tier 1 Leverage Capital ratio
decreased from 6.21% at December 31, 2009 to 6.18% at March 31, 2010. The
decrease in this ratio in the first quarter was due to the disallowance, solely
for purposes of computation of the Bank’s Tier 1 Leverage Capital ratio, of $3.2
million in deferred tax assets. Bank capital regulations limit the amount of
deferred tax assets that banks may include in equity capital when determining
compliance with bank capital requirements. Although the disallowance of $3.2
million in deferred tax assets adversely impacted our regulatory capital ratios
at March 31, 2010, we anticipate that we will be able to utilize the deferred
tax asset and did not increase the valuation allowance for the deferred tax
assets that we established in the fourth quarter of 2009. Following the large
loss experienced in 2009, the Company does not expect to reach the 8% Tier 1
Leverage Ratio target set forth in our memorandum of understanding during 2010
without raising capital externally. This expectation could be impacted
positively or negatively due to current uncertainties, which include, but are
not limited to, recovery of, or increases in, the deferred tax asset valuation
allowance, changing economic conditions, asset quality, and property values, and
potential increased impairment of investment securities.




Critical Accounting
Policies




The
Company’s Allowance for Loan Losses is a “critical accounting estimate” because
it is an estimate that is based on assumptions that are highly uncertain, and if
different assumptions were used or if any of the assumptions used were to
change, there could be a material impact on the presentation of the Company’s
financial condition. These assumptions include, but are not limited to,
collateral values and the effect of economic conditions on the financial
condition of the borrowers. To determine the Allowance for Loan Losses, the
Company estimates losses on all loans that are not classified as non accrual or
renegotiated by applying historical loss rates, adjusted for current conditions,
to those loans. In addition, all loans that are non accrual or renegotiated are
individually tested for impairment. Any amount of monetary impairment is
included in the Allowance for Loan Losses.




Financial
Condition




National
economic conditions appear to have begun to recover in the second half of 2009.
Local unemployment and property values have stabilized, however, the economic
environment is still weak in southeast Michigan, which caused our nonperforming
assets to increase during the quarter. Total loans decreased due to low loan
demand, payments received in the ordinary course of business, and charge offs of
existing loans. We continued to manage toward a decreased use of brokered
certificates of deposits, which has helped improve our net interest margin.
While some lending opportunities exist, the economy is expected to remain weak
in our market area throughout 2010. The Company expects low or slightly negative
deposit and asset growth in 2010 and intends to continue to focus efforts on
improved credit quality, capital management, and enterprise risk
mitigation.


-18-


Since
December 31, 2009, total loans decreased $26.4 million (3.1%) due to the weak
loan demand. This reduction in loans resulted in an increase of $25.2 million
(6.1%) in total cash and investments. Total assets and total deposits each
decreased less than 1% during the first quarter. Total capital increased $2.1
million or 2.6%, resulting from a nominal profit and a $1.8 million increase in
accumulated other comprehensive income (AOCI).  The increase in AOCI
resulted from an increase in the value of our securities available for sale. The
increase in total capital and the decrease in total assets caused the capital to
assets ratio to increase from 5.91% at December 31, 2009 to 6.07% at March 31,
2010.




The
amount of nonperforming assets (“NPAs”) increased $4.5 million or 4.1% since
year end. NPAs include non performing loans, which increased 4.3% from $86.1
million to $89.8 million, and Other Real Estate Owned and Other Assets (“OREO”),
which increased 4.3% from $18.8 million to $19.6 million. Total problem assets,
which includes all NPAs and performing loans that are internally classified as
substandard, increased $2.3 million, or 1.5%. The Company’s Allowance for Loan
and Lease Losses (“ALLL”) increased $49,000 since December 31, 2009, resulting
from an increase in our FAS 114 allocation from $6.5 million to $8.3 million,
and a decrease from $17.6 million to $15.8 million in our FAS 5 general
allocation due to the decrease in the size of the loan portfolio. The loss
factors utilized in the general allocation include loss averages for the most
recent eight quarters and adjustments for various current factors, such as
recent delinquency trends and national and local economic conditions. The ALLL
is now 2.93% of loans, compared to 2.83% at year end. The ALLL is 26.9% of NPLs,
compared to 27.9% at year end. In light of current economic conditions, we
believe that at this level the ALLL adequately estimates the potential losses in
the loan portfolio.




Results of Operations –
First Quarter 2010 vs. First Quarter 2009




Net
Interest Income - A comparison of the income statements for the three months
ended March 31, 2009 and 2010 shows a decrease of $808,000, or 7.9%, in Net
Interest Income. Interest income on loans decreased $1.7 million or 12.1% as the
average loans outstanding decreased $108.3 million and the average yield on
loans decreased from 5.90% to 5.86%. The interest income on investments, fed
funds sold, and interest bearing balances due from banks decreased $2.0 million
as the average amount of investments, fed funds sold, and interest bearing
balances due from banks decreased $35.5 million and the yield decreased from
4.65% to 3.14%. An improvement in the term structure of interest rates, a
decrease in the overall level of interest rates, and the maturity of some high
cost borrowings and brokered certificates of deposit allowed funding costs to
decrease faster than asset yields. The interest expense on deposits decreased
$2.2 million or 39.3% as the average deposits decreased $67.5 million and the
average cost of those deposits decreased from 2.03% to 1.32%. The cost of
borrowed funds decreased $0.7 million as the average amount of borrowed funds
decreased $33.8 million and the average cost of the borrowings decreased from
4.52% to 4.01%.




Provision
for Loan Losses - The Provision for Loan Losses decreased from $4.2 million in
the first quarter of 2009 to $2.2 million in the first quarter of 2010 primarily
due to stabilization of economic conditions, especially local real estate
values. Net charge offs were $2.2 million during the first quarter of 2010,
compared to $1.0 million in the first quarter of 2009. Each quarter, the Company
conducts a review and analysis of its ALLL to determine its adequacy. This
analysis involves specific allocations for impaired credits and a general
allocation for losses expected based on historical experience adjusted for
current conditions. The ALLL is 2.93% of loans as of March 31, 2010, and, in
light of current economic conditions, we believe that at this level the ALLL
adequately estimates the potential losses in our loan
portfolio.


-19-


Other
Income – Non interest income increased $710,000 or 21.3% compared to the first
quarter of 2009. We have been successful in attracting new business in our
Wealth Management Group and market values of investments improved, leading to a
5.3% increase in Wealth Management fees. Service charges and other fees
decreased $85,000, or 6.3%, primarily due to a decrease in NSF fees on checking
accounts. Mortgage loan activity increased in the first quarter of 2010, and the
origination fees on mortgage loans sold increased $23,000, or 21.1%. The net
gain on securities transactions increased $458,000 mainly due to an OTTI charge
on our pooled trust preferred CDO securities in the first quarter of
2009.




Other
Expenses – Total non interest expenses decreased $1.1 million or 9.2% compared
to the first quarter of 2009. Most expense categories were flat or decreased due
to cost containment initiatives implemented throughout the last year. Salaries
and Employee Benefits decreased $365,000, or 6.7%, due to a decrease in staff, a
decrease in the 401(k) matching contribution and the elimination of the
incentive pay accrual. Occupancy expense decreased $109,000, or 11.9% due to
lower rent, maintenance, and utilities costs. Collection expenses decreased
significantly due to a large charge for an unusual item last year to secure our
lien on loan collateral. FDIC deposit insurance premium expense increased
$195,000, or 44.7% primarily due to an increase in the assessment
rate.




As a
result of the above activity, the Income Before Income Taxes increased $3.0
million to a profit of $348,000. The income tax benefit of $207,000 was not
recorded due to the uncertainty of our expected ability to utilize our existing
deferred tax assets. Our first quarter net profit of $348,000 is an increase of
$1.7 million from the loss of $1.4 million in the first quarter of
2009.




Cash
Flows




Cash
flows used by operating activities decreased from $3.2 million in the first
three months of 2009 to $0.9 million in the first three months of 2010 due to
the increase in net income and the increase in the net deferred federal income
tax asset in the first quarter of 2009. Cash flows provided by investing
activities decreased from $45.2 million in the first three months of 2009 to
$3.5 million in the first three months of 2010 primarily due to a decrease in
the maturities and redemptions of investment securities. The amount of cash used
for financing activities decreased from $70.6 million in the first three months
of 2009 to $2.9 million in the first three months of 2010 as the decrease in
deposits decreased from $69.2 million in 2009 to $2.9 million in 2010. Also,
dividends paid decreased from $1.5 million in the first quarter of 2009 to zero
in the first quarter of 2010 as the dividend was eliminated in the third quarter
of 2009.




Liquidity and
Capital




The
Company believes it has sufficient liquidity to fund its lending activity and
allow for fluctuations in deposit levels. Internal sources of liquidity include
the maturities of loans and securities in the ordinary course of business as
well as our available for sale securities portfolio. External sources of
liquidity include a line of credit with the Federal Home Loan Bank of
Indianapolis, the Federal funds line that has been established with our
correspondent bank, Repurchase Agreements with money center banks that allow us
to pledge securities as collateral for borrowings and the Federal Reserve
Discount Window, which allows us to pledge loans and investments as collateral.
As of March 31, 2010, the Bank utilized $228.5 million of its authorized limit
of $275 million with the Federal Home Loan Bank of Indianapolis and none of its
$25 million of federal funds line with a correspondent bank.




The
Company’s Funds Management Policy includes guidelines for desired amounts of
liquidity and capital. The Funds Management Policy also includes contingency
plans for liquidity and capital that specify actions to take if liquidity and
capital ratios fall below the levels contained in the policy. Throughout the
first three months of 2010 the Company was in compliance with its Funds
Management Policy regarding liquidity and capital.


-20-


Total
stockholders’ equity of the Company was $83.9 million at March 31, 2010 and
$81.8 million at December 31, 2009. The ratio of equity to assets was 6.07% at
March 31, 2010 and 5.91% at December 31, 2009. Federal bank regulatory agencies
have set capital adequacy standards for Total Risk Based Capital, Tier 1 Risk
Based Capital, and Leverage Capital. These standards require banks to maintain
Leverage and Tier 1 ratios of at least 4% and a Total Capital ratio of at least
8% to be adequately capitalized. The regulatory agencies consider a bank to be
well capitalized if its Total Risk Based Capital is at least 10% of Risk
Weighted Assets, Tier 1 Capital is at least 6% of Risk Weighted Assets, and the
Leverage Capital Ratio is at least 5%.




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




Actual
                  
                  
                  Minimum to Qualify as
                    Well CapitalizedAmount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  RatioAs
      of March 31, 2010:Total
      Capital to Risk-Weighted AssetsConsolidated
                  
                  $
                  97,918
                  
                  
                  
                  10.30
                  %
                  
                  $
                  95,067
                  
                  
                  
                  10
                  %Monroe
      Bank & Trust
                  
                  
                  97,180
                  
                  
                  
                  10.23
                  %
                  
                  
                  94,986
                  
                  
                  
                  10
                  %Tier
      1 Capital to Risk-Weighted AssetsConsolidated
                  
                  
                  85,880
                  
                  
                  
                  9.03
                  %
                  
                  
                  57,040
                  
                  
                  
                  6
                  %Monroe
      Bank & Trust
                  
                  
                  85,111
                  
                  
                  
                  8.96
                  %
                  
                  
                  56,992
                  
                  
                  
                  6
                  %Tier
      1 Capital to Average AssetsConsolidated
                  
                  
                  85,880
                  
                  
                  
                  6.23
                  %
                  
                  
                  68,931
                  
                  
                  
                  5
                  %Monroe
      Bank & Trust
                  
                  
                  85,111
                  
                  
                  
                  6.18
                  %
                  
                  
                  68,901
                  
                  
                  
                  5
                  %




Actual
                  
                  
                  Minimum to Qualify as
                    Well CapitalizedAmount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  RatioAs
      of December 31, 2009:Total
      Capital to Risk-Weighted AssetsConsolidated
                  
                  $
                  101,158
                  
                  
                  
                  10.21
                  %
                  
                  $
                  99,065
                  
                  
                  
                  10
                  %Monroe
      Bank & Trust
                  
                  
                  100,329
                  
                  
                  
                  10.14
                  %
                  
                  
                  98,984
                  
                  
                  
                  10
                  %Tier
      1 Capital to Risk-Weighted AssetsConsolidated
                  
                  
                  88,627
                  
                  
                  
                  8.95
                  %
                  
                  
                  59,439
                  
                  
                  
                  6
                  %Monroe
      Bank & Trust
                  
                  
                  87,775
                  
                  
                  
                  8.87
                  %
                  
                  
                  59,390
                  
                  
                  
                  6
                  %Tier
      1 Capital to Average AssetsConsolidated
                  
                  
                  88,627
                  
                  
                  
                  6.27
                  %
                  
                  
                  70,681
                  
                  
                  
                  5
                  %Monroe
      Bank & Trust
                  
                  
                  87,775
                  
                  
                  
                  6.21
                  %
                  
                  
                  70,643
                  
                  
                  
                  5
                  %




At March
31, 2010 and December 31, 2009, the Bank was in compliance with the capital
guidelines and qualified as “well capitalized” under regulatory standards. Due
to the inability to attain the Tier 1 leverage ratio target in the MOU, it is
likely that the Bank will be required to enter into a formal agreement with its
regulators. If that occurs, the Bank will become classified as “adequately
capitalized” even though its ratios meet the “well capitalized”
guidelines.




Market
risk for the Bank, as is typical for most banks, consists mainly of interest
rate risk and market price risk. The Bank’s earnings and the economic value of
its equity are exposed to interest rate risk and market price risk, and
monitoring this risk is the responsibility of the Asset/Liability Management
Committee (ALCO) of the Bank. The Bank’s market risk is monitored monthly and it
has not changed significantly since year-end 2009.


-21-


Forward-Looking
Statements




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




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




Item
3. Quantitative and Qualitative Disclosures about Market Risk




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




Each
month, the Asset and Liability Committee (ALCO), which includes the senior
management of the Bank, estimates the effect of interest rate changes on the
projected net interest income of the Bank. The sensitivity of the Bank’s net
interest income to changes in interest rates is measured by using a computer
based simulation model to estimate the impact on earnings of gradual increases
or decreases of 100, 200, and 300 basis points in the prime rate. The net
interest income projections are compared to a base case projection, which
assumes no changes in interest rates.




The
Bank’s ALCO has established limits in the acceptable amount of interest rate
risk, as measured by the change in the Bank’s projected net interest income, in
its policy. At the end of 2009, the estimated variability of the net interest
income exceeded the Bank’s established policy limits for the minus 200 and minus
300 basis point rate scenarios. At the end of the first three months of 2010,
the estimated variability of the net interest income exceeded the Bank’s
established policy limit for the minus 300 basis point rate scenario. However,
because current interest rates are at historically low levels, it is not
probable that rates would decrease 300 basis points, and the ALCO determined
that no corrective action is required.




The ALCO
also monitors interest rate risk by estimating the effect of changes in interest
rates on the economic value of the Bank’s equity each month. The economic value
of the Bank’s equity is first determined by subtracting the fair value of the
Bank’s liabilities from the fair value of the Bank’s assets. The Bank estimates
the interest rate risk by calculating the effect of market interest rate changes
on that economic value of its equity. For this analysis, the Bank assumes
immediate parallel shifts of plus or minus 100, 200, and 300 basis points in
interest rates. The discount rates used to determine the present values of the
loans and deposits, as well as the prepayment rates for the loans, are based on
Management’s expectations of the effect of the rate changes on the market for
loans and deposits.


-22-


The
Bank’s interest rate risk, as measured by the net interest income and economic
value of equity simulations, has not changed significantly from December 31,
2009.




Item
4. Controls and Procedures




The
Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures as of
March 31, 2010, pursuant to Exchange Act Rule 13a-15.  Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures were effective as of March
31, 2010, in alerting them in a timely manner to material information relating
to the Company (including its consolidated subsidiaries) required to be included
in the Company's periodic SEC filings.





There was
no change in the Company’s internal control over financial reporting that
occurred during the Company’s fiscal quarter ended March 31, 2010, that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.




Part
II Other Information




Item
1. Legal Proceedings


MBT
Financial Corp. and its subsidiaries are not a party to, nor is any of their
property the subject of any material legal proceedings other than ordinary
routine litigation incidental to their respective businesses, nor are any such
proceedings known to be contemplated by governmental authorities.





Item
1A. Risk Factors


There
have been no material changes in the risk factors disclosed by the Company in
its Report on Form 10-K for the fiscal year ended December 31,
2009.





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


None.





Item
3. Defaults Upon Senior Securities


None.





Item
4. Other Information


No
matters to be reported.


-23-


Item
5. Exhibits


The
following exhibits are filed as a part of this report:





3.1
            Restated
      Articles of Incorporation of MBT Financial Corp. Previously filed as
      Exhibit 3.1 to MBT Financial Corp.’s Form 10-K for its fiscal year ended
      December 31, 2000.





3.2
            Amended
      and Restated Bylaws of MBT Financial Corp. Previously filed as Exhibit 3.2
      to MBT Financial Corp.’s Form 10-Q for its quarter ended March 31,
      2008.





31.1
            Certification
      by Chief Executive Officer required by Securities and Exchange Commission
      Rule 13a-14.





31.2
            Certification
      by Chief Financial Officer required by Securities and Exchange Commission
      Rule 13a-14.





32.1
            Certification
      by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as enacted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.





32.2
            Certification
      by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as enacted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.


-24-


Signatures




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




MBT Financial Corp.(Registrant)May 13, 2010
                                    
                                    By
                                    /s/
      H. Douglas ChaffinDate
                                    
                                    H.
      Douglas ChaffinPresident
      &Chief
      Executive OfficerMay 13, 2010
                                    
                                    By
                                    /s/
      John L. SkibskiDate
                                    
                                    John
      L. SkibskiExecutive
      Vice President andChief
      Financial
Officer


-25-


Exhibit
Index





Exhibit Number
                    
                    Description of Exhibits31.1
                    
                    Certification
      by Chief Executive Officer required by Securities and Exchange Commission
      Rule 13a-14.31.2
                    
                    Certification
      by Chief Financial Officer required by Securities and Exchange Commission
      Rule 13a-14.32.1
                    
                    Certification
      by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as enacted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2
                    
                    Certification
      by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as enacted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.