UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 Commission File Number: 000-30973
 MBT FINANCIAL CORP.
  MICHIGAN
(State of Incorporation)
    
    38-3516922
(I.R.S. Employer Identification No.)102 E. Front St. 
Monroe, Michigan
(Address of Principal Executive Offices)
    
    48161
(Zip Code)
 (734) 241-3431
 None
   o þ
 o þ
 þ o
 o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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Part I
 Item 1. Business
 General
     Competition
   Supervision and Regulation
  2




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3




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Employees
  Executive Officers of the Registrant
 NAME
    
    AGE
    
    POSITIONH. Douglas Chaffin
    
    
    53
    
    
    President & Chief Executive OfficerScott E. McKelvey
    
    
    49
    
    
    Executive Vice President, Senior Wealth
Management Officer, Monroe Bank & TrustJames E. Morr
    
    
    62
    
    
    Executive Vice President, General Counsel, and
Chief Risk Officer, Monroe Bank & Trust;
Secretary, MBT Financial Corp.Thomas G. Myers
    
    
    52
    
    
    Executive Vice President & Chief
Lending Manager, Monroe Bank & TrustJohn L. Skibski
    
    
    44
    
    
    Executive Vice President & Chief
Financial Officer, Monroe Bank & Trust;
Treasurer, MBT Financial Corp.
    Available Information
  4




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Item 1A. Risk Factors
   Risks Related to the Corporations Business
 Interest
Rate Risk
  Lending Risk
  5




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Economic Risk
 Competitive Risk
 Regulatory Risk
 6




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Failure or Circumvention of Controls and Procedures
 Item 1B. Unresolved Staff Comments
  Item 2. Properties
  Item 3. Legal Proceedings
  7




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##### 



Item 4. Submission of Matters to a Vote of Security Holders.
  Part II
 Item 5. Market for the Registrants Common Equity, Related Security Holder Matters, and Issuer
Purchases of Equity Securities
  2008
    
    2007High
    
    Low
    
    High
    
    Low1st quarter
    
    $
    9.87
    
    
    $
    7.93
    
    
    $
    15.48
    
    
    $
    12.262nd quarter
    
    $
    9.49
    
    
    $
    5.36
    
    
    $
    14.60
    
    
    $
    12.123rd quarter
    
    $
    6.00
    
    
    $
    4.27
    
    
    $
    14.04
    
    
    $
    11.154th quarter
    
    $
    4.83
    
    
    $
    2.40
    
    
    $
    12.25
    
    
    $
    8.30
  2008
    
    2007
    
    20061st quarter
    
    $
    0.18
    
    
    $
    0.18
    
    
    $
    0.172nd quarter
    
    $
    0.18
    
    
    $
    0.18
    
    
    $
    0.173rd quarter
    
    $
    0.09
    
    
    $
    0.18
    
    
    $
    0.184th quarter
    
    $
    0.09
    
    
    $
    0.18
    
    
    $
    0.18
  8




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MBT Financial Corp.
 
 Period EndingIndex
    
    12/31/03
    
    12/31/04
    
    12/31/05
    
    12/31/06
    
    12/31/07
    
    12/31/08MBT Financial Corp.
    
    
    100.00
    
    
    
    145.52
    
    
    
    105.04
    
    
    
    103.78
    
    
    
    63.43
    
    
    
    24.13NASDAQ Composite
    
    
    100.00
    
    
    
    108.59
    
    
    
    110.08
    
    
    
    120.56
    
    
    
    132.39
    
    
    
    78.72NASDAQ Bank
    
    
    100.00
    
    
    
    110.99
    
    
    
    106.18
    
    
    
    117.87
    
    
    
    91.85
    
    
    
    69.88MBTF 2008 Michigan Peer Group*
    
    
    100.00
    
    
    
    114.33
    
    
    
    98.15
    
    
    
    104.88
    
    
    
    57.42
    
    
    
    24.62
 The MBTF 2008 Michigan Peer Group* consists of Capitol Bancorp Ltd., Chemical Financial
Corporation, Citizens First Bancorp, Inc.,
Dearborn Bancorp, Inc., Citizens Republic Bancorp, Inc., Fentura Financial, Inc., Flagstar Bancorp,
Inc., Firstbank Corporation, Macatawa
Bank Corporation & Mercantile Bank Corporation. These are all publicly traded banking companies
headquartered in Michigan.
 9




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##### 



Item 6. Selected Financial Data
  Selected Consolidated Financial Data
 Dollar amounts are in thousands,except per share data
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Consolidated Statements of IncomeInterest Income
    
    $
    84,903
    
    
    $
    93,551
    
    
    $
    95,923
    
    
    $
    89,695
    
    
    $
    79,703Interest Expense
    
    
    42,514
    
    
    
    50,782
    
    
    
    49,288
    
    
    
    38,583
    
    
    
    26,998Net Interest Income
    
    
    42,389
    
    
    
    42,769
    
    
    
    46,635
    
    
    
    51,112
    
    
    
    52,705Provision for Loan Losses
    
    
    18,000
    
    
    
    11,407
    
    
    
    16,475
    
    
    
    6,906
    
    
    
    2,491Net Interest
Income after Provision for Loan Losses
    
    
    24,389
    
    
    
    31,362
    
    
    
    30,160
    
    
    
    44,206
    
    
    
    50,214Other Income
    
    
    15,985
    
    
    
    15,634
    
    
    
    9,542
    
    
    
    14,449
    
    
    
    13,776Other Expenses
    
    
    39,999
    
    
    
    37,234
    
    
    
    36,308
    
    
    
    33,818
    
    
    
    32,616Income before Provision
for Income Taxes
    
    
    375
    
    
    
    9,762
    
    
    
    3,394
    
    
    
    24,837
    
    
    
    31,374Provision for
Income Taxes
    
    
    (1,317
    )
    
    
    2,049
    
    
    
    (379
    )
    
    
    6,858
    
    
    
    8,775Net Income
    
    $
    1,692
    
    
    $
    7,713
    
    
    $
    3,773
    
    
    $
    17,979
    
    
    $
    22,599Net Income available to
Common Shareholders
    
    $
    1,692
    
    
    $
    7,713
    
    
    $
    3,773
    
    
    $
    17,979
    
    
    $
    22,599Per Common ShareBasic Net Income
    
    $
    0.10
    
    
    $
    0.47
    
    
    $
    0.22
    
    
    $
    1.04
    
    
    $
    1.30Diluted Net Income
    
    
    0.10
    
    
    
    0.47
    
    
    
    0.22
    
    
    
    1.03
    
    
    
    1.29Cash Dividends Declared
    
    
    0.54
    
    
    
    0.72
    
    
    
    0.70
    
    
    
    0.66
    
    
    
    0.62Book Value at Year End
    
    
    7.49
    
    
    
    7.90
    
    
    
    8.14
    
    
    
    8.82
    
    
    
    8.89Average Common Shares
Outstanding
    
    
    16,134,570
    
    
    
    16,415,425
    
    
    
    16,941,432
    
    
    
    17,334,376
    
    
    
    17,444,165Consolidated Balance Sheets
(Year End)Total Assets
    
    $
    1,562,401
    
    
    $
    1,556,806
    
    
    $
    1,566,819
    
    
    $
    1,638,356
    
    
    $
    1,552,279Total Securities
    
    
    466,043
    
    
    
    438,058
    
    
    
    439,025
    
    
    
    533,709
    
    
    
    505,441Loans, Net of Deferred Loan Fees
    
    
    941,732
    
    
    
    1,002,259
    
    
    
    998,998
    
    
    
    989,311
    
    
    
    945,881Allowance for Loan Losses
    
    
    18,528
    
    
    
    20,222
    
    
    
    13,764
    
    
    
    13,625
    
    
    
    13,800Deposits
    
    
    1,136,078
    
    
    
    1,109,980
    
    
    
    1,116,057
    
    
    
    1,184,710
    
    
    
    1,100,711Borrowings
    
    
    291,500
    
    
    
    304,800
    
    
    
    300,000
    
    
    
    291,500
    
    
    
    286,500Total Shareholders Equity
    
    
    120,977
    
    
    
    127,447
    
    
    
    136,062
    
    
    
    151,619
    
    
    
    155,346Selected Financial RatiosReturn on Average Assets
    
    
    0.11
    %
    
    
    0.50
    %
    
    
    0.24
    %
    
    
    1.13
    %
    
    
    1.55
    %Return on Average Equity
    
    
    1.36
    %
    
    
    5.77
    %
    
    
    2.60
    %
    
    
    11.57
    %
    
    
    15.18
    %Net Interest Margin
    
    
    2.96
    %
    
    
    2.99
    %
    
    
    3.12
    %
    
    
    3.42
    %
    
    
    3.75
    %Dividend Payout Ratio
    
    
    514.78
    %
    
    
    152.40
    %
    
    
    313.16
    %
    
    
    63.52
    %
    
    
    47.88
    %Allowance for Loan Losses
to Period End Loans
    
    
    1.97
    %
    
    
    2.02
    %
    
    
    1.38
    %
    
    
    1.38
    %
    
    
    1.69
    %Allowance for Loan Losses
to Non Performing Loans
    
    
    34.45
    %
    
    
    59.60
    %
    
    
    61.06
    %
    
    
    51.49
    %
    
    
    34.57
    %Non Performing Loans
to Period End Loans
    
    
    5.71
    %
    
    
    3.39
    %
    
    
    2.26
    %
    
    
    2.67
    %
    
    
    4.22
    %Net Charge Offs to Average Loans
    
    
    2.00
    %
    
    
    0.49
    %
    
    
    1.62
    %
    
    
    0.71
    %
    
    
    0.35
    %
 10




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Critical Accounting Policies
  Recent Accounting Pronouncements
 Results of Operations 
   11




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12




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13




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2008
    
    2007
    
    2006Return on Average Assets
    
    
    0.11
    %
    
    
    0.50
    %
    
    
    0.24
    %Return on Average Equity
    
    
    1.36
    %
    
    
    5.77
    %
    
    
    2.60
    %Dividend Payout Ratio
    
    
    514.78
    %
    
    
    152.40
    %
    
    
    313.16
    %Average Equity to Average Assets
    
    
    8.07
    %
    
    
    8.68
    %
    
    
    9.05
    %
 Balance Sheet Activity
 14




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##### 



Asset Quality 
  Liquidity and Capital 
   Minimum to be WellDecember 31, 2008
    
    December 31, 2007
    
    CapitalizedTier 1 Leverage Ratio
    
    
    7.8
    %
    
    
    8.4
    %
    
    
    5.0
    %Tier 1 Risk based Capital
    
    
    11.5
    %
    
    
    11.8
    %
    
    
    6.0
    %Total Risk Based Capital
    
    
    12.7
    %
    
    
    13.1
    %
    
    
    10.0
    %
  15




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##### 



Held to MaturityDecember 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006Estimated
    
    
    
    
    
    
    Estimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Market
    
    
    Amortized
    
    
    Market
    
    
    Amortized
    
    
    MarketCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueU.S. Government agency and corporation
obligations
    
    $
    7
    
    
    $
    7
    
    
    $
    7
    
    
    $
    8
    
    
    $
    10
    
    
    $
    10Securities issued by states and political
subdivisions in the U.S.
    
    
    46,833
    
    
    
    46,036
    
    
    
    44,727
    
    
    
    45,036
    
    
    
    64,928
    
    
    
    65,330Total
    
    $
    46,840
    
    
    $
    46,043
    
    
    $
    44,734
    
    
    $
    45,044
    
    
    $
    64,938
    
    
    $
    65,340Pledged securities
    
    $
    6,406
    
    
    $
    6,405
    
    
    $
    6,650
    
    
    $
    6,695
    
    
    $
    4,209
    
    
    $
    4,258
 Available for SaleDecember 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006Estimated
    
    
    
    
    
    
    Estimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Market
    
    
    Amortized
    
    
    Market
    
    
    Amortized
    
    
    MarketCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueU.S. Government agency and corporation obligations (excluding mortgage-backed
securities)
    
    $
    322,767
    
    
    $
    329,671
    
    
    $
    330,505
    
    
    $
    330,178
    
    
    $
    326,808
    
    
    $
    322,934Securities issued by states and political
subdivisions in the U.S.
    
    
    40,999
    
    
    
    41,114
    
    
    
    27,046
    
    
    
    27,134
    
    
    
    23,226
    
    
    
    23,129Trust Preferred CDO Securities
    
    
    25,132
    
    
    
    19,371
    
    
    
    20,044
    
    
    
    19,865
    
    
    
    22,994
    
    
    
    22,985Corporate Debt Securities
    
    
    15,170
    
    
    
    13,516
    
    
    
    1,024
    
    
    
    1,026
    
    
    
    2,998
    
    
    
    3,004Other domestic securities (debt and equity)
    
    
    2,386
    
    
    
    2,445
    
    
    
    2,013
    
    
    
    2,035
    
    
    
    2,014
    
    
    
    2,035Total
    
    $
    406,454
    
    
    $
    406,117
    
    
    $
    380,632
    
    
    $
    380,238
    
    
    $
    378,040
    
    
    $
    374,087Pledged securities
    
    $
    251,525
    
    
    $
    257,054
    
    
    $
    345,255
    
    
    $
    344,975
    
    
    $
    325,445
    
    
    $
    321,477
 16




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##### 



Years Ended December 31,2008
    
    
    
    
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    
    
    
    2006Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestDaily
    
    
    Earned
    
    
    Average
    
    
    Daily
    
    
    Earned
    
    
    Average
    
    
    Daily
    
    
    Earned
    
    
    Average(Dollars in Thousands)
    
    Balance
    
    
    or Paid
    
    
    Yield
    
    
    Balance
    
    
    or Paid
    
    
    Yield
    
    
    Balance
    
    
    or Paid
    
    
    YieldInvestmentsInterest Bearing Balances Due From Banks
    
    $
    3,368
    
    
    $
    29
    
    
    
    0.86
    %
    
    $
    182
    
    
    $
    9
    
    
    
    4.95
    %
    
    $
    100
    
    
    $
    5
    
    
    
    5.00
    %Obligations of US
 Government Agencies
    
    
    313,283
    
    
    
    16,073
    
    
    
    5.13
    %
    
    
    315,338
    
    
    
    16,918
    
    
    
    5.37
    %
    
    
    331,600
    
    
    
    16,778
    
    
    
    5.06
    %Obligations of States &
Political Subdivisions1
    
    
    76,862
    
    
    
    3,390
    
    
    
    4.41
    %
    
    
    77,391
    
    
    
    3,177
    
    
    
    4.11
    %
    
    
    90,032
    
    
    
    4,356
    
    
    
    4.84
    %Other Securities
    
    
    48,459
    
    
    
    2,903
    
    
    
    5.99
    %
    
    
    33,955
    
    
    
    2,058
    
    
    
    6.06
    %
    
    
    61,656
    
    
    
    3,763
    
    
    
    6.10
    %Total Investments
    
    
    441,972
    
    
    
    22,395
    
    
    
    5.07
    %
    
    
    426,866
    
    
    
    22,162
    
    
    
    5.19
    %
    
    
    483,388
    
    
    
    24,902
    
    
    
    5.15
    %LoansCommercial
    
    
    670,473
    
    
    
    41,757
    
    
    
    6.23
    %
    
    
    662,176
    
    
    
    48,058
    
    
    
    7.26
    %
    
    
    654,945
    
    
    
    46,987
    
    
    
    7.17
    %Mortgage
    
    
    210,427
    
    
    
    12,679
    
    
    
    6.03
    %
    
    
    221,594
    
    
    
    13,405
    
    
    
    6.05
    %
    
    
    228,960
    
    
    
    13,746
    
    
    
    6.00
    %Consumer
    
    
    102,682
    
    
    
    8,036
    
    
    
    7.83
    %
    
    
    116,569
    
    
    
    9,782
    
    
    
    8.39
    %
    
    
    126,074
    
    
    
    10,217
    
    
    
    8.10
    %Total Loans2
    
    
    983,582
    
    
    
    62,472
    
    
    
    6.35
    %
    
    
    1,000,339
    
    
    
    71,245
    
    
    
    7.12
    %
    
    
    1,009,979
    
    
    
    70,950
    
    
    
    7.02
    %Federal Funds Sold
    
    
    4,333
    
    
    
    36
    
    
    
    0.83
    %
    
    
    2,774
    
    
    
    144
    
    
    
    5.19
    %
    
    
    1,553
    
    
    
    71
    
    
    
    4.57
    %Total Interest Earning Assets
    
    
    1,429,887
    
    
    
    84,903
    
    
    
    5.94
    %
    
    
    1,429,979
    
    
    
    93,551
    
    
    
    6.54
    %
    
    
    1,494,920
    
    
    
    95,923
    
    
    
    6.42
    %Cash & Non Interest Bearing Due From Banks
    
    
    20,420
    
    
    
    
    
    
    
    
    
    
    
    23,171
    
    
    
    
    
    
    
    
    
    
    
    24,421Interest Receivable and Other Assets
    
    
    97,412
    
    
    
    
    
    
    
    
    
    
    
    86,853
    
    
    
    
    
    
    
    
    
    
    
    81,629Total Assets
    
    $
    1,547,719
    
    
    
    
    
    
    
    
    
    
    $
    1,540,003
    
    
    
    
    
    
    
    
    
    
    $
    1,600,970Savings Accounts
    
    $
    95,546
    
    
    $
    183
    
    
    
    0.19
    %
    
    $
    95,646
    
    
    $
    214
    
    
    
    0.22
    %
    
    $
    106,065
    
    
    $
    264
    
    
    
    0.25
    %NOW Accounts
    
    
    82,031
    
    
    
    668
    
    
    
    0.81
    %
    
    
    68,637
    
    
    
    252
    
    
    
    0.37
    %
    
    
    66,394
    
    
    
    165
    
    
    
    0.25
    %Money Market Deposits
    
    
    293,797
    
    
    
    6,115
    
    
    
    2.08
    %
    
    
    286,655
    
    
    
    9,830
    
    
    
    3.43
    %
    
    
    289,849
    
    
    
    9,846
    
    
    
    3.40
    %Certificates of Deposit
    
    
    494,962
    
    
    
    19,870
    
    
    
    4.01
    %
    
    
    498,952
    
    
    
    22,126
    
    
    
    4.43
    %
    
    
    512,780
    
    
    
    20,574
    
    
    
    4.01
    %Federal Funds Purchased
    
    
    18,364
    
    
    
    466
    
    
    
    2.54
    %
    
    
    10,019
    
    
    
    518
    
    
    
    5.17
    %
    
    
    18,913
    
    
    
    981
    
    
    
    5.19
    %Repurchase Agreements
    
    
    32,008
    
    
    
    1,474
    
    
    
    4.61
    %
    
    
    36,959
    
    
    
    1,644
    
    
    
    4.45
    %
    
    
    37,836
    
    
    
    1,564
    
    
    
    4.13
    %FHLB Advances
    
    
    258,303
    
    
    
    13,738
    
    
    
    5.32
    %
    
    
    256,500
    
    
    
    16,198
    
    
    
    6.32
    %
    
    
    256,500
    
    
    
    15,894
    
    
    
    6.20
    %Total Interest Bearing Liabilities
    
    
    1,275,011
    
    
    
    42,514
    
    
    
    3.33
    %
    
    
    1,253,368
    
    
    
    50,782
    
    
    
    4.05
    %
    
    
    1,288,337
    
    
    
    49,288
    
    
    
    3.83
    %Non-interest Bearing Deposits
    
    
    136,918
    
    
    
    
    
    
    
    
    
    
    
    141,269
    
    
    
    
    
    
    
    
    
    
    
    154,327Other Liabilities
    
    
    10,921
    
    
    
    
    
    
    
    
    
    
    
    11,676
    
    
    
    
    
    
    
    
    
    
    
    13,456Total Liabilities
    
    
    1,422,850
    
    
    
    
    
    
    
    
    
    
    
    1,406,313
    
    
    
    
    
    
    
    
    
    
    
    1,456,120Stockholders Equity
    
    
    124,869
    
    
    
    
    
    
    
    
    
    
    
    133,690
    
    
    
    
    
    
    
    
    
    
    
    144,850Total Liabilities & Stockholders Equity
    
    $
    1,547,719
    
    
    
    
    
    
    
    
    
    
    $
    1,540,003
    
    
    
    
    
    
    
    
    
    
    $
    1,600,970Net Interest Income
    
    
    
    
    
    $
    42,389
    
    
    
    
    
    
    
    
    
    
    $
    42,769
    
    
    
    
    
    
    
    
    
    
    $
    46,635Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    2.61
    %
    
    
    
    
    
    
    
    
    
    
    2.49
    %
    
    
    
    
    
    
    
    
    
    
    2.59
    %Net Interest Income as a percent of
average earning assets
    
    
    
    
    
    
    
    
    
    
    2.96
    %
    
    
    
    
    
    
    
    
    
    
    2.99
    %
    
    
    
    
    
    
    
    
    
    
    3.12
    %
 
 1
    
    Interest income on Obligations of States and Political Subdivisions is not on a taxable
equivalent basis.2
    
    Total Loans excludes Overdraft Loans, which are non-interest earning. These loans are
included in Other Assets. Total Loans includes nonaccrual loans. When a loan is placed in
nonaccrual status, all accrued and unpaid interest is charged against interest income. Loans
on nonaccrual status do not earn any interest. 17




---



##### 



Years Ended December 31,2008 versus 2007
    
    
    2007 versus 2006
    
    
    2006 versus 2005Changes due to
    
    
    Changes due to
    
    
    Changes due toincreased (decreased)
    
    
    increased (decreased)
    
    
    increased (decreased)(Dollars in Thousands)
    
    Rate
    
    
    Volume
    
    
    Net
    
    
    Rate
    
    
    Volume
    
    
    Net
    
    
    Rate
    
    
    Volume
    
    
    NetInterest IncomeInvestmentsInterest Bearing Balances Due From Banks
    
    $
    (141
    )
    
    $
    161
    
    
    $
    20
    
    
    $
    
    
    
    $
    4
    
    
    $
    4
    
    
    $
    1
    
    
    $
    
    
    
    $
    1Obligations of US Government Agencies
    
    
    (735
    )
    
    
    (110
    )
    
    
    (845
    )
    
    
    963
    
    
    
    (823
    )
    
    
    140
    
    
    
    1,443
    
    
    
    (543
    )
    
    
    900Obligations of States &
Political Subdivisions
    
    
    235
    
    
    
    (22
    )
    
    
    213
    
    
    
    (567
    )
    
    
    (612
    )
    
    
    (1,179
    )
    
    
    53
    
    
    
    (733
    )
    
    
    (680
    )Other Securities
    
    
    (34
    )
    
    
    879
    
    
    
    845
    
    
    
    (24
    )
    
    
    (1,681
    )
    
    
    (1,705
    )
    
    
    511
    
    
    
    (730
    )
    
    
    (219
    )Total Investments
    
    
    (675
    )
    
    
    908
    
    
    
    233
    
    
    
    372
    
    
    
    (3,112
    )
    
    
    (2,740
    )
    
    
    2,008
    
    
    
    (2,006
    )
    
    
    2LoansCommercial
    
    
    (6,928
    )
    
    
    602
    
    
    
    (6,326
    )
    
    
    618
    
    
    
    478
    
    
    
    1,096
    
    
    
    2,748
    
    
    
    2,268
    
    
    
    5,016Mortgage
    
    
    (27
    )
    
    
    (674
    )
    
    
    (701
    )
    
    
    76
    
    
    
    (442
    )
    
    
    (366
    )
    
    
    (128
    )
    
    
    928
    
    
    
    800Consumer
    
    
    (580
    )
    
    
    (1,166
    )
    
    
    (1,746
    )
    
    
    335
    
    
    
    (770
    )
    
    
    (435
    )
    
    
    630
    
    
    
    (74
    )
    
    
    556Total Loans
    
    
    (7,535
    )
    
    
    (1,238
    )
    
    
    (8,773
    )
    
    
    1,029
    
    
    
    (734
    )
    
    
    295
    
    
    
    3,250
    
    
    
    3,122
    
    
    
    6,372Federal Funds Sold
    
    
    (189
    )
    
    
    81
    
    
    
    (108
    )
    
    
    19
    
    
    
    54
    
    
    
    73
    
    
    
    27
    
    
    
    (173
    )
    
    
    (146
    )Total Interest Income
    
    
    (8,399
    )
    
    
    (249
    )
    
    
    (8,648
    )
    
    
    1,420
    
    
    
    (3,792
    )
    
    
    (2,372
    )
    
    
    5,285
    
    
    
    943
    
    
    
    6,228
 Interest ExpenseSavings Accounts
    
    
    (30
    )
    
    
    0
    
    
    
    (30
    )
    
    
    (25
    )
    
    
    (26
    )
    
    
    (51
    )
    
    
    0
    
    
    
    (33
    )
    
    
    (33
    )NOW Accounts
    
    
    366
    
    
    
    49
    
    
    
    415
    
    
    
    81
    
    
    
    6
    
    
    
    87
    
    
    
    (3
    )
    
    
    (1
    )
    
    
    (4
    )Money Market Deposits
    
    
    (3,960
    )
    
    
    245
    
    
    
    (3,715
    )
    
    
    93
    
    
    
    (109
    )
    
    
    (16
    )
    
    
    4,365
    
    
    
    (80
    )
    
    
    4,285Certificates of Deposit
    
    
    (2,080
    )
    
    
    (177
    )
    
    
    (2,257
    )
    
    
    2,107
    
    
    
    (555
    )
    
    
    1,552
    
    
    
    2,392
    
    
    
    631
    
    
    
    3,023Federal Funds Purchased
    
    
    (483
    )
    
    
    431
    
    
    
    (52
    )
    
    
    (2
    )
    
    
    (461
    )
    
    
    (463
    )
    
    
    350
    
    
    
    344
    
    
    
    694Repurchase agreements
    
    
    50
    
    
    
    (220
    )
    
    
    (170
    )
    
    
    117
    
    
    
    (36
    )
    
    
    81
    
    
    
    322
    
    
    
    186
    
    
    
    508FHLB Advances
    
    
    (2,573
    )
    
    
    114
    
    
    
    (2,459
    )
    
    
    304
    
    
    
    0
    
    
    
    304
    
    
    
    2,232
    
    
    
    0
    
    
    
    2,232Total Interest Expense
    
    
    (8,710
    )
    
    
    442
    
    
    
    (8,268
    )
    
    
    2,675
    
    
    
    (1,181
    )
    
    
    1,494
    
    
    
    9,658
    
    
    
    1,047
    
    
    
    10,705Net Interest Income
    
    $
    311
    
    
    $
    (691
    )
    
    $
    (380
    )
    
    $
    (1,255
    )
    
    $
    (2,611
    )
    
    $
    (3,866
    )
    
    $
    (4,373
    )
    
    $
    (104
    )
    
    $
    (4,477
    )
  18




---



##### 



MaturingWithin 1 year
    
    
    1 - 5 years
    
    
    5 - 10 Years
    
    
    Over 10 Years
    
    
    TotalAmount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield(Dollars in Thousands)Obligations of US
Government Agencies
    
    $
    39,156
    
    
    
    2.65
    %
    
    $
    25,527
    
    
    
    4.34
    %
    
    $
    60,015
    
    
    
    5.15
    %
    
    $
    204,980
    
    
    
    5.27
    %
    
    $
    329,678
    
    
    
    4.86
    %Obligations of States & Political
Subdivisions
    
    
    18,338
    
    
    
    3.93
    %
    
    
    30,768
    
    
    
    4.40
    %
    
    
    20,831
    
    
    
    4.14
    %
    
    
    18,010
    
    
    
    4.16
    %
    
    
    87,947
    
    
    
    4.19
    %Trust Preferred CDO Securities
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    19,371
    
    
    
    6.04
    %
    
    
    19,371
    
    
    
    6.04
    %Corporate Debt Securities
    
    
    1,001
    
    
    
    7.58
    %
    
    
    2,869
    
    
    
    7.56
    %
    
    
    7,734
    
    
    
    5.66
    %
    
    
    1,912
    
    
    
    7.50
    %
    
    
    13,516
    
    
    
    6.47
    %Other Securities
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    2,445
    
    
    
    3.99
    %
    
    
    2,445
    
    
    
    3.99
    %Total
    
    $
    58,495
    
    
    
    3.14
    %
    
    $
    59,164
    
    
    
    4.53
    %
    
    $
    88,580
    
    
    
    4.96
    %
    
    $
    246,718
    
    
    
    5.25
    %
    
    $
    452,957
    
    
    
    4.83
    %
  Assets/Liabilities at December 31, 2008, Maturing or Repricing in:0 - 6
    
    
    6 - 12
    
    
    1 - 2
    
    
    2 - 5
    
    
    Over 5
    
    
    Total(Dollars in Thousands)
    
    Months
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    AmountInterest Earning AssetsUS Treas Secs & Obligations of
US Govt Agencies
    
    $
    111,586
    
    
    $
    30,066
    
    
    $
    21,132
    
    
    $
    48,177
    
    
    $
    112,282
    
    
    $
    323,243Obligations of States & Political
Subdivisions
    
    
    12,815
    
    
    
    20,098
    
    
    
    6,289
    
    
    
    22,345
    
    
    
    25,126
    
    
    
    86,673Other Securities
    
    
    22,250
    
    
    
    
    
    
    
    3,000
    
    
    
    4,926
    
    
    
    11,900
    
    
    
    42,076Commercial Loans
    
    
    193,830
    
    
    
    38,876
    
    
    
    85,605
    
    
    
    268,100
    
    
    
    6,537
    
    
    
    592,948Mortgage Loans
    
    
    25,950
    
    
    
    36,335
    
    
    
    34,682
    
    
    
    63,441
    
    
    
    38,771
    
    
    
    199,179Consumer Loans
    
    
    33,663
    
    
    
    6,197
    
    
    
    12,588
    
    
    
    34,880
    
    
    
    8,136
    
    
    
    95,464Intereset Bearing DFB
    
    
    26,323
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,323Total Interest Earning Assets
    
    $
    426,417
    
    
    $
    131,572
    
    
    $
    163,296
    
    
    $
    441,869
    
    
    $
    202,752
    
    
    $
    1,365,906Interest Bearing LiabilitiesSavings Deposits
    
    $
    290,524
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    290,524Other Time Deposits
    
    
    195,599
    
    
    
    97,220
    
    
    
    57,933
    
    
    
    129,201
    
    
    
    3,947
    
    
    
    483,900FHLB Advances
    
    
    123,000
    
    
    
    20,000
    
    
    
    115,000
    
    
    
    3,500
    
    
    
    
    
    
    
    261,500Repurchase Agreements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    15,000
    
    
    
    30,000Total Interest Bearing Liabilities
    
    $
    609,123
    
    
    $
    117,220
    
    
    $
    172,933
    
    
    $
    147,701
    
    
    $
    18,947
    
    
    $
    1,065,924Gap
    
    $
    (182,706
    )
    
    $
    14,352
    
    
    $
    (9,637
    )
    
    $
    294,168
    
    
    $
    183,805
    
    
    $
    299,982Cumulative Gap
    
    $
    (182,706
    )
    
    $
    (168,354
    )
    
    $
    (177,991
    )
    
    $
    116,177
    
    
    $
    299,982
    
    
    $
    299,982Sensitivity Ratio
    
    
    0.70
    
    
    
    1.12
    
    
    
    0.94
    
    
    
    2.99
    
    
    
    10.70
    
    
    
    1.28Cumulative Sensitivity Ratio
    
    
    0.70
    
    
    
    0.77
    
    
    
    0.80
    
    
    
    1.11
    
    
    
    1.28
    
    
    
    1.28
 19




---



##### 



Assets/Liabilities at December 31, 2008, Maturing or Repricing in:0-6
    
    
    6-12
    
    
    1-2
    
    
    2-5
    
    
    Over 5Months
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalTotal Interest Earning Assets
    
    $
    426,417
    
    
    $
    131,572
    
    
    $
    163,296
    
    
    $
    441,869
    
    
    $
    202,752
    
    
    $
    1,365,906Total Interest Bearing Liabilities
    
    $
    786,402
    
    
    $
    117,220
    
    
    $
    172,933
    
    
    $
    147,701
    
    
    $
    18,947
    
    
    $
    1,243,203Gap
    
    $
    (359,985
    )
    
    $
    14,352
    
    
    $
    (9,637
    )
    
    $
    294,168
    
    
    $
    183,805
    
    
    $
    122,703Cumulative Gap
    
    $
    (359,985
    )
    
    $
    (345,633
    )
    
    $
    (355,270
    )
    
    $
    (61,102
    )
    
    $
    122,703
    
    
    $
    122,703Sensitivity Ratio
    
    
    0.54
    
    
    
    1.12
    
    
    
    0.94
    
    
    
    2.99
    
    
    
    10.70
    
    
    
    1.10Cumulative Sensitivity Ratio
    
    
    0.54
    
    
    
    0.62
    
    
    
    0.67
    
    
    
    0.95
    
    
    
    1.10
    
    
    
    1.10
   Years Ended December 31,(Dollars in Thousands)
    
    2008
    
    
    2007
    
    
    2006Maturing Within3 Months
    
    $
    50,991
    
    
    $
    62,901
    
    
    $
    80,8973 - 6 Months
    
    
    18,888
    
    
    
    35,370
    
    
    
    25,3436 - 12 Months
    
    
    24,775
    
    
    
    18,218
    
    
    
    23,107Over 12 Months
    
    
    38,595
    
    
    
    38,830
    
    
    
    27,393Total
    
    $
    133,249
    
    
    $
    155,319
    
    
    $
    156,740
    20




---



##### 



Book Value at December 31,2008 (a)
    
    
    2007 (a)
    
    
    2006 (a)
    
    
    2005 (a)
    
    
    2004 (a)Loans secured by real estate:Construction and land development
    
    $
    98,104
    
    
    $
    149,271
    
    
    $
    160,566
    
    
    $
    150,179
    
    
    $
    155,703Secured by farmland (including farm residential
and other improvements)
    
    
    10,459
    
    
    
    9,792
    
    
    
    10,057
    
    
    
    9,891
    
    
    
    8,499Secured by 1-4 family residential properties
    
    
    304,834
    
    
    
    317,327
    
    
    
    331,775
    
    
    
    309,061
    
    
    
    301,620Secured by multifamily (5 or more) residential properties
    
    
    25,002
    
    
    
    11,953
    
    
    
    10,124
    
    
    
    6,718
    
    
    
    6,429Secured by nonfarm nonresidential properties
    
    
    352,934
    
    
    
    357,622
    
    
    
    328,145
    
    
    
    337,408
    
    
    
    301,802Loans to finance agricultural production and other loans to farmers
    
    
    9,763
    
    
    
    5,981
    
    
    
    3,738
    
    
    
    3,519
    
    
    
    2,333Commercial and industrial loans to U.S. addresses (domicile)
    
    
    109,337
    
    
    
    107,156
    
    
    
    97,512
    
    
    
    99,220
    
    
    
    87,068Loans to individuals for household, family, and other
personal expenditures (includes purchased paper):Credit cards and related plans
    
    
    403
    
    
    
    374
    
    
    
    377
    
    
    
    393
    
    
    
    390Other
    
    
    29,728
    
    
    
    40,620
    
    
    
    55,510
    
    
    
    70,853
    
    
    
    80,761Nonrated industrial development obligations (other than
securities) of states and political subdivisions in the U.S.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other loans:Loans for purchasing or carrying securities (secured and unsecured)
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    73
    
    
    
    38All other loans
    
    
    384
    
    
    
    707
    
    
    
    473
    
    
    
    1,562
    
    
    
    1,259Total loans and leases, net of unearned income
    
    $
    940,948
    
    
    $
    1,000,828
    
    
    $
    998,277
    
    
    $
    988,877
    
    
    $
    945,902Nonaccrual loans
    
    $
    47,872
    
    
    $
    30,459
    
    
    $
    19,152
    
    
    $
    16,212
    
    
    $
    29,896Loans 90 days or more past due and accruing
    
    $
    93
    
    
    $
    102
    
    
    $
    69
    
    
    $
    101
    
    
    $
    230Troubled debt restructurings
    
    $
    5,811
    
    
    $
    3,367
    
    
    $
    888
    
    
    $
    1,813
    
    
    $
    3,715
 
 (a)
    
    Loan categories are presented net of deferred loan fees. The presentation in Note 4 to the
consolidated financial statements differs from this schedules presentation by presenting
the loan categories, gross, before deferred loan fees have been subtracted.   Years Ended December 31,(Dollars in Thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Balance Beginning of Period
    
    $
    20,222
    
    
    $
    13,764
    
    
    $
    13,625
    
    
    $
    13,800
    
    
    $
    14,500Loans Charged Off (Domestic)Commercial, Financial, and Agricultural
    
    
    7,591
    
    
    
    1,052
    
    
    
    1,600
    
    
    
    313
    
    
    
    2,045Secured by Real Estate
    
    
    12,036
    
    
    
    4,284
    
    
    
    14,910
    
    
    
    6,800
    
    
    
    468Loans to Individuals
    
    
    1,021
    
    
    
    1,050
    
    
    
    1,867
    
    
    
    2,227
    
    
    
    1,935Recoveries (Domestic)Commercial, Financial, and Agricultural
    
    
    201
    
    
    
    730
    
    
    
    815
    
    
    
    1,358
    
    
    
    335Secured by Real Estate
    
    
    250
    
    
    
    48
    
    
    
    421
    
    
    
    211
    
    
    
    57Loans to Individuals
    
    
    503
    
    
    
    659
    
    
    
    805
    
    
    
    965
    
    
    
    865Net Loans Charged Off
    
    
    19,694
    
    
    
    4,949
    
    
    
    16,336
    
    
    
    6,806
    
    
    
    3,191Transfer to establish reserve for unfunded loan commitments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    275
    
    
    
    Provision Charged to Operations
    
    
    18,000
    
    
    
    11,407
    
    
    
    16,475
    
    
    
    6,906
    
    
    
    2,491Balance End of Period
    
    $
    18,528
    
    
    $
    20,222
    
    
    $
    13,764
    
    
    $
    13,625
    
    
    $
    13,800Ratio of Net Loans Charged Off to
Average Total Loans Outstanding
    
    
    2.00
    %
    
    
    0.49
    %
    
    
    1.62
    %
    
    
    0.69
    %
    
    
    0.34
    %
 21




---



##### 



Years Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004$
    
    % of loans
    
    $
    
    % of loans
    
    $
    
    % of loans
    
    $
    
    % of loans
    
    $
    
    % of loans(Dollars in Thousands)
    
    Amount
    
    to total loans
    
    Amount
    
    to total loans
    
    Amount
    
    to total loans
    
    Amount
    
    to total loans
    
    Amount
    
    to total loansBalance at end of period applicable to:DomesticCommercial, Financial,
and Agricultural
    
    $
    3,586
    
    
    
    13.8
    %
    
    $
    2,436
    
    
    
    12.3
    %
    
    $
    1,524
    
    
    
    11.1
    %
    
    $
    2,209
    
    
    
    11.4
    %
    
    $
    1,421
    
    
    
    10.3
    %Real Estate  Construction
    
    
    2,915
    
    
    
    10.4
    %
    
    
    3,610
    
    
    
    14.9
    %
    
    
    2,181
    
    
    
    16.1
    %
    
    
    1,959
    
    
    
    15.2
    %
    
    
    2,277
    
    
    
    16.5
    %Real Estate  Mortgage
    
    
    11,673
    
    
    
    72.6
    %
    
    
    13,618
    
    
    
    68.7
    %
    
    
    9,056
    
    
    
    67.1
    %
    
    
    8,504
    
    
    
    66.0
    %
    
    
    8,901
    
    
    
    64.5
    %Loans to Individuals
    
    
    354
    
    
    
    3.2
    %
    
    
    558
    
    
    
    4.1
    %
    
    
    1,003
    
    
    
    5.7
    %
    
    
    953
    
    
    
    7.4
    %
    
    
    1,201
    
    
    
    8.7
    %Foreign
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Total
    
    $
    18,528
    
    
    
    100.0
    %
    
    $
    20,222
    
    
    
    100.0
    %
    
    $
    13,764
    
    
    
    100.0
    %
    
    $
    13,625
    
    
    
    100.0
    %
    
    $
    13,800
    
    
    
    100.0
    %
    Contractual Obligations 
 Payment Due by PeriodLess than
    
    
    1 - 3
    
    
    3 - 5
    
    
    Over 5(Dollars in Thousands)
    
    Total
    
    
    1 year
    
    
    Years
    
    
    Years
    
    
    YearsLong Term Debt Obligations
    
    $
    291,500
    
    
    $
    33,000
    
    
    $
    131,500
    
    
    $
    100,000
    
    
    $
    27,000Operating Lease Obligations
    
    
    1,274
    
    
    
    365
    
    
    
    641
    
    
    
    243
    
    
    
    25Salary Continuation Obligation
    
    
    580
    
    
    
    58
    
    
    
    116
    
    
    
    116
    
    
    
    290Total Contractual Obligations
    
    $
    293,354
    
    
    $
    33,423
    
    
    $
    132,257
    
    
    $
    100,359
    
    
    $
    27,315
 Off-Balance Sheet Arrangements 
 22




---



##### 



Item 7A. Quantitative and Qualitative Disclosures about Market Risk
   Base
    
    
    Rates
    
    
    Rates
    
    
    Rates
    
    
    Rates
    
    
    Rates
    
    
    Rates(Dollars in Thousands)
    
    Projection
    
    
    Up 1%
    
    
    Up 2%
    
    
    Up 3%
    
    
    Down 1%
    
    
    Down 2%
    
    
    Down 3%Year-End 2008 12 Month ProjectionInterest Income
    
    $
    72,293
    
    
    $
    74,504
    
    
    $
    76,370
    
    
    $
    78,165
    
    
    $
    69,766
    
    
    $
    67,637
    
    
    $
    65,852Interest Expense
    
    
    33,558
    
    
    
    34,686
    
    
    
    35,815
    
    
    
    36,937
    
    
    
    32,647
    
    
    
    32,053
    
    
    
    31,831Net Interest Income
    
    $
    38,735
    
    
    $
    39,818
    
    
    $
    40,555
    
    
    $
    41,228
    
    
    $
    37,119
    
    
    $
    35,584
    
    
    $
    34,021Percent Change From Base Projection
    
    
    
    
    
    
    2.8
    %
    
    
    4.7
    %
    
    
    6.4
    %
    
    
    -4.2
    %
    
    
    -8.1
    %
    
    
    -12.2
    %ALCO Policy Limit (+/-)
    
    
    
    
    
    
    5.0
    %
    
    
    7.5
    %
    
    
    10.0
    %
    
    
    5.0
    %
    
    
    7.5
    %
    
    
    10.0
    %
 Base
    
    
    Rates
    
    
    Rates(Dollars in Thousands)
    
    Projection
    
    
    Up 1%
    
    
    Down 1%Year-End 2007 12 Month ProjectionInterest Income
    
    $
    92,090
    
    
    $
    94,629
    
    
    $
    89,936Interest Expense
    
    
    48,951
    
    
    
    52,081
    
    
    
    46,728Net Interest Income
    
    $
    43,139
    
    
    $
    42,548
    
    
    $
    43,208Percent Change From Base Projection
    
    
    
    
    
    
    -1.4
    %
    
    
    0.2
    %ALCO Policy Limit (+/-)
    
    
    
    
    
    
    5.0
    %
    
    
    5.0
    %
  Disclosures about Fair Value of Financial Instruments
 23




---



##### 



Fair Value at December 31, 2008Rates(Dollars in Thousands)
    
    Base
    
    Up 1%
    
    Up 2%
    
    Up 3%
    
    Down 1%
    
    Down 2%
    
    Down 3%Assets
    
    $
    1,648,577
    
    
    $
    1,622,272
    
    
    $
    1,583,495
    
    
    $
    1,542,477
    
    
    $
    1,665,144
    
    
    $
    1,682,319
    
    
    $
    1,686,270Liabilities
    
    
    1,462,001
    
    
    
    1,433,144
    
    
    
    1,405,320
    
    
    
    1,378,475
    
    
    
    1,490,965
    
    
    
    1,509,692
    
    
    
    1,510,395Stockholders Equity
    
    $
    186,576
    
    
    $
    189,128
    
    
    $
    178,175
    
    
    $
    164,002
    
    
    $
    174,179
    
    
    $
    172,627
    
    
    $
    175,875Change in Equity
    
    
    
    
    
    
    1.4
    %
    
    
    -4.5
    %
    
    
    -12.1
    %
    
    
    -6.6
    %
    
    
    -7.5
    %
    
    
    -5.7
    %ALCO Policy Limit (+/-)
    
    
    
    
    
    
    10.0
    %
    
    
    20.0
    %
    
    
    30.0
    %
    
    
    10.0
    %
    
    
    20.0
    %
    
    
    30.0
    %
 Fair Value at December 31, 2007Rates(Dollars in Thousands)
    
    Base
    
    Up 1%
    
    Up 2%
    
    Down 1%
    
    Down 2%Assets
    
    $
    1,553,141
    
    
    $
    1,528,002
    
    
    $
    1,499,515
    
    
    $
    1,572,120
    
    
    $
    1,588,140Liabilities
    
    
    1,398,240
    
    
    
    1,380,076
    
    
    
    1,362,338
    
    
    
    1,416,845
    
    
    
    1,435,904Stockholders Equity
    
    $
    154,901
    
    
    $
    147,926
    
    
    $
    137,177
    
    
    $
    155,275
    
    
    $
    152,236Change in Equity
    
    
    
    
    
    
    -20.7
    %
    
    
    -26.5
    %
    
    
    -16.8
    %
    
    
    -18.4
    %ALCO Policy Limit (+/-)
    
    
    
    
    
    
    10.0
    %
    
    
    20.0
    %
    
    
    10.0
    %
    
    
    20.0
    %
  Item 8. Financial Statements and Supplementary Data
 
   24




---



##### 



(PLANTE MORAN LETTERHEAD)
    
    (GRAPHIC)
 
  
    25




---



##### 



26




---



##### 



Consolidated Balance Sheets
 December 31,Dollars in thousands
    
    2008
    
    
    2007AssetsCash and Cash Equivalents (Note 2)Cash and due from banksNon-interest bearing
    
    $
    24,463
    
    
    $
    24,513Interest bearing
    
    
    26,323
    
    
    
    600Total cash and cash equivalents
    
    
    50,786
    
    
    
    25,113Securities  Held to Maturity (Note 3)
    
    
    46,840
    
    
    
    44,734Securities  Available for Sale (Note 3)
    
    
    406,117
    
    
    
    380,238Federal Home Loan Bank stock  at cost
    
    
    13,086
    
    
    
    13,086Loans held for sale
    
    
    784
    
    
    
    1,431Loans  Net (Notes 4 and 5)
    
    
    922,420
    
    
    
    980,606Accrued interest receivable and other assets (Note 12)
    
    
    43,973
    
    
    
    36,370Bank Owned Life Insurance (Note 9)
    
    
    45,488
    
    
    
    42,509Premises and Equipment  Net (Note 6)
    
    
    32,907
    
    
    
    32,719Total assets
    
    $
    1,562,401
    
    
    $
    1,556,806LiabilitiesDeposits:Non-interest bearing
    
    $
    144,585
    
    
    $
    141,115Interest-bearing (Note 7)
    
    
    991,493
    
    
    
    968,865Total deposits
    
    
    1,136,078
    
    
    
    1,109,980Federal Home Loan Bank advances (Note 8)
    
    
    261,500
    
    
    
    256,500Federal funds purchased
    
    
    
    
    
    
    13,300Securities sold under repurchase agreements (Note 8)
    
    
    30,000
    
    
    
    35,000Interest payable and other liabilities (Note 9)
    
    
    13,846
    
    
    
    14,579Total liabilities
    
    
    1,441,424
    
    
    
    1,429,359Stockholders Equity(Notes 10, 13 and 15)Common stock (no par value; 30,000,000 shares authorized,
16,148,482 and 16,124,997 shares issued and outstanding)
    
    
    321
    
    
    
    Retained Earnings
    
    
    122,896
    
    
    
    129,917Accumulated other comprehensive loss
    
    
    (2,240
    )
    
    
    (2,470
    )Total stockholders equity
    
    
    120,977
    
    
    
    127,447Total liabilities and stockholders equity
    
    $
    1,562,401
    
    
    $
    1,556,806
  27




---



##### 



Consolidated Statements of Income
 Years Ended December 31,Dollars in thousands
    
    2008
    
    
    2007
    
    
    2006Interest IncomeInterest and fees on loans
    
    $
    62,472
    
    
    $
    71,245
    
    
    $
    70,950Interest on investment securities-Tax-exempt
    
    
    3,390
    
    
    
    3,177
    
    
    
    4,356Taxable
    
    
    18,976
    
    
    
    18,976
    
    
    
    20,541Interest on balances due from banks
    
    
    29
    
    
    
    9
    
    
    
    5Interest on federal funds sold
    
    
    36
    
    
    
    144
    
    
    
    71Total interest income
    
    
    84,903
    
    
    
    93,551
    
    
    
    95,923Interest ExpenseInterest on deposits
    
    
    26,835
    
    
    
    32,422
    
    
    
    30,849Interest on borrowed funds
    
    
    15,679
    
    
    
    18,360
    
    
    
    18,439Total interest expense
    
    
    42,514
    
    
    
    50,782
    
    
    
    49,288Net Interest Income
    
    
    42,389
    
    
    
    42,769
    
    
    
    46,635Provision For Loan Losses(Note 5)
    
    
    18,000
    
    
    
    11,407
    
    
    
    16,475Net Interest Income After
Provision For Loan Losses
    
    
    24,389
    
    
    
    31,362
    
    
    
    30,160Other IncomeWealth management income
    
    
    4,329
    
    
    
    4,577
    
    
    
    4,268Service charges and other fees
    
    
    6,371
    
    
    
    6,301
    
    
    
    6,210Net gain (loss) on sales of securities
    
    
    422
    
    
    
    (80)
    
    
    
    (5,057
    )Origination fees on mortgage loans sold
    
    
    426
    
    
    
    690
    
    
    
    560Bank owned life insurance income
    
    
    1,390
    
    
    
    1,294
    
    
    
    1,142Other
    
    
    3,047
    
    
    
    2,852
    
    
    
    2,419Total other income
    
    
    15,985
    
    
    
    15,634
    
    
    
    9,542Other ExpensesSalaries and employee benefits (Notes 9 and 15)
    
    
    20,614
    
    
    
    21,367
    
    
    
    19,572Occupancy expense (Note 6)
    
    
    3,591
    
    
    
    3,466
    
    
    
    3,113Equipment expense
    
    
    3,290
    
    
    
    3,261
    
    
    
    3,096Marketing expense
    
    
    1,253
    
    
    
    1,455
    
    
    
    1,623Professional fees
    
    
    1,635
    
    
    
    1,508
    
    
    
    1,835Net loss on other real estate owned
    
    
    2,737
    
    
    
    822
    
    
    
    1,755Other
    
    
    6,879
    
    
    
    5,355
    
    
    
    5,314Total other expenses
    
    
    39,999
    
    
    
    37,234
    
    
    
    36,308Income Before Provision For Income Taxes
    
    
    375
    
    
    
    9,762
    
    
    
    3,394Provision For (Benefit From) Income Taxes(Note 12)
    
    
    (1,317)
    
    
    
    2,049
    
    
    
    (379
    )Net Income
    
    $
    1,692
    
    
    $
    7,713
    
    
    $
    3,773Basic Earnings Per Common Share (Note 14)
    
    $
    0.10
    
    
    $
    0.47
    
    
    $
    0.22Diluted Earnings Per Common Share (Note 14)
    
    $
    0.10
    
    
    $
    0.47
    
    
    $
    0.22
  28




---



##### 



Consolidated Statements of Changes in Stockholders Equity
 AccumulatedOtherCommon
    
    Retained
    
    ComprehensiveDollars in thousands
    
    Stock
    
    Earnings
    
    Income (Loss)
    
    TotalBalance  January 1, 2006
    
    $
    14,417
    
    
    $
    142,205
    
    
    $
    (5,003
    )
    
    $
    151,619Repurchase of Common Stock (499,974 shares)
(Note 10)
    
    
    (8,141
    )
    
    
    
    
    
    
    
    
    
    
    (8,141
    )Issuance of Common Stock (16,818 shares)Stock options exercised (5,999 shares)
    
    
    81
    
    
    
    
    
    
    
    
    
    
    
    81Other stock issued (10,819 shares)
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    177Tax benefit from exercise of options
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Equity Compensation
    
    
    440
    
    
    
    
    
    
    
    
    
    
    
    440Dividends declared ($0.70 per share)
    
    
    
    
    
    
    (11,816
    )
    
    
    
    
    
    
    (11,816
    )Comprehensive income:Net income
    
    
    
    
    
    
    3,773
    
    
    
    
    
    
    
    3,773Change in net unrealized loss on securities
available for sale  Net of tax effect of $459
    
    
    
    
    
    
    
    
    
    
    (853
    )
    
    
    (853
    )Reclassification adjustment for gains included
in net income  Net of tax effect of $(1,770)
    
    
    
    
    
    
    
    
    
    
    3,287
    
    
    
    3,287Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,207Adjustment to initially apply FAS 158,
Net of tax effect of $1,353
    
    
    
    
    
    
    
    
    
    
    (2,510
    )
    
    
    (2,510
    )Balance  December 31, 2006
    
    $
    6,979
    
    
    $
    134,162
    
    
    $
    (5,079
    )
    
    $
    136,062Repurchase of Common Stock (599,362 shares)
(Note 10)
    
    
    (7,506
    )
    
    
    (203
    )
    
    
    
    
    
    
    (7,709
    )Issuance of Common Stock (10,399 shares)
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    127Equity Compensation
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    400Dividends declared ($0.72 per share)
    
    
    
    
    
    
    (11,755
    )
    
    
    
    
    
    
    (11,755
    )Comprehensive income:Net income
    
    
    
    
    
    
    7,713
    
    
    
    
    
    
    
    7,713Change in net unrealized loss on securities
available for sale  Net of tax effect of $(1,217)
    
    
    
    
    
    
    
    
    
    
    2,260
    
    
    
    2,260Reclassification adjustment for losses included
in net income  Net of tax effect of $(28)
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    52Change in postretirement liability  Net of tax
effect of $(160)
    
    
    
    
    
    
    
    
    
    
    297
    
    
    
    297Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,322Balance  December 31, 2007
    
    $
    
    
    
    $
    129,917
    
    
    $
    (2,470
    )
    
    $
    127,447Issuance of Common Stock (23,485 shares)
    
    
    131
    
    
    
    
    
    
    
    
    
    
    
    131Equity compensation
    
    
    190
    
    
    
    
    
    
    
    
    
    
    
    190Dividends declared ($0.54 per share)
    
    
    
    
    
    
    (8,713
    )
    
    
    
    
    
    
    (8,713
    )Comprehensive income:Net income
    
    
    
    
    
    
    1,692
    
    
    
    
    
    
    
    1,692Change in net unrealized loss on securities
available for sale  Net of tax effect of $(168)
    
    
    
    
    
    
    
    
    
    
    312
    
    
    
    312Reclassification adjustment for losses included
in net income  Net of tax effect of $148
    
    
    
    
    
    
    
    
    
    
    (274
    )
    
    
    (274
    )Change in postretirement liability  Net of tax
effect of $(103)
    
    
    
    
    
    
    
    
    
    
    192
    
    
    
    192Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,922Balance  December 31, 2008
    
    $
    321
    
    
    $
    122,896
    
    
    $
    (2,240
    )
    
    $
    120,977
  29




---



##### 



Consolidated Statements of Cash Flows
 Years Ended December 31,Dollars in thousands
    
    2008
    
    2007
    
    2006Cash Flows from Operating ActivitiesNet Income
    
    $
    1,692
    
    
    $
    7,713
    
    
    $
    3,773Adjustments to reconcile net income to net cash from operating activitiesProvision for loan losses
    
    
    18,000
    
    
    
    11,407
    
    
    
    16,475Depreciation
    
    
    2,586
    
    
    
    2,686
    
    
    
    2,353(Increase) decrease in net deferred federal income tax asset
    
    
    (1,394
    )
    
    
    (1,836
    )
    
    
    (1,059
    )Net accretion of investment premium and discount
    
    
    (94
    )
    
    
    (418
    )
    
    
    (84
    )Writedowns on other real estate owned
    
    
    2,545
    
    
    
    643
    
    
    
    265Net increase (decrease) in interest payable and other liabilities
    
    
    (439
    )
    
    
    336
    
    
    
    316Net (increase) decrease in interest receivable and other assets
    
    
    (11,742
    )
    
    
    (11,507
    )
    
    
    (5,828
    )Equity based compensation expense
    
    
    190
    
    
    
    400
    
    
    
    440Net (gain) loss on sales of securities
    
    
    (422
    )
    
    
    80
    
    
    
    5,057Increase in cash surrender value of life insurance
    
    
    (1,390
    )
    
    
    (1,294
    )
    
    
    (1,142
    )Net cash provided by operating activities
    
    $
    9,532
    
    
    $
    8,210
    
    
    $
    20,566Cash Flows from Investing ActivitiesProceeds from maturities and redemptions of investment securities held to maturity
    
    $
    12,613
    
    
    $
    25,790
    
    
    $
    24,058Proceeds from maturities and redemptions of investment securities available for sale
    
    
    207,676
    
    
    
    64,635
    
    
    
    17,887Proceeds from sales of investment securities available for sale
    
    
    65,762
    
    
    
    77,691
    
    
    
    144,718Net (increase) decrease in loans
    
    
    40,833
    
    
    
    (8,210
    )
    
    
    (26,023
    )Proceeds from sales of other real estate owned
    
    
    4,133
    
    
    
    2,988
    
    
    
    8,283Proceeds from sales of other assets
    
    
    187
    
    
    
    94
    
    
    
    83Purchase of investment securities held to maturity
    
    
    (14,715
    )
    
    
    (5,607
    )
    
    
    (12,524
    )Purchase of bank owned life insurance
    
    
    (1,589
    )
    
    
    (1,584
    )
    
    
    (2,238
    )Purchase of investment securities available for sale
    
    
    (298,747
    )
    
    
    (144,561
    )
    
    
    (93,769
    )Purchase of bank premises and equipment
    
    
    (2,779
    )
    
    
    (1,516
    )
    
    
    (10,701
    )Net cash provided by investing activities
    
    $
    13,374
    
    
    $
    9,720
    
    
    $
    49,774Cash Flows from Financing ActivitiesNet increase (decrease) in deposits
    
    $
    26,098
    
    
    $
    (6,077
    )
    
    $
    (68,653
    )Net increase (decrease) in short term borrowings
    
    
    (13,300
    )
    
    
    9,800
    
    
    
    3,500Net increase in Federal Home Loan Bank borrowings
    
    
    5,000
    
    
    
    
    
    
    
    Net increase (decrease) in securities sold under repurchase agreements
    
    
    (5,000
    )
    
    
    (5,000
    )
    
    
    5,000Issuance of common stock
    
    
    131
    
    
    
    127
    
    
    
    258Repurchase of common stock
    
    
    
    
    
    
    (7,709
    )
    
    
    (8,141
    )Dividends paid
    
    
    (10,162
    )
    
    
    (11,861
    )
    
    
    (11,731
    )Net cash provided by (used for) financing activities
    
    $
    2,767
    
    
    $
    (20,720
    )
    
    $
    (79,767
    )Net Increase (Decrease) in Cash and Cash Equivalents
    
    $
    25,673
    
    
    $
    (2,790
    )
    
    $
    (9,427
    )Cash and Cash Equivalents at Beginning of Year(Note 1)
    
    
    25,113
    
    
    
    27,903
    
    
    
    37,330Cash and Cash Equivalents at End of Year(Note 1)
    
    $
    50,786
    
    
    $
    25,113
    
    
    $
    27,903Supplemental Cash Flow InformationCash paid for interest
    
    $
    42,336
    
    
    $
    50,964
    
    
    $
    49,259Cash paid for federal income taxes
    
    $
    1,459
    
    
    $
    5,600
    
    
    $
    4,474Supplemental Schedule of Non Cash Investing ActivitiesTransfer of loans to other real estate owned
    
    $
    13,306
    
    
    $
    11,919
    
    
    $
    4,072Transfer of loans to other assets
    
    $
    393
    
    
    $
    1,939
    
    
    $
    150
  30




---



##### 



Notes To Consolidated Financial Statements
 (1)
    
    Summary of Significant Accounting PoliciesThe consolidated financial statements include the accounts of MBT Financial Corp. (the
Corporation) and its wholly owned 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 twenty-one offices in Monroe County, Michigan
and six offices 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 Corporation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, the fair value of
investment securities, and the valuation of other real estate owned.The significant accounting policies are as follows:PRINCIPLES OF CONSOLIDATIONThe consolidated financial statements include the accounts of the Corporation and its
subsidiary. All material intercompany transactions and balances have been eliminated.SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISKMost of the Corporations activities are with customers located within southeast Michigan.
Notes 3 and 4 discuss the types of securities and lending that the Corporation engages in.
The Corporation does not have any significant concentrations in any one industry or to any
one customer.INVESTMENT SECURITIESInvestment securities that are held to maturity are stated at cost, and adjusted for
accumulated amortization of premium and accretion of discount. The Bank has the intention
and, in Managements opinion, the ability to hold these investment securities until
maturity. Investment securities that are available for sale are stated at estimated
market value, with the related unrealized gains and losses reported as an amount, net of
taxes, as a component of stockholders equity. The market value of securities is based on
quoted market prices. For securities that do not have readily available market values,
estimated market values are calculated based on the market values of comparable securities.
Gains and losses on the sale of securities are determined using the specific identification
method. Premiums and discounts are recognized in interest income using the interest method
over the term of the security.LOANSThe Bank grants mortgage, commercial, and consumer loans to customers. Loans are reported
at their outstanding unpaid principal balances, adjusted for charge offs, the allowance for
loan losses, and any deferred fees or costs on originated loans. Interest income is accrued
on the unpaid principal balance. Loan origination fees and certain direct origination
costs, are deferred and recognized as an adjustment of the related loan yield using the
interest method.The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent
unless the credit is well secured and in the process of collection. In all cases, loans are
placed on nonaccrual or charged off at an earlier date if principal or interest is
considered doubtful.All interest accrued but not collected for loans that are placed on nonaccrual or charged
off is reversed against interest income. The interest on these loans is accounted for on
the cash basis or cost recovery method, until qualifying for return to accrual. Loans are
returned to accrual status when all the principal and interest amounts contractually due
are brought current and future payments are reasonably assured.LOANS HELD FOR SALELoans held for sale consist of fixed rate residential mortgage loans with maturities of 15
to 30 years. Such loans are recorded at the lower of aggregate cost or estimated fair
value.ALLOWANCE FOR LOAN LOSSESThe allowance for loan losses is established as losses are estimated to have occurred
through a provision for loan losses charged to earnings. Loan losses are charged against
the allowance when management believes the uncollectibility of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance.
 31




---



##### 



The allowance for loan losses is evaluated on a regular basis by management and is based
upon managements periodic review of the collectibility of the loans in light of historical
experience, the nature and volume of the loan portfolio, adverse situations that may affect
the borrowers ability to repay, estimated value of any underlying collateral and
prevailing economic conditions. This evaluation is inherently subjective as it requires
estimates that are susceptible to significant revision as more information becomes
available.The allowance consists of specific and general components. The specific component relates
to loans that are classified as non-accrual or renegotiated. For such loans that are also
classified as impaired, an allowance is established when the discounted cash flows (or
collateral value or observable market price) of the impaired loan is lower than the
carrying value of that loan. The general component covers non-classified loans and is based
on historical loss experience, adjusted for qualitative factors.A loan is considered impaired when, based on current information and events, it is probable
that the Corporation will be unable to collect the scheduled payments of principal or
interest when due according to the contractual terms of the loan agreement. Factors
considered by management in determining impairment include payment status, collateral
value, and the probability of collecting scheduled principal and interest payments when
due. Loans that experience insignificant payment delays and payment shortfalls generally
are not classified as impaired. Management determines the significance of payment delays
and payment shortfalls on a case-by-case basis, taking into consideration all of the
circumstances surrounding the loan and the borrower, including length of the delay, the
reasons for the delay, the borrowers prior payment record, and the amount of the shortfall
in relation to the principal and interest owed. Impairment is measured on a loan by loan
basis for commercial and construction loans by either the present value of expected future
cash flows discounted at the loans effective interest rate, the loans obtainable market
price, or the fair value of the collateral if the loan is collateral dependent.Large groups of homogeneous loans are collectively evaluated for impairment. Accordingly,
the Corporation does not separately identify individual consumer and residential loans for
impairment disclosures.FORECLOSED ASSETS (INCLUDES OTHER REAL ESTATE OWNED)Assets acquired through, or in lieu of, loan foreclosure are held for sale and are
initially recorded at the lower of fair value or the loan carrying amount at the date of
the foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are
periodically performed by Management and the assets are carried at the lower of carrying
amount or fair value less cost to sell. Revenue and expenses from operations and changes in
the valuation allowance are included in net expenses from foreclosed assets.BANK PREMISES AND EQUIPMENTBank premises and equipment are stated at cost, less accumulated depreciation of
$32,040,000 in 2008 and $29,536,000 in 2007. The Bank uses the straight-line method to
provide for depreciation, which is charged to operations over the estimated useful lives of
the assets. Depreciation expense amounted to $2,586,000 in 2008, $2,686,000 in 2007, and
$2,353,000 in 2006.The cost of assets retired and the related accumulated depreciation are eliminated from the
accounts and the resulting gains or losses are reflected in operations in the year the
assets are retired.BANK OWNED LIFE INSURANCEBank owned life insurance policies are stated at the current cash surrender value of the
policy, or the policy death proceeds less any obligation to provide a death benefit to an
insureds beneficiaries if that value is less than the cash surrender value. Increases in
the asset value are recorded as earnings in Other Income.COMPREHENSIVE INCOMEAccounting 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.The components of accumulated other comprehensive income (loss) and related tax effects are
as follows:
 Dollars in thousands
    
    2008
    
    2007
    
    2006Unrealized gains (losses) on securities available for sale
    
    $
    85
    
    
    $
    (474
    )
    
    $
    (9,008
    )Reclassification adjustment for losses (gains) realized
in income
    
    
    (422
    )
    
    
    80
    
    
    
    5,057Net unrealized gains (losses)
    
    $
    (337
    )
    
    $
    (394
    )
    
    $
    (3,951
    )Post retirement benefit obligations
    
    
    (3,109
    )
    
    
    (3,405
    )
    
    
    (3,863
    )Tax effect
    
    
    1,206
    
    
    
    1,329
    
    
    
    2,735Accumulated other comprehensive income (loss)
    
    $
    (2,240
    )
    
    $
    (2,470
    )
    
    $
    (5,079
    )
 32




---



##### 



CASH AND CASH EQUIVALENTSCash and Cash Equivalents include cash and due from banks and Federal funds sold.
Generally, cash equivalents have daily maturities.INCOME TAXESDeferred income tax assets and liabilities are determined using the liability (or balance
sheet) method. Under this method, the net deferred tax asset or liability is determined
based on the tax effects of the various temporary differences between the book and tax
bases of the various balance sheet assets and liabilities and gives current recognition to
changes in tax rates and laws.STOCK-BASED COMPENSATIONOn January 1, 2006, the Company adopted FAS 123(R), Accounting for Stock Based
Compensation for all share based payments to employees, including grants of stock options
and restricted stock units. The amount of compensation is measured at the fair value of the
options when granted, and this cost is expensed over the required service period, which is
normally the vesting period of the options.FAS 123(R) applies to awards granted or modified after January 1, 2006. Compensation cost
is also recorded for prior option grants that vest after the date of adoption.The weighted average fair value of options granted was $1.39, $2.76, and $3.61, in 2008,
2007, and 2006, respectively. The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following assumptions used
for grants in 2008, 2007, and 2006: expected option lives of seven years for all three;
expected volatility of 25.90%, 20.30%, and 22.90%; risk-free interest rates of 3.61%,
4.70%, and 4.50%; and dividend yields of 4.87%, 3.71%, and 3.50%, respectively.OFF BALANCE SHEET INSTRUMENTSIn the ordinary course of business, the Corporation has entered into commitments to extend
credit, including commitments under credit card arrangements, commercial letters of credit
and standby letters of credit. Such financial instruments are recorded when they are
funded.FAIR VALUEThe 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 FAS 159 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, which are in accordance with FAS 157.In accordance with FAS 157, 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.
 33




---



##### 



(2)
    
    Cash and Due from BanksThe Bank is required by regulatory agencies to maintain legal reserve requirements based on
the level of balances in deposit categories. Cash balances restricted from usage due to
these requirements were $4,695,000 and $3,475,000 at December 31, 2008 and 2007,
respectively. Cash and due from banks includes deposits held at correspondent banks which
are fully insured by the FDIC.(3)
    
    Investment SecuritiesThe following is a summary of the Banks investment securities portfolio as of December 31,
2008 and 2007 (000s omitted):
 Held to MaturityDecember 31, 2008Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    MarketCost
    
    Gains
    
    Losses
    
    ValueObligations of U.S. Government
Agencies
    
    $
    7
    
    
    $
    
    
    
    $
    
    
    
    $
    7Obligations of States and Political
Subdivisions
    
    
    46,833
    
    
    
    214
    
    
    
    (1,011
    )
    
    
    46,036$
    46,840
    
    
    $
    214
    
    
    $
    (1,011
    )
    
    $
    46,043
 Available for SaleDecember 31, 2008Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    MarketCost
    
    Gains
    
    Losses
    
    ValueObligations of U.S. Government
Agencies
    
    $
    322,767
    
    
    $
    6,915
    
    
    $
    (11
    )
    
    $
    329,671Obligations of States and Political
Subdivisions
    
    
    40,999
    
    
    
    541
    
    
    
    (426
    )
    
    
    41,114Trust Preferred CDO Securities
    
    
    25,132
    
    
    
    
    
    
    
    (5,761
    )
    
    
    19,371Corporate Debt Securities
    
    
    15,170
    
    
    
    
    
    
    
    (1,654
    )
    
    
    13,516Other Securities
    
    
    2,386
    
    
    
    59
    
    
    
    
    
    
    
    2,445$
    406,454
    
    
    $
    7,515
    
    
    $
    (7,852
    )
    
    $
    406,117
 Held to MaturityDecember 31, 2007Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    MarketCost
    
    Gains
    
    Losses
    
    ValueObligations of U.S. Government
Agencies
    
    $
    7
    
    
    $
    1
    
    
    $
    
    
    
    $
    8Obligations of States and Political
Subdivisions
    
    
    44,727
    
    
    
    334
    
    
    
    (25
    )
    
    
    45,036$
    44,734
    
    
    $
    335
    
    
    $
    (25
    )
    
    $
    45,044
 Available for SaleDecember 31, 2007Gross
    
    Gross
    
    EstimatedAmortized
    
    Unrealized
    
    Unrealized
    
    MarketCost
    
    Gains
    
    Losses
    
    ValueObligations of U.S. Government
Agencies
    
    $
    330,505
    
    
    $
    968
    
    
    $
    (1,295
    )
    
    $
    330,178Obligations of States and Political
Subdivisions
    
    
    27,046
    
    
    
    207
    
    
    
    (119
    )
    
    
    27,134Trust Preferred CDO Securities
    
    
    20,044
    
    
    
    
    
    
    
    (179
    )
    
    
    19,865Corporate Debt Securities
    
    
    1,024
    
    
    
    2
    
    
    
    
    
    
    
    1,026Other Securities
    
    
    2,013
    
    
    
    22
    
    
    
    
    
    
    
    2,035$
    380,632
    
    
    $
    1,199
    
    
    $
    (1,593
    )
    
    $
    380,238
 34




---



##### 



The amortized cost, estimated market value, and weighted average yield
 of securities at December 31, 2008, by contractual maturity, are shown below.
 Expected maturities will differ from contractual maturities because issuers may
 have the right to call or prepay obligations with or without call or prepayment
 penalties (000s omitted).
 Held to Maturity
    
    Available for SaleEstimated
    
    Weighted
    
    
    
    
    
    Estimated
    
    WeightedAmortized
    
    Market
    
    Average
    
    Amortized
    
    Market
    
    AverageCost
    
    Value
    
    Yield
    
    Cost
    
    Value
    
    YieldMaturing within
1 year
    
    $
    17,904
    
    
    $
    17,940
    
    
    
    3.95
    %
    
    $
    40,399
    
    
    $
    40,591
    
    
    
    2.78
    %1 to 5 years
    
    
    15,650
    
    
    
    15,654
    
    
    
    4.89
    %
    
    
    43,166
    
    
    
    43,514
    
    
    
    4.40
    %5 to 10 years
    
    
    7,286
    
    
    
    7,025
    
    
    
    4.70
    %
    
    
    80,060
    
    
    
    81,294
    
    
    
    4.99
    %Over 10 years
    
    
    6,000
    
    
    
    5,424
    
    
    
    4.89
    %
    
    
    240,443
    
    
    
    238,273
    
    
    
    5.30
    %Securities with no stated maturity
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    2,386
    
    
    
    2,445
    
    
    
    0.00
    %$
    46,840
    
    
    $
    46,043
    
    
    
    4.50
    %
    
    $
    406,454
    
    
    $
    406,117
    
    
    
    4.86
    %
 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 has the intent and ability to hold the investment for a period of time
sufficient to allow for an anticipated recovery in the market value. The fair values of
investments with an amortized cost in excess of their fair values at December 31, 2008 and
December 31, 2007 are as follows (000s omitted):
 December 31, 2008Less than 12 months
    
    12 months or longer
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossAggregate
    
    Unrealized
    
    Aggregate
    
    Unrealized
    
    Aggregate
    
    UnrealizedFair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesObligations of United States
Government Agencies
    
    $
    8,791
    
    
    $
    4
    
    
    $
    1,500
    
    
    $
    7
    
    
    $
    10,291
    
    
    $
    11Obligations of States and
Political Subdivisions
    
    
    20,707
    
    
    
    1,211
    
    
    
    3,878
    
    
    
    226
    
    
    
    24,585
    
    
    
    1,437Trust Preferred CDO Securities
    
    
    6,605
    
    
    
    2,474
    
    
    
    12,766
    
    
    
    3,287
    
    
    
    19,371
    
    
    
    5,761Corporate Debt Securities
    
    
    12,516
    
    
    
    1,654
    
    
    
    
    
    
    
    
    
    
    
    12,516
    
    
    
    1,654$
    48,619
    
    
    $
    5,343
    
    
    $
    18,144
    
    
    $
    3,520
    
    
    $
    66,763
    
    
    $
    8,863
 December 31, 2007Less than 12 months
    
    12 months or longer
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossAggregate
    
    Unrealized
    
    Aggregate
    
    Unrealized
    
    Aggregate
    
    UnrealizedFair Value
    
    Losses
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesObligations of United States
Government Agencies
    
    $
    63,520
    
    
    $
    234
    
    
    $
    64,720
    
    
    $
    1,061
    
    
    $
    128,240
    
    
    $
    1,295Obligations of States and
Political Subdivisions
    
    
    1,304
    
    
    
    6
    
    
    
    9,711
    
    
    
    138
    
    
    
    11,015
    
    
    
    144Trust Preferred CDO Securities
    
    
    16,865
    
    
    
    164
    
    
    
    2,000
    
    
    
    15
    
    
    
    18,865
    
    
    
    179$
    81,689
    
    
    $
    404
    
    
    $
    76,431
    
    
    $
    1,214
    
    
    $
    158,120
    
    
    $
    1,618
 The amount of investment securities issued by government agencies, states, and political
subdivisions with unrealized losses and the amount of unrealized losses on those investment
securities are primarily the result of market interest rates
and not the result of the credit quality of the issuers of the securities. The company has
the ability and intent to hold these securities until recovery, which may be until
maturity.The Trust Preferred Securities are issued by companies in the financial services industry,
including banks, thrifts, and insurance companies. Each of the four 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 that 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 banks in the pools. The analysis concluded that disruption
of our cash flows due to defaults by issuers was currently not expected to occur. 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.The Corporate Debt Securities consist of senior unsecured debt issued by regional banks and
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 six
bonds with maturities ranging from January, 2009 to February, 2019. The Company monitors
the financial condition of each issuer by reviewing financial statements and industry
analyst reports, and believes that the each of the issuers will be able to fulfill the
obligations of these securities. The Company has the ability and intent to hold these
securities until they recover, which could be at their maturity dates.
 35




---



##### 



Investment securities carried at $263,460,000 and $351,625,000 were pledged or set
aside to secure borrowings, public and trust deposits, and for other purposes required by
law at December 31, 2008 and December 31, 2007, respectively.At December 31, 2008, Obligations of U. S. Government Agencies included securities issued
by the Federal Home Loan Bank with an estimated market value of $75,999,000. At December
31, 2007, Obligations of U. S. Government Agencies included securities issued by the
Federal Home Loan Bank with an estimated market value of $124,511,000.For the years ended December 31, 2008, 2007, and 2006, proceeds from sales of securities
amounted to $65,762,000, $77,691,000, and $144,718,000, respectively. Gross realized gains
amounted to $630,000, $361,000, and $423,000, respectively. Gross realized losses amounted
to $208,000, $441,000, and $5,480,000, respectively. The tax provision applicable to these
net realized gains and losses amounted to $148,000, ($28,000), and ($1,770,000),
respectively.
 (4)
    
    LoansLoan balances outstanding as of December 31 consist of the following (000s omitted):
 2008
    
    2007Residential real estate loans
    
    $
    439,133
    
    
    $
    489,038Non residential real estate loans
    
    
    352,935
    
    
    
    357,622Loans to finance agricultural production and
other loans to farmers
    
    
    9,763
    
    
    
    5,981Commercial and industrial loans
    
    
    109,495
    
    
    
    107,375Loans to individuals for household, family,
and other personal expenditures
    
    
    29,901
    
    
    
    40,705All other loans (including overdrafts)
    
    
    384
    
    
    
    731Total loans, gross
    
    $
    941,611
    
    
    $
    1,001,452Less: Deferred loan fees and costs
    
    
    663
    
    
    
    624Total loans, net of deferred loan fees and costs
    
    $
    940,948
    
    
    $
    1,000,828Less: Allowance for loan losses
    
    
    18,528
    
    
    
    20,222$
    922,420
    
    
    $
    980,606
 The following is a summary of impaired loans (000s omitted):
 2008
    
    2007
    
    2006Year-end impaired loans with no allowance for loan losses allocated
    
    $
    16,974
    
    
    $
    2,603
    
    
    $
    3,089Year-end impaired loans with allowance for loan losses allocated
    
    
    39,272
    
    
    
    27,102
    
    
    
    19,258Year-end allowance for loan losses allocated to impaired loans
    
    
    6,135
    
    
    
    5,108
    
    
    
    3,712Average investment in impaired loans
    
    
    39,086
    
    
    
    23,486
    
    
    
    29,354Interest income recognized on impaired loans
    
    
    1,183
    
    
    
    1,254
    
    
    
    1,288Cash basis interest income recognized on impaired loans during the
year
    
    
    1,183
    
    
    
    1,254
    
    
    
    1,288
 Non-accrual loans totaled $47,872,000 as of December 31, 2008 and $30,459,000 as of
December 31, 2007. Loans ninety days or more past due and still accruing interest were
$93,000 as of December 31, 2008 and $102,000 as of December 31, 2007.Included in Loans are loans to certain officers, directors, and companies in which such
officers and directors have 10 percent or more beneficial ownership in the aggregate amount
of $30,610,000 and $28,320,000 at December 31, 2008 and 2007, respectively. In 2008, new
loans and other additions amounted to $42,726,000, and repayments and other reductions
amounted to $40,436,000. In 2007, new loans and other additions amounted to $42,810,000,
and repayments and other reductions amounted to $40,180,000. In Managements judgment,
these loans were made on substantially the same terms and conditions as those made to other
borrowers, and do not represent more than the normal risk of collectibility or present
other unfavorable features.Loans carried at $192,709,000 and $188,015,000 at December 31, 2008 and 2007, respectively,
were pledged to secure Federal Home Loan Bank advances.(5)
    
    Allowance For Loan LossesActivity in the allowance for loan losses was as follows (000s omitted):
 2008
    
    2007
    
    2006Balance beginning of year
    
    $
    20,222
    
    
    $
    13,764
    
    
    $
    13,625Provision for loan losses
    
    
    18,000
    
    
    
    11,407
    
    
    
    16,475Loans charged off
    
    
    (20,648
    )
    
    
    (6,386
    )
    
    
    (18,376
    )Recoveries
    
    
    954
    
    
    
    1,437
    
    
    
    2,040Balance end of year
    
    $
    18,528
    
    
    $
    20,222
    
    
    $
    13,764
 36




---



##### 



Each period the provision for loan losses in the income statement results from the
combination of an estimate by Management of loan losses that occurred during the current
period and the ongoing adjustment of prior estimates of losses occurring in prior periods.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, 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 appears on the consolidated balance sheets. As the specific customer and amount of a
loan loss is confirmed by gathering additional information, taking collateral in full or
partial settlement of the loan, bankruptcy of the borrower, etc., the loan is charged off,
reducing the allowance for loan losses. If, subsequent to a charge off, the Bank is able to
collect additional amounts from the customer or sell collateral worth more than earlier
estimated, a recovery is recorded.(6)
    
    Bank Premises and EquipmentBank premises and equipment as of year end are as follows (000s omitted):
 2008
    
    2007Land, buildings and improvements
    
    $
    43,859
    
    
    $
    41,900Equipment, furniture and fixtures
    
    
    21,088
    
    
    
    20,355Total Bank premises and equipment
    
    $
    64,947
    
    
    $
    62,255Less accumulated depreciation
    
    
    32,040
    
    
    
    29,536Bank premises and equipment, net
    
    $
    32,907
    
    
    $
    32,719
 Bank Premises and Equipment includes Construction in Progress of $1,647,000 as of December
31, 2008 and $551,000 as of December 31, 2007.The Company has entered into lease commitments for office locations. Rental expense charged
to operations was $352,000, $256,000, and $256,000 for the years ended December 31, 2008,
2007, and 2006, respectively. The future minimum lease payments are as follows:
 Year
    
    Minimum Payment2009
    
    $
    241,0002010
    
    
    216,0002011
    
    
    221,0002012
    
    
    137,0002013
    
    
    57,000
 (7)
    
    DepositsInterest expense on time certificates of deposit of $100,000 or more in the year 2008
amounted to $5,779,000, as compared with $7,748,000 in 2007, and $7,974,000 in 2006. At
December 31, 2008, the balance of time certificates of deposit of $100,000 or more was
$133,249,000, as compared with $155,319,000 at December 31, 2007. The amount of time deposits
with a remaining term of more than 1 year was $201,003,000 at December 31, 2008 and
$228,335,000 at December 31, 2007. The following table shows the scheduled maturities of
Certificates of Deposit as of December 31, 2008:
 Under $100,000
    
    $100,000 and over2009
    
    $
    220,392,000
    
    
    $
    94,654,0002010
    
    
    57,809,000
    
    
    
    3,628,0002011
    
    
    70,843,000
    
    
    
    28,720,0002012
    
    
    21,968,000
    
    
    
    4,934,0002013
    
    
    8,110,000
    
    
    
    1,101,000Thereafter
    
    
    3,678,000
    
    
    
    212,000Total
    
    $
    382,800,000
    
    
    $
    133,249,000
 37




---



##### 



Time certificates of deposit under $100,000 include $105,764,000 of brokered certificates
of deposit as of December 31, 2008, and $80,984,000 as of December 31, 2007.(8)
    
    Federal Home Loan Bank Advances and Repurchase AgreementsThe following is a summary of the Banks borrowings from the Federal Home Loan Bank of
Indianapolis as of December 31, 2008 and 2007 (000s omitted):
 December 31, 2008
 Floating Rate
    
    Fixed RateMaturing in
    
    Amount
    
    Rate
    
    Amount
    
    Rate2009
    
    $
    13,000
    
    
    
    2.46
    %
    
    $
    20,000
    
    
    
    4.91
    %2010
    
    
    
    
    
    
    
    
    
    
    115,000
    
    
    
    5.40
    %2011
    
    
    3,000
    
    
    
    2.02
    %
    
    
    3,500
    
    
    
    5.08
    %2013
    
    
    95,000
    
    
    
    4.94
    %
    
    
    
    
    
    
    2014
    
    
    12,000
    
    
    
    2.03
    %
    
    
    
    
    
    
    $
    123,000
    
    
    
    4.32
    %
    
    $
    138,500
    
    
    
    5.32
    %
 December 31, 2007
 Floating Rate
    
    Fixed RateMaturing in
    
    Amount
    
    Rate
    
    Amount
    
    Rate2009
    
    $
    13,000
    
    
    
    5.06
    %
    
    $
    15,000
    
    
    
    5.52
    %2010
    
    
    
    
    
    
    
    
    
    
    115,000
    
    
    
    5.40
    %2011
    
    
    3,000
    
    
    
    5.14
    %
    
    
    3,500
    
    
    
    5.08
    %2013
    
    
    95,000
    
    
    
    7.28
    %
    
    
    
    
    
    
    2014
    
    
    12,000
    
    
    
    5.15
    %
    
    
    
    
    
    
    $
    123,000
    
    
    
    6.78
    %
    
    $
    133,500
    
    
    
    5.41
    %
 The interest rates on the floating rate advances reset quarterly based on the three month
LIBOR rate plus a spread ranging from 15 to 260 basis points. The fixed rate advances have a
put option that allows the Federal Home Loan Bank to require repayment of the advance or
conversion of the advance to floating rate at the three month LIBOR rate plus a spread
ranging from 0 to 2 basis points.The following is a summary of the Banks borrowings under repurchase agreements as of
December 31, 2008 and 2007 (000s omitted):
 Securities Sold Under Agreements to Repurchase
December 31, 2008
 Floating Rate
    
    Fixed RateMaturing in
    
    Amount
    
    Rate
    
    Amount
    
    Rate2011
    
    $
    
    
    
    
    
    
    
    $
    10,000
    
    
    
    4.65
    %2012
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    4.12
    %2016
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    4.65
    %$
    
    
    
    
    
    
    
    $
    30,000
    
    
    
    4.56
    %
 December 31, 2007
 Floating Rate
    
    Fixed RateMaturing in
    
    Amount
    
    Rate
    
    Amount
    
    Rate2008
    
    $
    
    
    
    
    
    
    
    $
    5,000
    
    
    
    4.05
    %2011
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    4.65
    %2012
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    4.12
    %2016
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    4.65
    %$
    
    
    
    
    
    
    
    $
    35,000
    
    
    
    4.49
    %
 (9)
    
    Retirement Plans and Postretirement Benefit PlansIn 2000, the Bank implemented a retirement plan that included both a money purchase pension
plan, as well as a voluntary profit sharing 401(k) plan for all employees who meet certain
age and length of service eligibility requirements. In 2002, the Bank amended its retirement
plan to freeze the money purchase plan and retain the 401(k) plan. To ensure that the plan
meets the Safe Harbor provisions of the applicable sections of the Internal Revenue Code,
the Bank contributes an amount equal to four percent of the employees base salary to the
401(k) plan for all eligible employees. In addition, an employee may contribute from 1 to 75
percent of his or her base salary, up to a maximum of $20,500 in 2008. The Bank matches the
 38




---



##### 



employees elective contribution up to the first six percent of the employees annual base
salary. Depending on the Banks profitability, an additional profit sharing contribution may
be made by the Bank to the 401(k) plan. There were no profit sharing contributions in 2008,
2007, and 2006. The total retirement plan expense was $1,270,000, for the year ended
December 31, 2008, $1,258,000 for the year ended December 31, 2007, and $1,188,000 for the
year ended December 31, 2006.
 The Bank has a postretirement benefit plan that generally provides for the continuation of
medical benefits for all employees hired before January 1, 2007 who retire from the Bank at
age 55 or older, upon meeting certain length of service eligibility requirements. The Bank
does not fund its postretirement benefit obligation. Rather, payments are made as costs are
incurred by covered retirees. The amount of benefits paid under the postretirement benefit
plan was $239,000 in 2008, $227,000 in 2007, and $221,000 in 2006. The amount of insurance
premium paid by the Bank for retirees is capped at 200% of the cost of the premium as of
December 31, 1992.A reconciliation of the accumulated postretirement benefit obligation (APBO) to the
amounts recorded in the consolidated balance sheets in Interest Payable and Other
Liabilities at December 31 is as follows (000s omitted):
 2008
    
    2007APBO
    
    $
    2,000
    
    
    $
    1,985Unrecognized net transition obligation
    
    
    (214
    )
    
    
    (268
    )Unrecognized prior service costs
    
    
    (21
    )
    
    
    (24
    )Unrecognized net gain
    
    
    356
    
    
    
    261Accrued benefit cost at fiscal year end
    
    $
    2,121
    
    
    $
    1,954
 The changes recorded in the accumulated postretirement benefit obligation were as follows (000s
omitted):
 2008
    
    2007APBO at beginning of year
    
    $
    1,985
    
    
    $
    1,890Service cost
    
    
    102
    
    
    
    100Interest cost
    
    
    116
    
    
    
    110Actuarial loss (gain)
    
    
    (98
    )
    
    
    (4
    )Plan participants contributions
    
    
    134
    
    
    
    116Benefits paid during year
    
    
    (239
    )
    
    
    (227
    )APBO at end of year
    
    $
    2,000
    
    
    $
    1,985
 Components of the Banks postretirement benefit expense were as follows:
 2008
    
    2007
    
    2006Service cost
    
    $
    102
    
    
    $
    100
    
    
    $
    104Interest cost
    
    
    116
    
    
    
    110
    
    
    
    106Amortization of transition obligation
    
    
    54
    
    
    
    54
    
    
    
    54Prior service costs
    
    
    4
    
    
    
    4
    
    
    
    4Amortization of gains
    
    
    (4
    )
    
    
    (4
    )
    
    
    Net postretirement benefit expense
    
    $
    272
    
    
    $
    264
    
    
    $
    268
 The APBO as of December 31, 2008 and 2007 was calculated using an assumed discount rate of
5.75% and 6.00%, respectively. Based on the provisions of the plan, the Banks expense is
capped at 200% of the 1992 expense, with all expenses above the cap incurred by the retiree.
The expense reached the cap in 2004, and accordingly the impact of an increase in health
care costs on the APBO was not calculated.The Bank Owned Life Insurance policies fund a Death Benefit Only (DBO) obligation that the
Bank has with 10 of its active directors, 5 retired directors, 16 active executives, and 8
retired executives. The DBO plan, which replaced previous split dollar agreements, provides
a taxable death benefit. The benefit for directors is grossed up to provide a net benefit to
each directors beneficiaries based on that directors length of service on the board. The
directors net death benefits are $500,000 for director service of less than 3 years,
$600,000 for service up to 5 years, $750,000 for service up to 10 years, and $1,000,000 for
director service of 10 years or more. The executives beneficiaries will receive a grossed
up benefit that will provide a net benefit equal to two times the executives base salary if
death occurs during employment and a postretirement benefit equal to the executives final
annual salary rate at the time of retirement if death occurs after retirement.
 39




---



##### 



Information for the postretirement death benefits and health care benefits is as follows as
of the December 31 measurement date (000s):
 Postretirement Death Benefit
    
    Postretirement Health CareObligations
    
    Benefits2008
    
    2007
    
    2008
    
    2007Change in benefit obligationBenefit obligation at beginning of year
    
    $
    3,996
    
    
    
    4,297
    
    
    $
    1,985
    
    
    $
    1,890Service cost
    
    
    56
    
    
    
    69
    
    
    
    102
    
    
    
    100Interest cost
    
    
    234
    
    
    
    236
    
    
    
    116
    
    
    
    110Plan participants contributions
    
    
    
    
    
    
    
    
    
    
    134
    
    
    
    116Actuarial loss (gain)
    
    
    128
    
    
    
    (56
    )
    
    
    (98
    )
    
    
    (4
    )Benefits paid
    
    
    
    
    
    
    (550
    )
    
    
    (239
    )
    
    
    (227
    )Benefit obligation at end of year
    
    $
    4,414
    
    
    $
    3,996
    
    
    $
    2,000
    
    
    $
    1,985Change in accrued benefit costAccrued benefit cost at beginning of year
    
    $
    579
    
    
    $
    524
    
    
    $
    1,954
    
    
    $
    1,801Service cost
    
    
    56
    
    
    
    69
    
    
    
    102
    
    
    
    100Interest cost
    
    
    234
    
    
    
    236
    
    
    
    116
    
    
    
    110Amortization
    
    
    315
    
    
    
    314
    
    
    
    54
    
    
    
    54Employer contributions
    
    
    
    
    
    
    (550
    )
    
    
    (105
    )
    
    
    (111
    )Net gain
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    31Accrued benefit cost at end of year
    
    $
    1,184
    
    
    $
    591
    
    
    $
    2,121
    
    
    $
    1,985Change in plan assetsFair value of plan assets at beginning of year
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Employer contributions
    
    
    
    
    
    
    550
    
    
    
    105
    
    
    
    111Plan participants contributions
    
    
    
    
    
    
    
    
    
    
    134
    
    
    
    116Benefits paid during year
    
    
    
    
    
    
    (550
    )
    
    
    (239
    )
    
    
    (227
    )Fair value of plan assets at end of year
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Funded status at end of year
    
    $
    (3,230
    )
    
    $
    (3,405
    )
    
    $
    121
    
    
    $
    0
 Amounts recognized in other liabilities as of December 31 consist of (000s):
 Postretirement Death Benefit
    
    Postretirement Health CareObligations
    
    Benefits2008
    
    2007
    
    2008
    
    2007Assets
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    Liabilities
    
    
    4,414
    
    
    
    3,996
    
    
    
    2,000
    
    
    
    1,985Total
    
    $
    4,414
    
    
    $
    3,996
    
    
    $
    2,000
    
    
    $
    1,985
 Amounts recognized in accumulated other comprehensive income as of December 31 consist of
(000s):
 Postretirement Death Benefit
    
    Postretirement Health CareObligations
    
    Benefits2008
    
    2007
    
    2008
    
    2007Net loss (gain)
    
    $
    (11
    )
    
    
    (138
    )
    
    $
    (356
    )
    
    $
    (261
    )Transition obligation (asset)
    
    
    
    
    
    
    
    
    
    
    214
    
    
    
    268Prior service cost (credit)
    
    
    3,241
    
    
    
    3,543
    
    
    
    21
    
    
    
    (7
    )$
    3,230
    
    
    $
    3,405
    
    
    $
    (121
    )
    
    $
    
 40




---



##### 



(10)
    
    Stockholders EquityOn December 22, 2005, the Corporations Board of Directors authorized the repurchase of up
to 2 million shares of MBT Financial Corp. common stock during 2006. On December 21, 2006,
the Board of Directors authorized the repurchase of up to 1 million shares during 2007. On
December 20, 2007, the Board of Directors authorized the repurchase of up to 1 million
shares during 2008. Shares purchased during the last three years are as follows:
 SharesRepurchased
    
    Cost2006
    
    
    499,974
    
    
    
    8,141,0002007
    
    
    599,362
    
    
    
    7,709,0002008
    
    
    
    
    
    
    0Total
    
    
    1,099,336
    
    
    $
    15,850,000
 On December 18, 2008, the Corporations Board of Directors authorized the repurchase of up
to 1 million shares of MBT Financial Corp. common stock during the 12 month period ending
December 31, 2009.(11)
    
    Disclosures about Fair Value of Financial InstrumentsCertain 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 December 31, 2008 and 2007.INVESTMENT SECURITIESFair 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 3. The fair value
disclosures required by FAS 157 are in Note 19.LOANS, NETThe 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. The estimated fair value
of loans at December 31, 2008, net of the allowance for loan losses, is $953,267,000,
compared to the carrying amount of $922,420,000. The estimated fair value of loans at
December 31, 2007, net of the allowance for loan losses, was $993,051,000, compared to the
carrying amount of $980,606,000.OTHER TIME DEPOSITSThe 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. The estimated fair value of other
time deposits at December 31, 2008 is $521,272,000, compared to the carrying amount of
$514,316,000. The estimated fair value of other time deposits at December 31, 2007 was
$494,276,000, compared to the carrying amount of $491,943,000.FHLB ADVANCES AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTSA 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
estimated fair value of putable Federal Home Loan Bank advances at December 31, 2008 is
$138,870,000, compared to the carrying amount of $130,000,000. The estimated fair value of
putable Federal Home Loan Bank advances at December 31, 2007 was $135,694,000, compared to
the carrying amount of $130,000,000.The estimated fair value of the variable rate advances at December 31, 2008 is
$131,491,000, compared to the carrying amount of $123,000,000. The estimated fair value of
the variable rate advances at December 31, 2007 was $132,675,000, compared to the carrying
amount of $123,000,000.The estimated fair value of the fixed rate Federal Home Loan Bank advances at December 31,
2008 was $8,800,000, compared to the carrying amount of $8,500,000. The estimated fair
value of the fixed rate Federal Home Loan Bank advances at December 31, 2007 was
$3,607,000, compared to the carrying amount of $3,500,000.The estimated fair value of the Securities Sold under Repurchase Agreements at December 31,
2008 was $33,840,000, compared to the carrying amount of $30,000,000. The estimated fair
value of the Securities Sold under Repurchase Agreements at December 31, 2007 was
$36,783,000, compared to the carrying amount of $35,000,000.OFF-BALANCE-SHEET FINANCIAL INSTRUMENTSThe 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.
 41




---



##### 



(12)
    
    Federal Income TaxesDeferred tax assets and liabilities are recognized for future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using the enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be reversed. The Corporation and the Bank file a
consolidated Federal income tax return.The provision for Federal income taxes consists of the following (000s omitted):
 2008
    
    2007
    
    2006Federal income taxes currently payable
    
    $
    77
    
    
    $
    3,885
    
    
    $
    680Provision (credit) for deferred taxes on:Book (over) under tax loan loss provision
    
    
    584
    
    
    
    (2,260
    )
    
    
    (251
    )Accretion of bond discount
    
    
    18
    
    
    
    (61
    )
    
    
    (39
    )Net deferred loan origination fees
    
    
    (21
    )
    
    
    216
    
    
    
    (147
    )Accrued postretirement benefits
    
    
    (303
    )
    
    
    (100
    )
    
    
    (267
    )Tax over (under) book depreciation
    
    
    14
    
    
    
    51
    
    
    
    (45
    )Alternative minimum tax
    
    
    (440
    )
    
    
    680
    
    
    
    (680
    )Non-accrual loan interest
    
    
    (352
    )
    
    
    (12
    )
    
    
    6Write down of other real estate owned
    
    
    (799
    )
    
    
    (188
    )
    
    
    124Other, net
    
    
    (95
    )
    
    
    (162
    )
    
    
    240Total deferred provision (credit)
    
    
    (1,394
    )
    
    
    (1,836
    )
    
    
    (1,059
    )$
    (1,317
    )
    
    $
    2,049
    
    
    $
    (379
    )
 The effective tax rate differs from the statutory rate applicable to corporations as a
result of permanent differences between accounting and taxable income as follows:
 2008
    
    2007
    
    2006Statutory rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %Municipal interest income
    
    
    (266.7
    )
    
    
    (9.0
    )
    
    
    (43.6
    )Other, net
    
    
    (118.5
    )
    
    
    (4.0
    )
    
    
    (1.6
    )Effective tax rate
    
    
    (351.2
    )%
    
    
    21.0
    %
    
    
    (11.2
    )%
 The components of the net deferred Federal income tax asset (included in Interest
Receivable and Other Assets on the accompanying consolidated balance sheets) at December 31
are as follows (000s omitted):
 2008
    
    2007Deferred Federal income tax assets:Allowance for loan losses
    
    $
    6,590
    
    
    $
    7,174Net deferred loan origination fees
    
    
    232
    
    
    
    211Tax versus book depreciation differences
    
    
    276
    
    
    
    290Net unrealized losses on securities available for sale
    
    
    118
    
    
    
    138Accrued postretirement benefits
    
    
    2,530
    
    
    
    2,330Alternative minimum tax
    
    
    440
    
    
    
    Non-accrual loan interest
    
    
    416
    
    
    
    64Write down of other real estate owned
    
    
    1,060
    
    
    
    261Other, net
    
    
    397
    
    
    
    303$
    12,059
    
    
    $
    10,771Deferred Federal income tax liabilities:Accretion of bond discount
    
    $
    (144
    )
    
    $
    (127
    )Other
    
    
    (437
    )
    
    
    (437
    )$
    (581
    )
    
    $
    (564
    )Net deferred Federal income tax asset
    
    $
    11,478
    
    
    $
    10,207
 (13)
    
    Regulatory Capital RequirementsThe Corporation and the Bank are subject to various regulatory capital requirements
administered by the Federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory (and possibly additional discretionary) actions by
regulators that, if undertaken, could have a direct material effect on the Corporations
consolidated financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Corporation and the Bank must meet specific
capital guidelines that involve quantitative measures of assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The capital
amounts and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.Quantitative measures established by regulation to ensure capital adequacy require the
Corporation and the Bank to maintain minimum amounts and ratios (set forth in the
accompanying tables) of Total and Tier I capital to risk weighted assets and of Tier I
capital to average assets.
 42




---



##### 



As of December 31, 2008, the Corporations capital ratios exceeded the required minimums to
be considered well capitalized under the regulatory framework for prompt corrective action.
To be categorized as well capitalized, the Corporation must maintain minimum Total risk
based, Tier I risk based, and Tier I leverage ratios as set forth in the tables. There are
no conditions or events since December 31, 2008 that Management believes have changed the
Corporations category. Management believes, as of December 31, 2008, that the Corporation
meets all capital adequacy requirements to which it is subject.The Corporations and Banks actual capital amounts and ratios are also presented in the
table (000s omitted in dollar amounts).
 Minimum to Qualify asActual
    
    Well CapitalizedAmount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2008:Total Capital to Risk-Weighted AssetsConsolidated
    
    $
    136,286
    
    
    
    12.7
    %
    
    $
    106,980
    
    
    
    10.0
    %Monroe Bank & Trust
    
    
    134,853
    
    
    
    12.6
    %
    
    
    106,895
    
    
    
    10.0
    %Tier 1 Capital to Risk-Weighted AssetsConsolidated
    
    
    122,820
    
    
    
    11.5
    %
    
    
    64,188
    
    
    
    6.0
    %Monroe Bank & Trust
    
    
    121,398
    
    
    
    11.4
    %
    
    
    64,137
    
    
    
    6.0
    %Tier 1 Capital to Average AssetsConsolidated
    
    
    122,820
    
    
    
    7.8
    %
    
    
    78,543
    
    
    
    5.0
    %Monroe Bank & Trust
    
    
    121,398
    
    
    
    7.7
    %
    
    
    78,495
    
    
    
    5.0
    %
 Minimum to Qualify asActual
    
    Well CapitalizedAmount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2007:Total Capital to Risk-Weighted AssetsConsolidated
    
    $
    143,679
    
    
    
    13.1
    %
    
    $
    109,974
    
    
    
    10.0
    %Monroe Bank & Trust
    
    
    142,632
    
    
    
    13.0
    %
    
    
    109,889
    
    
    
    10.0
    %Tier 1 Capital to Risk-Weighted AssetsConsolidated
    
    
    129,839
    
    
    
    11.8
    %
    
    
    65,985
    
    
    
    6.0
    %Monroe Bank & Trust
    
    
    128,803
    
    
    
    11.7
    %
    
    
    65,934
    
    
    
    6.0
    %Tier 1 Capital to Average AssetsConsolidated
    
    
    129,839
    
    
    
    8.4
    %
    
    
    77,470
    
    
    
    5.0
    %Monroe Bank & Trust
    
    
    128,803
    
    
    
    8.3
    %
    
    
    77,428
    
    
    
    5.0
    %
 (14)
    
    Earnings Per ShareThe calculation of earnings per common share for the years ended December 31 is as follows:
 2008
    
    2007
    
    2006BasicNet income
    
    $
    1,692,000
    
    
    $
    7,713,000
    
    
    $
    3,773,000Less preferred dividends
    
    
    
    
    
    
    
    
    
    
    Net income applicable to common stock
    
    $
    1,692,000
    
    
    $
    7,713,000
    
    
    $
    3,773,000Average common shares outstanding
    
    
    16,134,570
    
    
    
    16,415,425
    
    
    
    16,941,432Earnings per common share  basic
    
    $
    0.10
    
    
    $
    0.47
    
    
    $
    0.22
 2008
    
    2007
    
    2006DilutedNet income
    
    $
    1,692,000
    
    
    $
    7,713,000
    
    
    $
    3,773,000Less preferred dividends
    
    
    
    
    
    
    
    
    
    
    Net income applicable to common stock
    
    $
    1,692,000
    
    
    $
    7,713,000
    
    
    $
    3,773,000Average common shares outstanding
    
    
    16,134,570
    
    
    
    16,415,425
    
    
    
    16,941,432Stock option adjustment
    
    
    0
    
    
    
    0
    
    
    
    0Average common shares outstanding  diluted
    
    
    16,134,570
    
    
    
    16,415,425
    
    
    
    16,941,432Earnings per common share  diluted
    
    $
    0.10
    
    
    $
    0.47
    
    
    $
    0.22
 43




---



##### 



(15)
    
    Stock-Based Compensation PlanThe Long-Term Incentive Compensation Plan approved by shareholders at the April 6, 2000
Annual Meeting of Shareholders of Monroe Bank & Trust authorized the Board of Directors to
grant nonqualified stock options to key employees and non-employee directors. Such grants
could be made until January 2, 2010 for up to 1,000,000 shares of the Corporations common
stock. The amount that could be awarded to any one individual was limited to 100,000 shares
in any one calendar year. The MBT Financial Corp. 2008 Stock Incentive Plan was approved by
shareholders at the May 1, 2008 Annual meeting of shareholders of MBT Financial Corp. This
plan replaced the Long-Term Incentive Compensation Plan and authorized the Board of
Directors to grant equity incentive awards to key employees and non-employee directors.
Such grants may be made until May 1, 2018 for up to 1 million shares of the Corporations
common stock. The amount that may be awarded to any one individual is limited to 100,000
shares in any one calendar year. As of December 31, 2008, the number of shares available under the plan is 874,682. This includes 1,375 shares
that were previously awarded that have been forfeited.Stock Option Awards Stock options granted under the plans have exercise prices equal to
the fair market value at the date of grant. Options granted under the plan may be exercised
for a period of no more than ten years from the date of grant. One-third of the options
granted to key employees in 2007 vest annually, beginning December 31, 2007. All options
granted in 2006 and prior years are fully vested at December 31, 2008.Stock Only Stock Appreciation Rights (SOSARs) On June 4, 2008, Stock Only Stock
Appreciation Rights (SOSARs) were awarded to key executives in accordance with the MBT
Financial Corp. 2008 Stock Incentive Plan. The SOSARs have a term of 10 years and vest in
three equal annual installments beginning December 31, 2008. 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. Upon exercise, the executive will generally
receive common shares equal in value to the excess of the market value of the shares over
the exercise price on the exercise date.The fair value of each option and SOSAR grant is estimated on the date of grant using the
Black-Scholes option pricing model with the assumptions disclosed in Note 1 to the
consolidated financial statements.A summary of the status of stock options and SOSARs under the plans is presented in the
table below.
 2008
    
    2007
    
    2006Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOptions Outstanding, January 1
    
    
    602,143
    
    
    $
    17.36
    
    
    
    510,143
    
    
    $
    17.73
    
    
    
    432,642
    
    
    $
    17.98Granted
    
    
    99,500
    
    
    
    8.53
    
    
    
    94,500
    
    
    
    15.33
    
    
    
    86,000
    
    
    
    16.24Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,999
    
    
    
    13.45Forfeited/Expired
    
    
    60,167
    
    
    
    16.84
    
    
    
    2,500
    
    
    
    16.24
    
    
    
    2,500
    
    
    
    20.72Options Outstanding, December 31
    
    
    641,476
    
    
    $
    16.04
    
    
    
    602,143
    
    
    $
    17.36
    
    
    
    510,143
    
    
    $
    17.73Options Exercisable, December 31
    
    
    549,491
    
    
    $
    16.95
    
    
    
    511,322
    
    
    $
    17.68
    
    
    
    407,991
    
    
    $
    17.32Weighted Average Fair Value of
Options Granted During Year
    
    
    
    
    
    $
    1.39
    
    
    
    
    
    
    $
    2.76
    
    
    
    
    
    
    $
    3.61
 The options outstanding as of December 31, 2008 are exercisable at prices ranging from
$8.53 to $23.40. The options exercisable as of December 31, 2008 are exercisable at prices
ranging from $8.53 to $23.40. The number of options and remaining life of options at each
exercise price are as follows:
 Outstanding Options
    
    Exercisable OptionsExercise
    
    
    
    
    
    Remaining Life
    
    
    
    
    
    Remaining LifePrice
    
    Shares
    
    (in years)
    
    Shares
    
    (in years)$
    8.53
    
    
    
    99,500
    
    
    
    9.60
    
    
    
    35,845
    
    
    
    9.60$
    13.20
    
    
    
    71,669
    
    
    
    4.01
    
    
    
    71,669
    
    
    
    4.01$
    13.85
    
    
    
    25,838
    
    
    
    3.01
    
    
    
    25,838
    
    
    
    3.01$
    13.94
    
    
    
    4,402
    
    
    
    2.01
    
    
    
    4,402
    
    
    
    2.01$
    15.33
    
    
    
    88,667
    
    
    
    8.01
    
    
    
    60,337
    
    
    
    8.01$
    16.24
    
    
    
    76,500
    
    
    
    7.01
    
    
    
    76,500
    
    
    
    7.01$
    16.69
    
    
    
    101,500
    
    
    
    5.01
    
    
    
    101,500
    
    
    
    5.01$
    18.125
    
    
    
    52,400
    
    
    
    1.50
    
    
    
    52,400
    
    
    
    1.50$
    23.40
    
    
    
    121,000
    
    
    
    6.01
    
    
    
    121,000
    
    
    
    6.10641,476
    
    
    
    6.06
    
    
    
    549,491
    
    
    
    5.57
 The total intrinsic value of options exercised during the years ended December 31, 2008,
2007, and 2006 was $0, $0, and $19,000, respectively.
 44




---



##### 



A summary of the status of the Corporations nonvested option shares as of December 31,
2008 and changes during the year ended December 31, 2008 is as follows:
 Weighted AverageGrant Date FairNonvested Shares
    
    Shares
    
    ValueNonvested at January 1, 2008
    
    
    90,821
    
    
    $
    3.02Granted
    
    
    99,500
    
    
    
    1.39Vested
    
    
    (91,504
    )
    
    
    2.46Forfeited
    
    
    (6,832
    )
    
    
    3.07Nonvested at December 31, 2008
    
    
    91,985
    
    
    $
    1.81
 As of December 31, 2008, there was $168,000 of total unrecognized compensation cost related
to non vested share based compensation arrangements granted under the Plan. The cost is
expected to be recognized over a weighted average period of 1.5 years.Restricted Stock Awards Restricted stock units granted under the plan result in an award
of common shares to key employees based upon earnings performance during the vesting
period. Key employees were granted 21,500 Restricted Stock Units (RSUs) on June 4, 2008 and
23,800 Performance Stock Units (PSUs) on January 2, 2007. RSUs granted on June 4, 2008 will
vest on December 31, 2010 and PSUs granted on January 2, 2007 will vest on December 31,
2009. The amount of these stock units that will vest is based on the three year cumulative
earnings per share achieved by the company during the vesting period as shown in the
following schedule:
 Three Year Cumulative Fully
    
    
    
    
    
    Three Year Cumulative FullyDiluted EPS for the Three
    
    
    
    
    
    Diluted EPS for the ThreeYear Performance Period
    
    Percent PSUs
    
    Year Performance Period
    
    Percent RSUsEnding December 31, 2009
    
    Vested
    
    Ending December 31, 2010
    
    Vested$
    3.22
    
    
    
    100
    %
    
    $
    2.40
    
    
    
    100
    %$
    3.15
    
    
    
    80
    %
    
    $
    2.34
    
    
    
    90
    %$
    3.09
    
    
    
    60
    %
    
    $
    2.28
    
    
    
    80
    %$
    3.03
    
    
    
    40
    %
    
    $
    2.24
    
    
    
    70
    %$
    2.97
    
    
    
    20
    %
    
    $
    2.21
    
    
    
    60
    %$
    2.91
    
    
    
    0
    %
    
    $
    2.16
    
    
    
    50
    %less than $2.16
    
    
    0
    %
 The Corporation does not expect to meet the earnings threshold required to award any shares
under the awards granted in 2007 and 2008, therefore no expense was recorded in 2008 for
the PSUs or RSUs.(16)
    
    Parent CompanyCondensed parent company financial statements, which include transactions with the
subsidiary, are as follows (000s omitted):Balance Sheets
 December 31,2008
    
    2007AssetsCash and due from banks
    
    $
    2,055
    
    
    $
    3,099Investment in subsidiary bank
    
    
    119,555
    
    
    
    126,411Other assets
    
    
    840
    
    
    
    840Total assets
    
    $
    122,450
    
    
    $
    130,350LiabilitiesDividends payable and other liabilities
    
    $
    1,473
    
    
    $
    2,903Total liabilities
    
    
    1,473
    
    
    
    2,903Stockholders EquityTotal stockholders equity
    
    
    120,977
    
    
    
    127,447Total liabilities and stockholders equity
    
    $
    122,450
    
    
    $
    130,350
 45




---



##### 



Statements of Income
 Years Ended December 31,2008
    
    2007
    
    2006IncomeDividends from subsidiary bank
    
    $
    10,549
    
    
    $
    19,106
    
    
    $
    19,415Other operating income
    
    
    5
    
    
    
    21
    
    
    
    Total income
    
    
    10,554
    
    
    
    19,127
    
    
    
    19,415ExpenseOther expense
    
    
    493
    
    
    
    146
    
    
    
    158Total expense
    
    
    493
    
    
    
    146
    
    
    
    158Income before tax and equity in undistributed
net income of subsidiary bank
    
    
    10,061
    
    
    
    18,981
    
    
    
    19,257Income tax benefit
    
    
    (166
    )
    
    
    (43
    )
    
    
    (54
    )Income before equity in undistributed
net income of subsidiary bank
    
    
    10,227
    
    
    
    19,024
    
    
    
    19,311Equity in undistributed net income
of subsidiary bank
    
    
    (8,535
    )
    
    
    (11,311
    )
    
    
    (15,538
    )Net Income
    
    $
    1,692
    
    
    $
    7,713
    
    
    $
    3,773
 Statements of Cash Flows
 Years Ended December 31,2008
    
    2007
    
    2006Cash Flows Provided By Operating Activities:Net income
    
    $
    1,692
    
    
    $
    7,713
    
    
    $
    3,773Equity in undistributed net income of subsidiary bank
    
    
    8,535
    
    
    
    11,311
    
    
    
    15,538Net increase (decrease) in other liabilities
    
    
    (1,430
    )
    
    
    (106
    )
    
    
    928Net (increase) decrease in other assets
    
    
    190
    
    
    
    112
    
    
    
    (75
    )Net cash provided by operating activities
    
    $
    8,987
    
    
    $
    19,030
    
    
    $
    20,164Cash Flows Used For Financing Activities:Issuance of common stock
    
    $
    131
    
    
    $
    127
    
    
    $
    258Repurchase of common stock
    
    
    
    
    
    
    (7,709
    )
    
    
    (8,141
    )Dividends paid
    
    
    (10,162
    )
    
    
    (11,861
    )
    
    
    (11,731
    )Net cash used for financing activities
    
    $
    (10,031
    )
    
    $
    (19,443
    )
    
    $
    (19,614
    )Net Increase (Decrease) In
Cash And Cash Equivalents
    
    $
    (1,044
    )
    
    $
    (413
    )
    
    $
    550Cash And Cash Equivalents
At Beginning Of Year
    
    
    3,099
    
    
    
    3,512
    
    
    
    2,962Cash And Cash Equivalents At End Of Year
    
    $
    2,055
    
    
    $
    3,099
    
    
    $
    3,512
 Under current regulations, the Bank is limited in the amount it may loan to the
Corporation. Loans to the Corporation may not exceed ten percent of the Banks capital
stock, surplus, and undivided profits plus the allowance for loan losses. Loans from the
Bank to the Corporation are required to be collateralized. Accordingly, at December 31,
2008, Bank funds available for loans to the Corporation amounted to $14,032,000. The Bank
has not made any loans to the Corporation.Federal and state banking laws place certain restrictions on the amount of dividends a bank
may make to its parent company. Michigan law limits the amount of dividends that the Bank
can pay to the Corporation without regulatory approval to the amount of net income then on
hand. Accordingly, the Bank can pay dividends of $41,795,000 in 2009, in addition to its
2009 net income, without regulatory approval.(17)
    
    Financial Instruments with Off-Balance Sheet RiskThe 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 balance sheets.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 at
December 31 were as follows (000s omitted):
 46




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##### 



Contractual Amount2008
    
    2007Commitments to extend credit:Unused portion of commercial lines of credit
    
    $
    62,537
    
    
    $
    92,774Unused portion of credit card lines of credit
    
    
    5,872
    
    
    
    5,988Unused portion of home equity lines of credit
    
    
    20,200
    
    
    
    20,047Standby letters of credit and financial guarantees written
    
    
    7,297
    
    
    
    9,994All other off-balance sheet assets
    
    
    3,682
    
    
    
    3,555
 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, generally have fixed expiration
dates or other termination clauses, and require payment of a fee. 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 counter party.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. Approximately $7,099,000 of the letters of credit expires in 2009 and
$197,000 extends for two to five years. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to customers.(18)
    
    Quarterly Financial Information (Unaudited) (000s omitted):
 2008
    
    First
    
    Second
    
    Third
    
    FourthTotal Interest Income
    
    $
    22,200
    
    
    $
    21,387
    
    
    $
    21,113
    
    
    $
    20,203Total Interest Expense
    
    
    11,747
    
    
    
    10,260
    
    
    
    10,027
    
    
    
    10,480Net Interest Income
    
    
    10,453
    
    
    
    11,127
    
    
    
    11,086
    
    
    
    9,723Provision for Loan Losses
    
    
    1,200
    
    
    
    2,700
    
    
    
    4,100
    
    
    
    10,000Other Income
    
    
    3,962
    
    
    
    3,858
    
    
    
    4,265
    
    
    
    3,900Other Expenses
    
    
    9,698
    
    
    
    10,163
    
    
    
    11,365
    
    
    
    8,773Income Before Provision For Income Taxes
    
    
    3,517
    
    
    
    2,122
    
    
    
    (114
    )
    
    
    (5,150
    )Provision For Income Taxes
    
    
    870
    
    
    
    404
    
    
    
    (438
    )
    
    
    (2,153
    )Net Income
    
    $
    2,647
    
    
    $
    1,718
    
    
    $
    324
    
    
    $
    (2,997
    )Basic Earnings Per Common Share
    
    $
    0.16
    
    
    $
    0.11
    
    
    $
    0.02
    
    
    $
    (0.19
    )Diluted Earnings Per Common Share
    
    $
    0.16
    
    
    $
    0.11
    
    
    $
    0.02
    
    
    $
    (0.19
    )Dividends Declared Per Share
    
    $
    0.18
    
    
    $
    0.18
    
    
    $
    0.09
    
    
    $
    0.09
 2007
    
    First
    
    Second
    
    Third
    
    FourthTotal Interest Income
    
    $
    23,717
    
    
    $
    23,288
    
    
    $
    23,557
    
    
    $
    22,989Total Interest Expense
    
    
    12,534
    
    
    
    12,501
    
    
    
    12,889
    
    
    
    12,858Net Interest Income
    
    
    11,183
    
    
    
    10,787
    
    
    
    10,668
    
    
    
    10,131Provision for Loan Losses
    
    
    750
    
    
    
    750
    
    
    
    1,000
    
    
    
    8,907Other Income
    
    
    3,763
    
    
    
    4,119
    
    
    
    3,928
    
    
    
    3,824Other Expenses
    
    
    9,112
    
    
    
    9,279
    
    
    
    9,242
    
    
    
    9,601Income Before Provision For Income Taxes
    
    
    5,084
    
    
    
    4,877
    
    
    
    4,354
    
    
    
    (4,553
    )Provision For Income Taxes
    
    
    1,381
    
    
    
    1,342
    
    
    
    1,173
    
    
    
    (1,847
    )Net Income
    
    $
    3,703
    
    
    $
    3,535
    
    
    $
    3,181
    
    
    $
    (2,706
    )Basic Earnings Per Common Share
    
    $
    0.22
    
    
    $
    0.21
    
    
    $
    0.20
    
    
    $
    (0.16
    )Diluted Earnings Per Common Share
    
    $
    0.22
    
    
    $
    0.21
    
    
    $
    0.20
    
    
    $
    (0.16
    )Dividends Declared Per Share
    
    $
    0.18
    
    
    $
    0.18
    
    
    $
    0.18
    
    
    $
    0.18
 (19)
    
    Fair Value DisclosuresThe following tables present information about the Corporations assets measured at fair
value on a recurring basis at December 31, 2008, and the valuation techniques used by the
Corporation 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.
 47




---



##### 



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.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 inActive Markets for
    
    Significant Other
    
    Significant
    
    Balance atIdentical Assets
    
    Observable Inputs
    
    Unobservable Inputs
    
    December 31,(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    2008Investment Securities
 Available for Sale
    
    $
    333,115
    
    
    $
    53,256
    
    
    $
    19,746
    
    
    $
    406,117
 The changes in Level 3 assets measured at fair value on a recurring basis were (000s
omitted):
 InvestmentSecurities Availablefor SaleBalance at December 31, 2007
    
    $
    585Total realized and unrealized gains (losses) included in income
    
    
    (17
    )Total unrealized gains (losses) included in other
comprehensive income
    
    
    (5,759
    )Net purchases, sales, calls and maturities
    
    
    Net transfers in/out of Level 3
    
    
    24,937Balance at December 31, 2008
    
    $
    19,746
 Of the Level 3 assets that were held by the Corporation at December 31, 2008, the
unrealized loss for the year was $5,931,000, which is recognized in other comprehensive
income in the consolidated statements of financial condition. The fair value of Level 3
available for sale securities purchased by the Corporation during 2008 was $6,136,000.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 Level 3 fair values disclosed for December 31, 2007 through the first two quarters of
2008 included $585,000 of available for sale investment securities issued by local
municipalities. Previously the Company estimated the fair value of these bonds based on the
present value of expected future cash flows using managements best estimate of key
assumptions, including forecasted interest yield and payment rates, credit quality, and a
discount rate commensurate with the current market and other risks involved. During the
third quarter of 2008, the Company began using a yield curve pricing matrix to calculate
the fair value, and these securities were transferred out of Level 3 and into Level 2. The
Company owns pooled Trust Preferred Securities (TRUPs) with a fair value of $19,372,000 as
of December 31, 2008. The Company reported the TRUPS as Level 2 assets as of June 30, 2008
using broker indications for fair values. As of December 31, 2008, trading of these types
of securities was only conducted on a distress sale or forced liquidation basis. As a
result, the Company is now measuring 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 non-recurring basis. These assets include held to maturity investments and
loans. The Company estimated the fair values of these assets using Level 3 inputs,
specifically discounted cash flow projections.
 48




---



##### 



Assets measured at fair value on a nonrecurring basis are as follows (000s omitted):
 Quoted Prices inActive Markets for
    
    Significant Other
    
    Significant
    
    Total Losses forBalance at December
    
    Identical Assets
    
    Observable Inputs
    
    Unobservable Inputs
    
    the year ended31, 2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    December 31, 2008Impaired loans
accounted for under
FAS 114
    
    $
    50,111
    
    
    $
    
    
    
    $
    
    
    
    $
    50,111
    
    
    $
    3,805Other Real Estate Owned
    
    $
    17,156
    
    
    $
    
    
    
    $
    17,156
    
    
    $
    
    
    
    $
    2,545
 Impaired loans accounted for under FAS 114 categorized as Level 3 assets consist of
non-homogenous loans that are considered impaired. The Corporation 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 Corporation utilizes outside
appraisals to estimate the fair value of OREO properties.
 49




---



##### 



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  Item 9A. Controls and Procedures
 Conclusion
Regarding the Effectiveness of Disclosure Controls and
Procedures
  Managements
Report on Internal Control Over Financial Reporting
    Item 9B. Other Information
  50




---



##### 



Part III
 Item 10. Directors and Executive Officers of the Registrant
 (a)
    
    Executive Officers See Executive Officers in part I, Item 1 hereof.(b)
    
    Directors and Executive Officers information required by this item is incorporated by
reference from the sections entitled Election of Directors and Section 16(a) Beneficial
Ownership Reporting Compliance in the Proxy Statement for the Annual Meeting of Shareholders
that is to be filed with the Securities Exchange Commission.(c)
    
    Audit Committee Financial Expert The Board of Directors has determined that Peter H.
Carlton, member of the Audit Committee, is an audit committee financial expert and
independent as defined under applicable SEC and Nasdaq rules.(d)
    
    MBT Financial Corp. has adopted its Code of Ethics, a code of ethics that applies to all its
directors, officers, and employees, including its Chief Executive Officer, Chief Financial
Officer, and internal auditor. A copy of the Code of Ethics is posted on our website at
http://www.mbandt.com. In the event we make any amendment to, or grant any waiver of, a
provision of the Code of Ethics that applies to the principal executive officers, principal
financial officer, principal accounting officer, or controller, or persons performing similar
functions that require disclosure under applicable SEC rules, we intend to disclose such
amendment or waiver, the reasons for it, and the nature of any waiver, the name of the person
to whom it was granted, and the date, on our internet website.
 Item 11. Executive Compensation
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
   Number of securities remainingNumber of securities to be
    
    Weighted average
    
    available for future issuance underissued upon exercise of
    
    exercise price of
    
    equity compensation plansoutstanding options, warrants,
    
    outstanding options,
    
    (excluding securities reflected in theand rights
    
    warrants, and rights
    
    first column )Equity Compensation plans approved by 
security holders
    
    
    643,309
    
    
    $
    16.03
    
    
    
    874,682Equity Compensation plans not approved 
by security holders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    643,309
    
    
    $
    16.03
    
    
    
    874,682
 51




---



##### 



Item 13. Certain Relationships and Related Transactions
  Item 14. Principal Accountant Fees and Services
  Part IV
 Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
  Financial StatementsReports of Independent Registered Public Accounting Firm  Pages 25-26Consolidated Balance Sheets as of December 31, 2008 and 2007  Page 27Consolidated Statements of Income for the Years Ended
December 31, 2008, 2007, and 2006  Page 28Consolidated Statements of Changes in Stockholders Equity for the Years Ended
December 31, 2008, 2007, and 2006  Page 29Consolidated Statements of Cash Flows for the Years Ended
December 31, 2008, 2007, and 2006  Page 30Notes to
Consolidated Financial Statements  Pages 31 - 49
  52




---



##### 



2
    
    Purchase and Assumption Agreement dated October 10, 2008. Previously filed as Exhibit 2 to
MBT Financial Corp.s Form 8-K filed on October 16, 2008.3.1
    
    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-K for its fiscal year ended December 31, 2004.10.1
    
    MBT Financial Corp. Long-Term Incentive Compensation Plan. Previously filed as Exhibit 10.1
to MBT Financial Corp.s Form 10-K for its fiscal year ended December 31, 2000.10.2
    
    Monroe Bank & Trust Salary Continuation Agreement with Ronald D. LaBeau. Previously filed as
Exhibit 10.2 to MBT Financial Corp.s Form 10-K for its fiscal year ended December 31, 2000.10.3
    
    MBT Financial Corp. Amended and Restated Change in Control Agreement with H. Douglas Chaffin.
Previously filed as Exhibit 10.5 to MBT Financial Corp.s Form 10-K for its fiscal year ended
December 31, 2005.10.4
    
    Monroe Bank & Trust Group Director Death Benefit Only Plan. Previously filed as Exhibit 10.4
to MBT Financial Corp.s Form 10-K for its fiscal year ended December 31, 2006.10.5
    
    Monroe Bank & Trust Group Executive Death Benefit Only Plan. Previously filed as Exhibit 10.5
to MBT Financial Corp.s Form 10-K for its fiscal year ended December 31, 2006.10.6
    
    Monroe Bank & Trust Amended and Restated Supplemental Executive Retirement Agreement with H.
Douglas Chaffin. Previously filed as Exhibit 10.6 to MBT Financial Corp.s Form 10-K for its
fiscal year ended December 31, 2007.10.7
    
    MBT Financial Corp. Severance Agreements with Donald M. Lieto, James E. Morr, Thomas G.
Myers, and John L. Skibski. Previously filed as Exhibit 10 on Form 8-K filed by MBT Financial
Corp. on January 26, 2006.10.8
    
    MBT Financial Corp. Severance Agreement with Scott E. McKelvey. Previously filed as Exhibit
10.1 to MBT Financial Corp.s Form 10-Q for its quarter ended June 30, 2007.21
    
    Subsidiaries of the Registrant. Previously filed as Exhibit 21 to MBT Financial Corp.s Form
10-K for its fiscal year ended December 31, 2000.23
    
    Consent of Independent Auditors31.1
    
    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 2002.32.1
    
    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.
 53




---



##### 



Signatures
  Dated: March 6, 2009
    MBT FINANCIAL CORP.By:
    /s/ John L. SkibskiJohn L. SkibskiChief Financial Officer   /s/ H. Douglas Chaffin
    
    /s/ John L. SkibskiH.
Douglas Chaffin
President, Chief Executive
Officer & Director
    
    John L. Skibski
Chief Financial Officer &
Director/s/ William D. McIntyre, Jr.
    
    /s/ Peter H. CarltonWilliam
D. McIntyre, Jr.
Chairman
    
    Peter H. Carlton
Director/s/ Joseph S. Daly
    
    /s/ Edwin L. HarwoodJoseph
S. Daly
Director
    
    Edwin L. Harwood
Director/s/ Thomas M. Huner
    
    /s/ Rocque E. LipfordThomas
M. Huner
Director
    
    Rocque E. Lipford
Director/s/ Michael J. Miller
    
    /s/ Debra J. ShahMichael
J. Miller
Director
    
    Debra J. Shah
Director/s/
Philip P. Swy
    
    /s/ Karen M. WilsonPhilip
P. Swy
Director
    
    Karen M. Wilson
Director
 54




---



##### 



Exhibit Index
 Exhibit Number
    
    Description of Exhibits2
    
    Purchase and Assumption Agreement dated October 10, 2008. Previously filed as Exhibit 2 to
MBT Financial Corp.s Form 8-K filed on October 16, 2008.3.1
    
    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-K for its fiscal year ended December 31, 2004.10.1
    
    MBT Financial Corp. Long-Term Incentive Compensation Plan. Previously filed as Exhibit
10.1 to MBT Financial Corp.s Form 10-K for its fiscal year ended December 31, 2000.10.2
    
    Monroe Bank & Trust Salary Continuation Agreement with Ronald D. LaBeau. Previously filed
as Exhibit 10.2 to MBT Financial Corp.s Form 10-K for its fiscal year ended December 31,
2000.10.3
    
    MBT Financial Corp. Amended and Restated Change in Control Agreement with H. Douglas
Chaffin. Previously filed as Exhibit 10.5 to MBT Financial Corp.s Form 10-K for its fiscal
year ended December 31, 2005.10.4
    
    Monroe Bank & Trust Group Director Death Benefit Only Plan. Previously filed as Exhibit
10.4 to MBT Financial Corp.s Form 10-K for its fiscal year ended December 31, 2006.10.5
    
    Monroe Bank & Trust Group Executive Death Benefit Only Plan. Previously filed as Exhibit
10.5 to MBT Financial Corp.s Form 10-K for its fiscal year ended December 31, 2006.10.6
    
    Monroe Bank & Trust Amended and Restated Supplemental Executive Retirement Agreement with
H. Douglas Chaffin. Previously filed as Exhibit 10.6 to MBT Financial Corp.s Form 10-K for
its fiscal year ended December 31, 2007.10.7
    
    MBT Financial Corp. Severance Agreements with Donald M. Lieto, James E. Morr, Thomas G.
Myers, and John L. Skibski. Previously filed as Exhibit 10 on Form 8-K filed by MBT
Financial Corp. on January 26, 2006.10.8
    
    MBT Financial Corp. Severance Agreement with Scott E. McKelvey. Previously filed as
Exhibit 10.1 to MBT Financial Corp.s Form 10-Q for its quarter ended June 30, 2007.21
    
    Subsidiaries of the Registrant. Previously filed as Exhibit 21 to MBT Financial Corp.s
Form 10-K for its fiscal year ended December 31, 2000.23
    
    Consent of Independent Auditors31.1
    
    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 2002.32.1
    
    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.
 55