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US Bank Branch Map
MBT Financial Corp. (NASDAQ: MBTF)

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FORWARD-LOOKING STATEMENTS			1
QUESTIONS AND ANSWERS RELATING TO THE RIGHTS OFFERING			2
SUMMARY			9
THE RIGHTS OFFERING AND THE PUBLIC REOFFER			15
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA			20
RISK FACTORS			22
USE OF PROCEEDS			34
DETERMINATION OF THE OFFERING PRICE			34
CAPITALIZATION			34
DILUTION			35
PRICES FOR COMMON STOCK, DIVIDENDS AND RELATED SHAREHOLDER MATTERS			35
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			37
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			62
BUSINESS			64
REGULATION AND SUPERVISION			75
MANAGEMENT			86
EXECUTIVE COMPENSATION			91
DIRECTOR INDEPENDENCE AND RELATED PARTY TRANSACTIONS			103
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES			105
DESCRIPTION OF CAPITAL STOCK			107
PLAN OF DISTRIBUTION			110
LEGAL MATTERS			110
EXPERTS			110
WHERE YOU CAN FIND ADDITIONAL INFORMATION			111
INDEX TO FINANCIAL STATEMENTS			F-1

You should rely only on the information contained in this prospectus or in any related free writing prospectus filed with the Securities and Exchange Commission and used or referred to in this offering. We have not, and the sales agent has not, authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Neither we nor the sales agent is making an offer of these securities in any jurisdiction where the offer is not permitted. Furthermore, you should not consider this prospectus to be an offer or solicitation relating to our common stock if the person making the offer or solicitation is not qualified to do so, or it is unlawful for you to receive such an offer or solicitation.

Information contained on our website is not part of this prospectus.

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FORWARD-LOOKING STATEMENTS

This prospectus contains or incorporates by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “project,” “is confident that,” and similar expressions that are intended to identify these forward-looking statements. These forward-looking statements involve risk and uncertainty and a variety of factors, which are in many instances beyond our control and could cause our actual results and experiences to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. We assume no obligation to update or revise forward-looking statements.

These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside MBT’s control and difficult to predict. Factors that may cause such differences include, but are not limited to:

For a discussion of these and other risks that may cause actual results to differ from expectations, refer to the section entitled “Risk Factors” in this document. The forward-looking statements contained or incorporated by reference in this document relate only to circumstances as of the date on which the statements are made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements.

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QUESTIONS AND ANSWERS RELATING TO THE RIGHTS OFFERING

The following are examples of what we anticipate will be common questions about the rights offering asked by our shareholders who are awarded rights in the offering. In this Q&A section references to “you” and “your” refer to our shareholders of record on            , 2013 who have the right to purchase shares in this offering. The answers are based on selected information from this prospectus. The following questions and answers do not contain all of the information that may be important to you and may not address all of the questions that you may have about the rights offering. This prospectus contains more detailed descriptions of the terms and conditions of the rights offering and provides additional information about us and our business, including potential risks related to the rights offering, our common stock and our business.

Exercising the rights and investing in our common stock involves a high degree of risk. We urge you to carefully read the section entitled “Risk Factors” and all other information included or incorporated herein by reference in its entirety before you decide whether to exercise your rights.

What are the different components of the offering?

We are offering a total of      shares of MBT common stock pursuant to the offering. We have commitments from certain standby purchasers for the purchase of      shares of our common stock at $     per share for a total of $5,000,000. The remaining      shares are being offered at the same price to our existing shareholders pursuant to the rights offering. At the conclusion of the rights offering we will offer any shares that remain unsold to non-shareholders as part of a public reoffer. The standby purchasers have agreed to purchase any shares that remain unsold after the rights offering and the public reoffer.

The shares to be issued in the offering, like our existing common shares, will be quoted on the NASDAQ Global Select Market under the symbol “MBTF.”

What is the rights offering?

We are awarding, at no charge, to holders of our shares of common stock, nontransferable subscription rights to purchase shares of our common stock. Each shareholder has the right to purchase      shares of our common stock for each      shares owned by them at 5:00 p.m. Eastern Time, on the record date. Each subscription right entitles the holder to a basic subscription privilege and an oversubscription privilege which are described below. These subscription rights expire on            , 20  , subject to extension by us but to a date not later than            , 20  .

Any shares not purchased by our shareholders in the rights offering will be offered to the public pursuant to the public reoffer, and any shares remaining unsold after the conclusion of the public reoffer will be sold to the standby purchasers pursuant to our agreements with them.

Who are the Standby Purchasers and what are their commitments in the offering?

We have secured written standby commitments from       ,       ,        and        (the “standby purchasers”), who have agreed to purchase      shares of our stock at $     (the “standby commitments”) for an aggregate minimum subscription amount of $5,000,000. Under the standby commitments the standby purchasers have also agreed to purchase all shares that remain unsold at the conclusion of the rights offering and the public reoffer.

What is the basic subscription right?

The basic subscription right gives our shareholders the opportunity to purchase      of our common shares for each      shares of our common stock owned at 5:00 p.m. on            , 2013, the record date. Fractional shares resulting from the exercise of basic subscription rights will be eliminated by rounding down to the nearest whole share. For example, if you owned 100 common shares as of the record date, you would have received 100 basic subscription rights and would have the right to purchase      common shares. You may exercise all or a portion of your basic subscription rights or you may choose not to exercise any basic subscription rights at all. However, if you exercise less than your full basic subscription rights, you will not be entitled to purchase any additional shares by using your oversubscription privilege.

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If you hold an MBT share certificate or your shares are held in direct registration form, the number of rights you may exercise pursuant to your basic subscription rights is indicated on the enclosed subscription documents. If you hold your shares in the name of a custodian bank, broker, dealer or other nominee, your custodian bank, broker, dealer or other nominee will contact you for instructions about whether to exercise your subscription right on your behalf, and will provide you with instructions about how to go about exercising that right.

At what price can I purchase shares in the offering?

Our shareholders may purchase our common shares in the offering at $     per share which is the same price we have agreed to sell shares under the standby commitments and the same price that we may offer shares in the public reoffer.

What is the oversubscription privilege?

In the event that you purchase all of the common shares available to you pursuant to your basic subscription rights, you may also choose to purchase a portion of any common shares that are not purchased by our other shareholders through the exercise of their basic subscription rights. You should indicate on your enclosed subscription materials how many additional shares you would like to purchase pursuant to your oversubscription privilege.

If sufficient common shares are available, we will seek to honor your oversubscription request in full. If, however, oversubscription requests exceed the number of common shares available to be purchased pursuant to the oversubscription privilege, we will allocate the available common shares among shareholders who oversubscribed by multiplying the number of shares requested by each shareholder through the exercise of their oversubscription privileges by a fraction that equals (x) the number of shares available to be issued through oversubscription privileges divided by (y) the total number of shares requested by all subscribers through the exercise of their oversubscription privileges. As described above for the basic subscription rights, we will not issue fractional shares through the exercise of oversubscription privileges.

In order to properly exercise your oversubscription privilege, you must deliver payment for all shares subscribed for, including those related to your oversubscription, with your subscription agreement.

If I want to purchase shares in the rights offering, am I required to exercise all, or any minimum number of the rights offered to me?

No. There is no individual minimum purchase requirement for our existing shareholders in the rights offering in connection with their basic subscription right, except that if you wish to be eligible to purchase shares pursuant to your oversubscription privilege, you must purchase all shares available to you pursuant to your basic subscription right.

Are there limits on the number of shares of common stock I may purchase in the rights offering?

You have the right to purchase all of the shares available to you under the basic subscription right. If you subscribe for additional shares pursuant to your oversubscription privilege, you may be limited in the number of shares you may purchase.

The terms of the offering permit us to limit the purchase by any person or entity if such purchase would result in such person or entity, together with any related persons or entities, owning 5% or more of our issued and outstanding shares of common stock following the offering, or that would otherwise require regulatory approval.

We may also accept or reject any subscription for shares, other than the basic subscription right afforded to our shareholders under the rights offering, in our sole discretion for any reason.

What agreements does the Company have with the standby purchasers?

The standby purchasers executed standby purchase agreements. Pursuant to these agreements, the standby purchasers have agreed to acquire from us, at the subscription price of $     per share, a minimum of      shares of common stock for an aggregate minimum subscription of $5,000,000, or     % of MBT’s outstanding common stock on a fully diluted basis, assuming the maximum number of shares are issued in the

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offering, including shares issued to the standby purchasers, and no additional shares are purchased by them in the offering. The standby purchasers have also agreed to purchase any shares offered by us that remain unsold at the completion of the rights offering and the public reoffer. The maximum amount of shares that the standby purchasers can purchase is equal to the entire offering amount, including the variable maximum offering amount of      shares, or     % of MBT’s outstanding common stock, on a fully diluted basis.

In no event will any of the standby purchasers be required to purchase a number of shares that would require prior regulatory clearance or approval from any state or federal bank regulatory authority.

What effects will the stock offering have on our outstanding common stock?

As of September 30, 2013, we had 17,917,512 shares of our common stock issued and outstanding. Assuming no outstanding options or other equity awards are exercised prior to the expiration of the offering, and assuming the maximum number of shares we are offering, including the variable maximum offering amount of     , are sold, we will have      shares of our common stock outstanding immediately after completion of the stock offering.

In the event the offering is fully subscribed and an existing shareholder does not purchase any shares in the offering, such shareholder’s ownership would be diluted by     %. If the offering is fully subscribed at the variable maximum amount of      shares and a shareholder exercises all of his or her basic subscription rights in the rights offering, such shareholder’s ownership will be diluted by the minimum number of shares issued to the standby purchasers, and shares sold under the additional variable maximum offering amount of $2,500,000, or     %.

How do I exercise my subscription rights?

If you wish to participate in the rights offering, you must deliver to the subscription agent your properly completed and signed subscription agreement that is contained on the reverse side of the rights certificate that you received with this prospectus, along with your payment for all shares subscribed for.

Payments must be made in full in U.S. dollars for the full number of shares for which you are subscribing by:

[insert wire transfer information]

Any wire transfer should reference “American Stock Transfer & Trust Company, LLC, as subscription agent for MBT Financial Corp.” and should clearly indicate the identity of the shareholder who is paying the subscription price by wire transfer.

Please follow the payment and delivery instructions in the subscription documents. You are solely responsible for completing delivery of your subscription materials and payment. We urge you to allow sufficient time for delivery of your subscription materials to the subscription agent so that they are received by the subscription agent by 5:00 p.m., Eastern Time, on          , 2013. You may also deliver your subscription documents and payment to us at our main office by hand or by mail. We will deliver them for you to the subscription agent. Subscription documents received by us or post-marked prior to the subscription deadline will be considered received timely.

If you send a payment that is insufficient to purchase the number of shares you requested, or if the number of shares you requested is not specified in the subscription document, the payment received will be applied to exercise your subscription rights to the fullest extent possible based on the amount of the payment received, subject to the availability of shares under the oversubscription privilege, purchase limitations and the elimination of fractional shares. Any excess subscription payments received by the subscription agent will be returned promptly, without interest or penalty, following the expiration of the rights offering.

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How do I participate in the rights offering if I hold shares in an account with my broker, dealer, custodian bank or other nominee?

If you hold your shares of our common stock in “street name,” such as in an account with a broker, dealer, custodian bank or other nominee, then your broker, dealer, custodian bank or other nominee is the record holder of the shares you own. You will not receive subscription materials with respect to those shares directly from us. The record holder must exercise the subscription rights on your behalf for the shares of common stock you wish to purchase in the rights offering.

We will ask your record holder to notify you of the rights offering. However, if you are not contacted by your broker, dealer, custodian bank or other nominee, you should promptly initiate contact with that intermediary. Your broker, dealer, custodian bank or other nominee may establish a deadline prior to our deadline of          , which we established as the expiration date of the rights offering, by which you must provide it with your instructions to exercise your subscription rights and pay for your shares.

Will our officers and directors be exercising their subscription rights?

Yes. We expect our directors and officers will subscribe for, in the aggregate, approximately      shares of common stock, or $     million, in the rights offering. The purchase price paid by them will be $     per share, the same paid by all other persons who purchase shares of our common stock in the offering. Following the offering, our current directors and executive officers, together with their affiliates, are expected to own approximately      shares of common stock, or     % and     % of our total outstanding shares of common stock, assuming the sale at the minimum and maximum of the offering range, respectively.

Has our board of directors made a recommendation to our shareholders regarding the exercise of rights under the rights offering?

No. Neither our board of directors nor our sales agent, Donnelly Penman & Partners, makes any recommendation regarding your exercise of the subscription rights. Shareholders who exercise their subscription rights risk loss on their investment. We cannot assure you that the market price of our common stock will be above the subscription price or that anyone purchasing shares at the subscription price will be able to sell those shares in the future at the same price or a higher price. You are urged to make your decision based on your own assessment of our business and the rights offering. Please see the section entitled “Risk Factors” for a discussion of some of the risks involved in investing in our common stock.

Why are we conducting the rights offering?

We are conducting the offering to raise capital for our operating subsidiary, Monroe Bank & Trust (the “Bank”), which is operating under the terms of a consent order (“Consent Order”) with the Federal Deposit Insurance Corporation (“FDIC”) and the Bank and Trust Division of the Michigan Department of Insurance and Financial Services (“Michigan DIFS Bank & Trust Division”), which requires us, among other things, to meet certain minimum capital ratios. As of June 30, 2013, in order to be in compliance with the minimum capital ratios imposed on the Bank by the Consent Order, we needed approximately $26.145 million in additional capital.

How was the subscription price of $     per share determined?

In determining the subscription price, our board of directors considered a number of factors, including: the price at which they believed our shareholders might be willing to participate in the rights offering, historical and current trading prices for our common stock, the need for liquidity and capital, negotiations with the standby purchasers resulting in the standby commitments, and the desire to provide an opportunity to our shareholders to participate in the rights offering on a pro rata basis. In conjunction with its review of these factors, our board of directors also reviewed our history and prospects, including our past and present earnings, our prospects for future earnings, our current financial condition and regulatory status. The subscription price is not necessarily related to our book value or any other established criteria of value and may or may not be considered the fair value of our common stock to be offered in the rights offering. You should not assume or expect that, after the stock offering, our shares of common stock will trade at or above the $     purchase price.

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How soon must I act to exercise my rights?

If you received subscription materials and elect to exercise some or all of your subscription rights, the subscription agent or we must receive your completed and signed subscription materials and complete payment prior to the expiration of the rights offering, which is          , 2013, at 5:00 p.m., Eastern Time. If you hold your shares in the name of a broker, dealer, custodian bank or other nominee, your broker, dealer, custodian bank or other nominee may establish a deadline prior to 5:00 p.m. Eastern Time, on             , 2013 by which you must provide it with your instructions to exercise your subscription rights and pay for your shares.

Although we will make reasonable attempts to provide this prospectus to holders of subscription rights, the rights offering and all subscription rights will expire at 5:00 p.m., Eastern Time on          , 2013 (unless extended), whether or not we have been able to locate each person entitled to subscription rights.

May I transfer my rights?

No. You may not transfer your subscription rights.

Are we requiring a minimum aggregate subscription to complete the offering?

Yes. In the event we have not received subscriptions proceeds, on or prior to the final expiration date of the offering, including all permitted extensions, of at least $10,000,000 the offering will expire and the subscription agent will return all subscription proceeds to subscribers, without interest. Subscriptions received from the standby purchasers, our existing shareholders in the rights offering and the public reoffer will be aggregated in determining whether the minimum offering amount of $10,000,000 has been met. Because the standby purchasers have agreed in written standby commitments to purchase any shares that remain unsold after the rights offering and the public reoffer, we expect that the minimum offering amount will be met.

Can the board of directors cancel, amend or extend the offering?

Yes. The rights offering expires on      and the public reoffer expires on     . We have the option to extend these dates but not beyond the final offering expiration date of            , 201 . Our board of directors may cancel the offering at any time for any reason. If the offering is canceled, all subscription payments received by the subscription agent will be returned promptly, without interest. Our board of directors reserves the right to amend or modify the terms of the offering at any time, for any reason.

Will I receive a stock certificate for the shares I purchase?

No. All shares purchased in the offering will be issued in book entry or direct registration form. No stock certificates will be issued in connection with your purchase of shares in the offering. You may later obtain a certificate if you wish by making a request to our transfer agent, American Stock Transfer, if your shares are in direct registration form, or by contacting your broker if you hold your shares in street name with your broker or other nominee.

After I send in my payment and subscription materials, may I change or cancel my subscription?

No. Once submitted with payment, all subscriptions for shares in the offering are irrevocable, even if you later learn information that you consider unfavorable to the exercise of your subscription rights.

How many shares of common stock will be outstanding after the offering?

As of September 30, 2013, 17,917,512 of our shares of common stock were issued and outstanding. Assuming no other transactions by us involving shares of our common stock and no options for shares of our common stock are exercised prior to the expiration of the offering, if the offering is fully subscribed at the maximum amount then an additional      of our shares of common stock will be issued and outstanding after the closing of the offering, for a total of      shares of common stock outstanding. If we elect to accept additional subscriptions under our right to increase the offering amount to the variable maximum offering amount then an additional      of our shares of common stock will be issued and outstanding after the closing of the offering, for a total of      shares of common stock outstanding.

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As a result of the offering, the ownership interests and voting interests of the existing shareholders will be diluted. The amount of the dilution will depend upon whether a shareholder exercises his or her basic subscription right and whether such shareholder subscribes for additional shares as an oversubscription privilege.

Are there risks in exercising my subscription rights?

Yes. The exercise of your subscription rights involves risks. Exercising your subscription rights involves the purchase of additional shares of common stock and should be considered as carefully as you would consider any other equity investment. Among other things, you should carefully consider the risks described in the section entitled “Risk Factors” in this prospectus and the documents incorporated by reference in this prospectus.

If the offering is not completed, will my subscription payment be refunded to me?

Yes. The subscription agent will hold all funds it receives until it has received proceeds equal to the minimum offering amount and we accept those subscriptions. If the offering is not completed, all subscription payments received by the subscription agent will be returned promptly, without interest. If you hold shares through a broker, dealer, custodian bank or other nominee, it may take longer for you to receive payment because the subscription agent will return payments through the record holder of your shares.

What fees or charges apply if I purchase the shares of common stock?

We are not charging any fee or sales commission to issue subscription rights to you or to issue shares to you if you exercise your subscription rights. If you exercise your subscription rights through your broker, dealer, custodian bank or other nominee, you are responsible for paying any fees your nominee may charge you. We have agreed to pay a commission of $     per share to Donnelly Penman & Partners for each subscription right exercised. See “Plan of Distribution.”

What are the material U.S. federal income tax consequences of exercising my subscription rights?

For U.S. federal income tax purposes, you should not recognize income or loss upon receipt or exercise of subscription rights. You should consult your tax advisor as to your particular tax consequences resulting from the rights offering. For a more detailed discussion, see the section entitled “Material United States Federal Income Tax Consequences.”

What is the public reoffer?

Concurrently with the rights offering, shares of common stock offered by this prospectus that remain unsubscribed for in the rights offering will be offered to the public in the public reoffer at the subscription price of $     per share through Donnelly Penman & Partners, who we have engaged to act as our sales agent in the offering. Donnelly Penman & Partners will act on a “best efforts” basis only and will not have any obligation or commitment to sell any dollar amount or number of shares or to acquire any shares for its own account or with a view to their distribution.

The public reoffer period will commence concurrently with the rights offering and will expire on            , 201 , unless we extend it in our sole discretion. However, we will not extend the public reoffer period beyond            , 2014. The shares available for sale in the public reoffer are only those that are not purchased by our shareholders in the rights offering or by our shareholders under their oversubscription privilege that we accept. In the event our shareholders of record on            , 2013, exercise all of the rights to purchase their ratable share of the offering in the rights offering, no other persons will be eligible to purchase shares in the offering.

Shares will only be sold in the public reoffer to the extent any remain available for sale following the rights offering. If sufficient common shares are available, we will generally fill subscriptions from investors in the public reoffer in full. If we receive subscriptions in the public reoffer that exceed the number of common shares available, we will allocate the available common shares among such investors by multiplying the number of shares requested by each investor by a fraction that equals (x) the number of shares remaining for issuance through the public reoffer divided by (y) the total number of shares requested by all subscribers in

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the public reoffer. We will not issue fractional shares. We also reserve the right to reject any or all of a subscription received in the public reoffer that would cause that investor and its related parties to own 5% or more of our common stock, or in our sole discretion for any reason.

What is the role of Donnelly Penman & Partners in the rights offering and public reoffer?

We have engaged Donnelly Penman & Partners to act as our exclusive sales agent in connection with the offering on a “best efforts” basis. Donnelly Penman & Partners will not have any obligation or commitment to sell any dollar amount or number of shares or to acquire any shares for its own account or with a view to their distribution in the public reoffer. Donnelly Penman & Partners is a registered broker-dealer with the Financial Industry Regulatory Authority (“FINRA”). We will pay to Donnelly Penman & Partners for services as sales agent in connection with the offering a fee equal to 3% of the total gross proceeds we receive for subscriptions accepted by us from existing shareholders in the rights offering and 6% of the total gross proceeds we receive for subscriptions accepted by us from the standby purchasers and other investors in the public reoffer. In certain cases where Donnelly Penman & Partners and we agree to engage additional broker dealers to assist in the sale of common shares pursuant to this offering, we will pay a fee of 7% on such proceeds received, which shall be allocated as agreed between Donnelly Penman & Partners and such additional broker dealers. We will not owe any fee to Donnelly Penman & Partners for subscriptions received directly from our employees, executive officers and directors and their related persons and entities unless we specifically request that Donnelly Penman & Partners solicit such a person, for which they would be compensated at 3%.

We have also agreed to reimburse Donnelly Penman & Partners for reasonable out-of-pocket expenses in an amount not to exceed $15,000, and to pay the expenses of its counsel in connection with the offering, which are estimated to be $70,000. We have also agreed to indemnify Donnelly Penman & Partners and certain affiliated persons of Donnelly Penman & Partners against certain claims, liabilities and expenses arising in connection with the offering, or contribute to payments they may be required to make in respect thereof.

Who should I contact if I have other questions?

If you have any questions regarding completing the subscription materials or submitting payment in the rights offering, please contact our subscription agent for the rights offering, American Stock Transfer & Trust Company, LLC at (800) 934-5449 or http://www.amstock.com/main/nav_contactUs.asp. If you have any general questions regarding us, the Bank or the rights offering, please contact John C. Donnelly, Managing Director of Donnelly Penman & Partners, at (313) 393-3054; jdonnelly@donnellypenman.com, or Andrew C. Christians, Vice President, at (313) 393-3074; achristians@donnellypenman.com.

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SUMMARY

This summary highlights selected information contained elsewhere in this prospectus and may not contain all the information that you need to consider in making your investment decision. You should carefully read this entire prospectus before deciding whether to invest in the common stock. You should pay special attention to the “Risk Factors” section of this prospectus to determine whether an investment in the common stock is appropriate for you.

About MBT Financial Corp.

MBT Financial Corp. operates as a bank holding company headquartered in Monroe, Michigan. It was incorporated under the laws of the State of Michigan in January 2000, at the direction of the management of Monroe Bank & Trust (the “Bank”), for the purpose of becoming a bank holding company by acquiring all the outstanding shares of Monroe Bank & Trust. On July 1, 2000, the Bank became a wholly-owned subsidiary of MBT Financial Corp.

The Bank was incorporated and chartered as Monroe State Savings Bank under the laws of the State of Michigan in 1905. In 1940, the Bank consolidated with Dansard Bank and moved to the present address of its main office. The Bank operated as a unit bank until 1950, when it opened its first branch office in Ida, Michigan. It continued its expansion to its present total of 25 branch offices, including its main office. The Bank changed its name from “Monroe State Savings Bank” to “Monroe Bank & Trust” in 1968.

The Bank provides customary retail and commercial banking and trust services to its customers, including checking and savings accounts, time deposits, safe deposit facilities, commercial loans, personal loans, real estate mortgage loans, installment loans, IRAs, ATM and night depository facilities, treasury management services, telephone and internet banking, personal trust, employee benefit and investment management services. The Bank’s primary service areas are comprised of Monroe and Wayne counties in Southern Michigan.

The Bank’s deposits are insured by the FDIC to applicable legal limits and the Bank is supervised and regulated by the FDIC and the Michigan DIFS Bank & Trust Division.

As of June 30, 2013, we had total consolidated assets of approximately $1.163 billion, total deposits of approximately $1.041 billion, total consolidated liabilities, including deposits, of approximately $1.084 billion, and consolidated shareholders’ equity of approximately $79.1 million.

Unless otherwise stated or where the context suggests otherwise, references in this prospectus to “the Company,” “we,” “us” or “our” include not only the business of MBT Financial Corp. but also the business of the Bank and other consolidated entities. References to the “Bank” refer solely to Monroe Bank & Trust, and references to “MBT Financial Corp.” refer solely to MBT Financial Corp.

Background to the Offering

We are conducting this offering in order to raise capital for the Bank. The Bank is operating under a Consent Order with its bank regulatory agencies and is currently in substantial compliance with all of the provisions of the consent order except the requirement to attain and maintain specified capital ratios. In the event this offering is successful at the maximum offering amount of $17,500,000 and we inject at least $16,000,000 of the net proceeds we receive after all expenses and sales commissions into the Bank as additional Tier 1 capital, the Bank would have had a Tier 1 leverage ratio of 8.17% and a total risk-based capital ratio of 14.16% on a pro-forma basis as of June 30, 2013. While not in compliance with the 9% Tier 1 capital required by the Consent Order, we believe that together with our expected earnings during the balance of 2013 and during 2014, the Bank is likely to achieve compliance with the capital requirements of the Consent Order during 2014. The board of directors of the Company believes conducting this offering at this time represents a reasonable balance of the interests of the current shareholders of the Company, the availability and cost of additional capital and the need to bring the Bank into compliance with the Consent Order as soon as practicable.

Our Bank began to experience rising levels of nonperforming loans and higher provisions for loan losses in 2006 as the Michigan economy experienced economic stress ahead of national trends. The Bank incurred

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significant losses starting in the third quarter of 2008 and lasting through 2011. Although the Bank has now had eight consecutive quarters of profitability, the losses it incurred adversely affected its capital ratios.

We suspended cash dividends on our common stock on August 27, 2009. The Bank’s current capital plan and the Consent Order require that the Bank achieve and maintain a minimum Tier 1 leverage ratio of 9% and a minimum total risk-based capital ratio of 12%. At June 30, 2013, the Bank’s Tier 1 leverage ratio was 6.86% and its total risk-based capital ratio was 12.09%.

Our Core Business Strategy

We believe that given the current operating environment and the capital from this offering, we will be in a position to further our core business strategy as follows:

Competition and Growth

We have a dominant deposit market share in our primary market in Monroe County, Michigan of 50.3%, of total deposits and are the ninth (9^th) largest independent financial institution headquartered in the State of Michigan as of June 30, 2013. We believe the capital provided by this offering will position us to capture customers from other banks in our primary service area and eventually to position us to grow our business through organic growth, and potentially, future acquisitions.

Michigan Economic Update

While the Michigan economy has generally been under stress for the past several years, we believe it has stabilized. Below is a summary of certain economic trends in our markets:

Unemployment:  While Michigan has had a higher unemployment rate than the United States as a whole, both the unemployment rate and nonfarm payrolls have generally showed positive trends since mid-2009. On a seasonally-adjusted basis, the July 2013 unemployment rate of 8.8% for Michigan compares to 7.3% for the entire United States. Michigan's unemployment rate peaked at 14.2% in August 2009. Since reaching a bottom in 2009, Michigan’s total employment has added about 200,000 jobs. The Monroe Metropolitan Statistical Area (“MSA”) had an unemployment rate of 8.1% in July 2013, 0.7% below the Michigan unemployment rate, however still above the national rate.

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Housing Market:  The Michigan housing market has stabilized. The June 2013 Michigan Freddie Mac House Price Index was up 12.0% year-over-year as compared to the 9.3% increase of the National index. The June 2013 Monroe MSA Freddie Mac Home Price Index was up 6.2% year-over-year. Existing home sales rose for the second-straight year in 2012 and are following the same trend this year.

Other Economic Indicators:  The Michigan Economic Activity Index consists of seven variables, as follows: nonfarm payrolls, exports, sales tax revenues, hotel occupancy rates, continuing claims for unemployment insurance, building permits, and motor vehicle production. All data are seasonally adjusted, as necessary, and indexed to a base year of 2008. The June 2013 index reached a level of 127.4 (2008 = 100), which is up approximately 55 points, or 77%, from the index cyclical low of 72.1 in 2009. The higher index reflects improved labor market conditions, strong vehicle production, and better housing market conditions in the state.

Our asset quality trends are consistent with these generally positive economic trends for the State of Michigan. Our levels of new loan defaults have been declining and nonperforming loans, nonperforming assets, and loan net charge-offs have decreased significantly since 2009. The improved asset quality metrics have led to lower credit-related costs and our return to profitability starting with the third quarter of 2011.

Our Management Team

Our management team includes executives with extensive experience in the banking industry, both at larger financial institutions and in the Michigan market. Doug Chaffin, our President and Chief Executive Officer, has 33 years of banking-related experience and has been with us for 12 years. The other four members of our executive management each have over 25 years of banking experience, a majority of which have been in our Southeast Michigan market. Key roles within our management team are held by executives with extensive bank backgrounds:

Name		Title		Years in Banking		Years at the Bank		Years in Present Position
H. Douglas Chaffin		President & CEO		33		12		9
Donald M. Lieto		EVP – Senior Administration Manager		36		30		10
Scott E. McKelvey		EVP – Senior Wealth Management		31		11		7
Thomas G. Myers		EVP – Chief Lending Officer		30		11		10
John L. Skibski		EVP – Chief Financial Officer		25		19		9

Our Proactive Management of Troubled Loans

We proactively manage troubled loans and have focused on early loss recognition throughout the current credit cycle. In response to challenges in this credit cycle, we have implemented a comprehensive foundation of credit best practices. Highlights include:

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As a community bank, we share the philosophy that we will “work with our clients as long as they are working with us.” We believe this approach to our clients' lending needs has produced, and should continue to produce, better results than if we used the less personalized approaches of some of our larger competitors. As an example, one indicator of the success of our approach is that, as of June 30, 2013, approximately 62.6% of our restructured loans remained performing for six months or more after modification and approximately 46.9% remained performing for one year or more after modification. As our troubled loan portfolio decreases, we expect to be in a position to allocate more resources to organic growth.

Loan Quality Update and Trends

Our asset quality metrics and credit trends have shown significant improvement since 2009. As of June 30, 2013, our nonperforming loans (NPLs) have decreased $21.9 million, or 25.4%, since the end of 2009. A breakdown of NPLs by loan type is as follows:

($ in thousands)		6/30/2013				12/31/2012				12/31/2009
Agriculture and Agricultural Real Estate		$	507			$	607			$	546
Commercial			4,539				3,464				6,026
Commercial Real Estate			33,958				36,907				37,324
Construction Real Estate			6,901				7,636				14,950
Residential Real Estate			17,833				20,579				27,102
Consumer and Other			517				611				166
Total		$	64,255			$	69,804			$	86,114
Ratio of nonperforming loans to total portfolio loans			10.44	%			11.13	%			10.14	%
Ratio of nonperforming loans to total assets			5.53	%			5.50	%			6.22	%
Ratio of the allowance for loan losses to nonperforming loans			26.76	%			24.78	%			27.94	%
Ratio of 30 – 89 days past due loans to total portfolio loans			1.51	%			1.98	%			3.82	%

The decrease in NPLs since year-end 2009 reflects declines in all loan categories, including paydowns, net loan charge-offs, negotiated transactions, and the migration of loans into other real estate owned (OREO).

Loans classified as “troubled debt restructurings” (TDRs) are loans for which we have modified the terms. A TDR loan that continues to perform after being modified is not included in our NPLs, except with respect to certain consumer loans, as noted in footnote 2 to the table below. However, NPLs do include TDRs that are no longer performing, including TDRs that are on nonaccrual or are 90 days or more past due. A breakdown of our TDRs as of June 30, 2013, is as follows (in 000's):

		Commercial				Consumer				Total
Performing TDRs		$	30,501			$	5,362			$	35,863
Nonperforming TDRs(1)			15,177				3,280	(2)			18,457
Total		$	45,678			$	8,642			$	54,320

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As illustrated above, the majority of our TDRs have demonstrated an ability to pay and correspondingly have been categorized as accruing assets. Once modification has been deemed appropriate for a respective account, our approach to TDRs, both consumer and commercial, is to modify the loan in a manner that is intended to enhance the borrower’s ability to pay. This may include a reduction in interest rate, lengthening of the amortization period, deferral of payments, and/or a reduction in the principal balance subject to accrual.

Nonperforming assets (NPAs) have declined by 27.8% since the end of 2009.

Our 30 – 89 day past due loans are down 71.4% since the end of 2009, exhibiting significant improvement.

Our provision for loan losses decreased by $1.4 million, or 42.4%, in the first six months of 2013 compared to the year-ago level, primarily reflecting a reduction in nonperforming loans, reduced loan net charge-offs, a lower level of commercial loan watch credits, a reduced level of new loan defaults, and an overall decline in total loan balances. The provision for loan losses was $1.9 million and $3.3 million in the first six months of 2013 and 2012, respectively. The level of the provision for loan losses in each period reflects our overall assessment of the allowance for loan losses, taking into consideration factors such as loan mix, levels of nonperforming and classified loans, and loan net charge-offs. Loan net charge-offs were $2.0 million (0.65% annualized of average loans) in the first six months of 2013, compared to $4.7 million (1.40% annualized of average loans) in the first six months of 2012. The decline in 2013 loan net charge-offs compared to year ago levels is primarily due to declines in both commercial and mortgage loan net charge-offs that reflect increased recoveries on previous charge-offs as well as a reduced level of loan defaults. At June 30, 2013, the allowance for loan losses totaled $17.2 million, or 2.79% of portfolio loans, compared to $17.3 million, or 2.75% of portfolio loans, at December 31, 2012.

Agreement with Regulators

On July 12, 2010, the Bank entered into a stipulation and consent to the issuance of a consent order (the “Consent Order”) with the FDIC and the Michigan DIFS Bank & Trust Division. The Consent Order became effective July 22, 2010 and requires the following:

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A failure to achieve and maintain the capital ratio targets referred to in the Consent Order may result in further adverse regulatory actions, including the imposition of additional restrictions under the FDIC’s Prompt Corrective Action regulations. See “Risk Factors.” The Bank has complied with all requirements contained within the Consent Order, with the exception of capital ratio targets. Our Tier 1 leverage and total risk-based ratios have increased in each of the last ten (10) quarters due to positive earnings, two modest private placements, and balance sheet management.

Corporate Information

Our principal executive offices are located at 102 E. Front St., Monroe, Michigan 48161, and our telephone number at that address is (734) 241-3431. We maintain an Internet website at www.mbandt.com. Neither this website nor the information on this website is included in, incorporated in, or part of this prospectus.

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THE RIGHTS OFFERING AND THE PUBLIC REOFFER

The following summary of the offering contains basic information about the offering and the common stock and is not intended to be complete. It does not contain all the information that may be important to you. For a more complete understanding of the common stock, please refer to the section of this prospectus entitled “Description of Capital Stock.”

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table provides summary historical consolidated financial data for the periods and as of the dates indicated. You should read this information in conjunction with our historical consolidated financial statements, including the related notes, and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The information as of and for the years ended December 31, 2008 through 2012 is derived from our audited consolidated financial statements. Our audited consolidated financial statements as of December 31, 2012 and 2011 and for each of the years in the three-year period ended December 31, 2012, are contained elsewhere in this prospectus. Our audited consolidated financial statements as of December 31, 2010, 2009 and 2008 are not included in this prospectus, but are on file with the Securities and Exchange Commission (“SEC”). All share and per share data have been adjusted for stock splits and stock dividends.

The information as of and for the six months ended June 30, 2013 and 2012 is unaudited but, in the opinion of our management, contains all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of our financial condition and results of operations for those periods. The summary historical consolidated financial data as of June 30, 2013 and 2012 (balance sheet) are derived from unaudited interim consolidated financial statements. The results of operations for the six-month period ended June 30, 2013 are not necessarily indicative of the results to be expected for the remainder of the year or any other period.

Dollar amounts are in thousands, except per share data		June 30, 2013				June 30, 2012				2012				2011				2010				2009				2008
Consolidated Statement of Income Data
Interest Income		$	19,802			$	23,030			$	44,535			$	49,560			$	56,586			$	71,004			$	84,903
Interest Expense			3,669				5,318				9,886				14,433				19,758				29,989				42,514
Net Interest Income			16,133				17,712				34,649				35,127				36,828				41,015				42,389
Provision for Loan Losses			1,900				3,300				7,350				13,800				20,500				36,000				18,000
Net Interest Income after
Provision for Loan Losses			14,233				14,412				27,299				21,327				16,328				5,015				24,389
Other Income			7,977				8,241				16,437				18,230				19,436				10,480				15,985
Other Expenses			19,600				19,634				38,694				42,819				44,480				49,774				39,999
Income before Provision for Income Taxes			2,610				3,019				5,042				(3,262	)			(8,716	)			(34,279	)			375
Provision for (benefit from) Income Taxes			—				1,549				(3,503	)			500				3,183				(102	)			(1,317	)
Net Income (Loss)		$	2,610			$	1,470			$	8,545			$	(3,762	)		$	(11,899	)		$	(34,177	)		$	1,692
Net Income (Loss) available to Common Shareholders		$	2,610			$	1,470			$	8,545			$	(3,762	)		$	(11,899	)		$	(34,177	)		$	1,692
Per Common Share
Basic Net Income (Loss)		$	0.15			$	0.08			$	0.49			$	(0.22	)		$	(0.72	)		$	(2.11	)		$	0.10
Diluted Net Income (Loss)			0.15				0.08				0.49				(0.22	)			(0.72	)			(2.11	)			0.10
Cash Dividends Declared			—				—				—				—				—				0.02				0.54
Book Value			4.42				4.43				4.80				4.38				4.29				5.04				7.49
Tangible Book Value			4.42				4.43				4.80				4.37				4.28				5.03				7.47
Average Common Shares Outstanding			17,712,310				17,310,239				17,332,012				17,270,528				16,498,734				16,186,478				16,134,570
Consolidated Balance Sheet Data
Total Assets		$	1,162,672			$	1,235,271			$	1,268,595			$	1,238,027			$	1,259,377			$	1,383,369			$	1,562,401
Total Securities			424,402				402,499				443,158				400,868				325,000				356,865				466,043
Total Loans			615,371				667,228				627,249				679,475				752,887				848,979				940,948
Allowance for Loan Losses			17,195				19,486				17,299				20,865				21,223				24,063				18,528
Deposits			1,040,860				1,017,502				1,048,830				1,022,310				1,031,893				1,031,791				1,136,078
Borrowings			27,000				127,000				122,000				127,000				143,500				258,500				291,500
Total Shareholders' Equity			79,075				76,784				83,574				75,711				73,998				81,764				120,977

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Dollar amounts are in thousands, except per share data		June 30, 2013				June 30, 2012				2012				2011				2010				2009				2008
Performance Ratios
Return on Average Assets			0.42	%			0.24	%			0.69	%			-0.30	%			-0.92	%			-2.36	%			0.11	%
Return on Average Equity			6.14	%			3.86	%			11.03	%			-5.11	%			-14.06	%			-29.53	%			1.36	%
Noninterest Expense to Average Assets			3.16	%			3.19	%			3.12	%			3.43	%			3.41	%			3.40	%			2.58	%
Noninterest Income to Average Assets			1.29	%			1.34	%			1.32	%			1.46	%			1.49	%			0.72	%			1.03	%
Net Interest Margin			2.82	%			3.18	%			3.02	%			3.07	%			3.10	%			3.06	%			2.96	%
Asset Quality Ratios
Allowance for Loan Losses to Period End Loans			2.79	%			2.91	%			2.75	%			3.07	%			2.82	%			2.83	%			1.97	%
Allowance for Loan Losses to Non Performing Loans			26.76	%			29.40	%			24.78	%			27.63	%			25.98	%			27.94	%			34.45	%
Allowance for Loan Losses to Non Performing Assets			22.21	%			24.03	%			20.13	%			21.97	%			20.65	%			23.00	%			26.02	%
Non Performing Loans (excluding TDRs) to Period End Loans			5.21	%			6.02	%			5.00	%			7.52	%			8.98	%			6.71	%			5.09	%
Non Performing Loans (including TDRs) to Period End Loans			10.20	%			9.82	%			10.94	%			11.08	%			10.68	%			9.91	%			5.53	%
Non Performing Assets (excluding TDRs) to Period End Total Assets			4.01	%			4.51	%			3.84	%			5.71	%			7.11	%			5.79	%			4.17	%
Non Performing Assets (including TDRs) to Period End Total Assets			6.78	%			6.63	%			6.87	%			7.71	%			8.23	%			7.89	%			4.54	%
Texas Ratio (excluding TDRs)			45.19	%			54.98	%			45.22	%			70.18	%			91.51	%			71.32	%			46.81	%
Texas Ratio (including TDRs)			78.63	%			82.14	%			83.35	%			95.84	%			106.33	%			98.88	%			50.99	%
Net Charge Offs to Average Loans			0.65	%			1.40	%			1.65	%			1.97	%			2.89	%			3.36	%			2.00	%
Capital Ratios
Tangible Common Equity to Total Assets			6.80	%			6.21	%			6.59	%			6.11	%			5.87	%			5.89	%			7.72	%
Tier 1 Leverage Capital Ratio (Bank)			6.86	%			6.14	%			6.38	%			6.03	%			6.17	%			6.21	%			7.73	%
Tier 1 Risk Based Capital Ratio (Bank)			10.82	%			9.58	%			10.19	%			9.15	%			8.88	%			8.87	%			11.36	%
Total Risk Based Capital Ratio (Bank)			12.09	%			10.86	%			11.46	%			10.42	%			10.15	%			10.14	%			12.62	%

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RISK FACTORS

Investing in our common stock involves risks. The material risks and uncertainties that management believes affect us are described below. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included in this prospectus. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that management is not aware of, or focused on, or that management currently deems immaterial, may also impact us and our securities. If any of the following risks actually occurs, our results of operations and financial condition could be materially and adversely affected. If this were to happen, the value of our common stock could decline, and you could lose all or part of your investment.

Risks Related to Our Business

We are in violation of the capital provisions of our regulatory Consent Order and must raise capital.

For the three-year period ending December 31, 2011, we lost $49.8 million, substantially impairing our capital and lowering our Tier 1 leverage ratio from 7.73% on January 1, 2009 to 5.82% at June 30, 2011. Our return to profitability began during the third quarter of 2011, when we reported a profit of $632,000 for the three-month period ending September 30, 2011. Beginning with the third quarter of 2011, through June 30, 2013, we have reported eight consecutive quarters of profits totaling in the aggregate $12.2 million. Notwithstanding our return to profitability, we continue to report elevated levels of problem assets and our capital levels remain below that required by our bank regulatory agencies. The Bank is party to a consent order that was issued by the FDIC and the Michigan DIFS Bank & Trust Division in July, 2010 (the “Consent Order”). In connection with the Consent Order, the Bank is required to achieve a Tier 1 leverage ratio of 9% and a total risk-based capital ratio of 12%. At June 30, 2013, the Bank’s Tier 1 leverage ratio was 6.86% and its total risk-based capital ratio was 12.09%. In order to achieve the required Tier 1 leverage ratio of 9%, the Bank would have needed approximately $26.145 million in additional Tier 1 equity capital as of June 30, 2013. While we remain subject to the Consent Order we are subject to certain restrictions on our business and are subject to higher levels of FDIC insurance premiums on our deposits. A failure to achieve and maintain the capital ratio targets referred to in the Consent Order may result in further adverse regulatory actions, including the imposition of additional restrictions under the FDIC’s Prompt Corrective Action regulations. The Bank has complied with all requirements contained within the Consent Order, with the exception of capital ratio targets. Our Tier 1 leverage and total risk-based ratios have increased in each of the last ten (10) quarters due to positive earnings, two modest private placements, and balance sheet management. In the event this offering is successful at the maximum offering amount of $17,500,000 and we inject at least $16,000,000 of the net proceeds we receive after all expenses and sales commissions into the Bank as additional Tier 1 capital, the Bank would have had a Tier 1 leverage ratio of 8.17% and a total risk-based capital ratio of 14.16% on a pro-forma basis as of June 30, 2013. While not in compliance with the 9% Tier 1 capital required by the Consent Order, we believe that together with our expected earnings during the balance of 2013 and during 2014, the Bank is likely to achieve compliance with the capital requirements of the Consent Order during 2014. The board of directors of the Company believes conducting the offering at this time represents a reasonable balance of the interests of the current shareholders of the Company, the availability and cost of additional capital and the need to bring the Bank into compliance with the Consent Order as soon as practicable.

Our business may be adversely affected by conditions in the financial markets and economic conditions generally.

Our success depends significantly on the general economic conditions of the State of Michigan. Unlike larger regional or national banks that are more geographically diversified, the Bank provides banking and financial services to customers primarily in Southeast Michigan and Northwest Ohio.

Southeast Michigan and the United States as a whole have gone through a prolonged downward economic cycle that began in 2007 and continues today. Significant weakness in market conditions adversely impacted all aspects of the economy including our business. In particular, dramatic declines in the housing market, with decreasing home prices and increasing delinquencies and foreclosures, negatively impacted the credit performance of construction loans, which resulted in significant write-downs of assets by many financial institutions. Business activity across a wide range of industries and regions was greatly reduced, and local

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governments and many businesses experienced serious difficulty due to the lack of consumer spending and the lack of liquidity in the credit markets. In addition, unemployment has been high throughout this period. The business environment was adverse for many households and businesses in the Southeast Michigan market, United States, and worldwide.

Overall, during the past five years, the general business environment has had an adverse effect on our business, and while there has been recent improvement in general economic conditions in our market with evidence of stabilizing home prices and a reduction in unemployment levels, there can be no assurance that the environment will continue to improve in the near term. Unemployment levels remain elevated, housing prices remain depressed, and demand for housing remains weak due to distressed sales and tightened lending standards. Consequently, particularly in Michigan, which has been one of the most adversely impacted states in the United States by the recent recession, there can be no assurance that the economic conditions will continue to improve in the near term. Furthermore, a worsening of economic conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the financial institutions industry. Continued market stress could have a material adverse effect on the credit quality of the Bank’s loans and, therefore, our financial condition and results of operations.

The Bank is operating under a Consent Order with its governmental regulators and may be subject to further regulatory enforcement actions.

On July 12, 2010, the Bank agreed to the issuance of a consent order (the “Consent Order”) with the FDIC and the Michigan DIFS Bank & Trust Division requiring the following:

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As of June 30, 2013, the Bank’s Tier 1 leverage capital and total risk-based capital ratios were 6.86% and 12.09%, respectively, and therefore the Bank had not yet achieved the Tier 1 leverage Capital ratio target set in the Consent Order. As a result, the FDIC and the Michigan DIFS Bank & Trust Division may take additional regulatory action against the Bank. In the event this offering is successful at the maximum offering amount of $17,500,000 and we inject at least $16,000,000 of the net proceeds we receive after all expenses and sales commissions into the Bank as additional Tier 1 capital, the Bank would have had a Tier 1 leverage ratio of 8.17% and a total risk-based capital ratio of 14.16% on a pro-forma basis as of June 30, 2013.

A failure to achieve and maintain the capital ratio targets referred to in the Consent Order may result in further adverse regulatory actions, including the imposition of additional restrictions under the FDIC’s Prompt Corrective Action regulations. The Bank has complied with all requirements contained within the Consent Order, with the exception of capital ratio targets. Our Tier 1 leverage and total risk-based ratios have increased in each of the last ten (10) quarters due to positive earnings, two modest private placements, and balance sheet management.

Our business is subject to credit risk and the impact of nonperforming loans.

We face the risk that loan losses, including unanticipated loan losses due to changes in loan portfolios, fraud and economic factors, could require additional increases in the allowance for loan losses. Additions to the allowance for loan losses would cause our net income to decline and could have a material adverse impact on our financial condition and results of operations.

Making loans is an essential element of our business, and there is a risk that customer loans will not be repaid. The risk of nonpayment is affected by a number of factors, including:

The Bank’s allowance for loan losses may not be adequate.

We attempt to maintain an appropriate allowance for loan losses to provide for potential losses in our loan portfolio. We periodically determine the amount of the allowance based on consideration of several factors including, among others, the ongoing review and grading of the loan portfolio, consideration of our past loan loss experience as well as that of the banking industry, trends in past due and nonperforming loans, risk characteristics of the various classifications of loans, existing economic conditions, the fair value of underlying collateral, the size and diversity of individual credits, and other qualitative and quantitative factors which could affect probable credit losses. We determine the amount of the allowance for loan losses by considering these factors and by using estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on our historical loss experience with additional qualitative factors for various issues, and allocation of specific reserves for special situations that are unique to the measurement period with consideration of current economic trends and conditions, all of which are susceptible to significant change. As an integral part of their examination process,

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various federal and state regulatory agencies also review the allowance for loan losses. These agencies may require that certain loan balances be classified differently or charged off when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination. Although we believe the level of the allowance for loan losses is appropriate as recorded in the consolidated financial statements, because current economic conditions are uncertain and future events are inherently difficult to predict, the anticipated amount of estimated loan losses, and therefore the adequacy of the allowance, could change significantly. At June 30, 2013, the Bank’s allowance for loan losses was $17.195 million, or 2.79% of total loans and 26.76% of nonperforming loans, a decrease of $104,000 compared from its allowance for loan losses of $17.299 million, or 2.76% of total loans and 24.78% of nonperforming loans as of December 31, 2012.

Our loan portfolio is collateralized predominantly by real estate.

A substantial portion of the Bank’s loan portfolio is sensitive to real estate values. The declines in the market value of real estate that occurred during the most recent national and regional decline during the 2008 – 2010 timeframe resulted in significant increases in delinquencies and losses on certain segments of our portfolio. While the real estate market has stabilized and is no longer experiencing the rapid decreases in value and increases in inventory of foreclosed properties that occurred during 2008 – 2010 timeframe, there remain substantial risks associated with real estate collateral values, particularly in the Bank’s primary market in Southeast Michigan. As of June 30, 2013, more than 80% of the Bank’s loan portfolio was secured by real estate.

We are subject to interest rate risk.

Our earnings and cash flows are largely dependent upon the Bank’s net interest income. Net interest income is the difference between interest earned on interest earning assets such as loans and securities and interest paid on interest bearing liabilities such as deposits and borrowings. Interest rates are highly sensitive to many factors that are beyond our control, including general economic and market conditions and policies of various governmental and regulatory agencies and, in particular, the Board of Governors of the Federal Reserve System. Changes in monetary policy, including changes in interest rates, could influence not only the interest the Bank receives on loans and investment securities and the amount of interest it pays on deposits and borrowings, but such changes could also affect the Bank’s ability to originate loans and obtain deposits and the fair values of the Bank’s financial assets and liabilities. If the interest rates paid on deposits and other borrowings increase at a faster rate or decrease at a slower rate than the interest rates received on loans and investments, the Bank’s net interest income, and therefore its and our earnings, could be adversely affected.

Although management believes it has implemented effective asset and liability management strategies to reduce the potential effects of changes in interest rates on the Bank’s results of operations, any substantial, unexpected, or prolonged change in market interest rates or in the term structure of interest rates could have a material adverse effect on the Bank’s, and our, financial condition and results of operations. See “Quantitative and Qualitative Disclosures about Market Risk” in this document for further discussion related to the Bank’s management of interest rate risk.

Real estate market volatility and future changes in disposition strategies could result in net proceeds that differ significantly from other real estate owned (“OREO”) fair value appraisals.

The Bank’s OREO portfolio consists of properties that it obtained through foreclosure or other collection actions in satisfaction of loans. OREO properties are recorded at the lower of the recorded investment in the loans for which the properties served as collateral or estimated fair value, less estimated selling costs. Generally, in determining fair value, an orderly disposition of the property is assumed, except where a different disposition strategy is expected. Significant judgment is required in estimating the fair value of OREO property, and the period of time within which such estimates can be considered current is significantly shortened during periods of market volatility. While the real estate market has stabilized and is no longer experiencing the rapid decreases in value and increases in inventory of foreclosed properties that occurred during 2008 through 2010, there remain substantial risks associated with real estate collateral values, particularly in Southeast Michigan.

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In response to market conditions and other economic factors, the Bank may utilize alternative sale strategies other than orderly dispositions as part of its OREO disposition strategy, such as immediate liquidation sales. In this event, as a result of the significant judgments required in estimating fair value and the variables involved in different methods of disposition, the net proceeds realized from such sales transactions could differ significantly from estimates used to determine the fair value of the Bank’s OREO properties. As of June 30, 2013 the Bank’s OREO portfolio was valued at $11.438 million.

The Bank operates in a highly competitive industry.

The Bank faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include regional and national banks within the Bank’s market. The Bank also faces competition from many other types of financial institutions, including savings and loan institutions, credit unions, finance companies, brokerage firms, insurance companies, and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory, and technological changes and continued consolidation. Banks, securities firms, and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, and insurance. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of the Bank’s competitors have fewer regulatory constraints, and may have lower cost structures. Additionally, many competitors may be able to achieve economies of scale, and as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Bank can. Increased competition could adversely affect the Bank’s growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.

We and the Bank are subject to extensive government regulation and supervision.

Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds, and the banking system as a whole, not shareholders. These regulations affect the Bank’s lending practices, capital structure, investment practices, dividend policy, and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations, and policies for possible changes. Changes to statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services and products we and the Bank may offer and/or increase the ability of non-banks to offer competing financial products and services, among other things. Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties, and/or reputational damage, which could have a material adverse effect on our business, financial condition, and results of operations. While we have policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.

Current economic conditions, particularly in the financial markets, have resulted in government regulatory agencies placing increased focus on and scrutiny of the financial services industry. The U.S. government has intervened on an unprecedented scale, responding to what has been commonly referred to as the financial crisis, by introducing various actions and passing legislation such as the Dodd-Frank Wall Street Reform and Consumer Protection Act. Such programs and legislation subject us and other financial institutions to restrictions, oversight and/or costs that may have an impact on our business, financial condition, results of operations, or the price of our common stock.

New proposals for legislation and regulations continue to be introduced that could further substantially increase regulation of the financial services industry. We cannot predict whether any pending or future legislation will be adopted or the substance and impact of any such new legislation. Additional regulation could affect us in a substantial way and could have an adverse effect on the Bank’s and our business, financial condition, and results of operations.

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The Bank cannot accept or renew brokered certificates of deposit without a waiver from the FDIC, which could affect the Bank’s liquidity.

While the Bank is subject to its Consent Order with the FDIC and the Michigan DIFS Bank & Trust Division, it cannot be categorized as “well capitalized” regardless of its actual capital ratios. As of June 30, 2013, the Bank is categorized as “adequately capitalized” and cannot renew or accept new brokered deposits without being granted a waiver from the FDIC. It is not likely that the Bank will be granted a waiver. As of June 30, 2013, the Bank had $13.8 million in brokered certificates of deposit, including $5.2 million that mature in less than one year.

The new Basel III Capital Standards may have an adverse effect on us.

In July 2013, the Federal Reserve Board released its final rules which will implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the final rule, minimum requirements will increase for both the quality and quantity of capital held by banking organizations. Consistent with the international Basel framework, the rule includes a new minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5 percent and a common equity tier 1 capital conservation buffer of 2.5 percent of risk-weighted assets that will apply to all supervised financial institutions. The rule also, among other things, raises the minimum ratio of tier 1 capital to risk-weighted assets from 4 percent to 6 percent and includes a minimum leverage ratio of 4 percent for all banking organizations. Banking organizations with consolidated assets equal to or in excess of $250 billion must begin transitioning into the new rules effective January 1, 2014. All other covered banking organizations must begin transitioning effective January 1, 2015. The impact of the new capital rules is likely to require us to maintain higher levels of capital.

If the concentration level of the Bank’s commercial real estate loan portfolio increases, we may be subject to additional regulatory scrutiny.

The FDIC, the Federal Reserve Board, and the Office of the Comptroller of the Currency have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under the guidance, a financial institution that is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors, (i) total reported loans for construction, land development, and other land represent 100% or more of total capital or (ii) total reported loans secured by multifamily and nonfarm non-residential properties, loans for construction, land development, and other land loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital and increased by 50% or more during the prior 36 months. The joint guidance requires heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment, and monitoring through market analysis and stress testing. As of June 30, 2013, the Bank did not meet the level of concentration in commercial real estate lending activity that would indicate a need under the regulatory guidance for increased risk assessment.

The Bank is dependent upon outside third parties for processing and handling of its records and data.

The Bank relies on software developed by third party vendors to process various Bank transactions. In some cases, the Bank has contracted with third parties to run its proprietary software on behalf of the Bank. These systems include, but are not limited to, general ledger, payroll, employee benefits, trust record keeping, loan and deposit processing, merchant processing, and securities portfolio management. While the Bank performs a review of controls instituted by the vendors over these programs in accordance with industry standards and performs its own testing of user controls, the Bank must rely on the continued maintenance of these controls by the outside parties, including safeguards over the security of customer data. In addition, the Bank maintains backups of key processing output daily in the event of a failure on the part of any of these systems. Nonetheless, the Bank may incur a temporary disruption in its ability to conduct its business or process its transactions, or incur damage to its reputation if the third party vendor fails to adequately maintain internal controls or institute necessary changes to systems. Such disruption or breach of security may have a material adverse effect on our financial condition and results of operations.

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The Bank continually encounters technological change.

The banking and financial services industry continually undergoes technological changes, with frequent introductions of new technology-driven products and services. In addition to serving customers better, the effective use of technology increases efficiency and enables financial institutions to reduce costs. The Bank’s future success will depend, in part, on its ability to address the needs of its customers by using technology to provide products and services that enhance customer convenience and that create additional efficiencies in the Bank’s operations. Many of the Bank’s competitors have greater resources to invest in technological improvements, and the Bank may not effectively implement new technology-driven products and services or do so as quickly, which could reduce its ability to effectively compete. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on the Bank’s business and, in turn, our financial condition and results of operations.

The Bank is subject to claims and litigation pertaining to fiduciary responsibility and other legal risks.

From time to time, customers and others make claims and take legal action pertaining to the Bank’s performance of fiduciary responsibilities. If such claims and legal actions are not resolved in our favor, they may result in significant financial liability and/or adversely affect the market perception of the Bank and its products and services as well as customer demand for those products and services. Any financial liability or reputational damage could have a material adverse effect on the Bank’s business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Consumers and businesses may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to complete financial transactions that historically have involved banks at one or both ends of the transaction. For example, consumers can now pay bills and transfer funds directly without banks. This could result in the loss of fee income as well as the loss of customer deposits and income generated from those deposits and could have a material adverse effect on our financial condition and results of operations.

Our controls and procedures may fail or be circumvented.

Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the Bank’s business, and in turn, our results of operations and financial condition.

Financial services companies depend upon the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions, the Bank may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information. The Bank may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other financial information could have a material adverse effect on the Bank’s business and, in turn, our financial condition and results of operations.

We are subject to risks arising from increases in FDIC insurance premiums.

The FDIC maintains a deposit insurance fund to resolve the cost of bank failures. The FDIC’s deposit insurance fund is funded by fees assessed on insured depository institutions including us. The magnitude and cost of resolving an increased number of bank failures have reduced the deposit insurance fund. Future deposit premiums paid by us depend on the level of the deposit insurance fund and the magnitude and cost of future bank failures. We also may be required to pay significantly higher FDIC premiums because market developments have significantly depleted the deposit insurance fund of the FDIC and reduced the ratio of reserves to insured deposits. Presently we pay higher FDIC insurance premiums due to our status as a “problem bank,” operating under the terms of a consent order.

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We may not be able to realize the benefit of deferred tax assets.

We record deferred tax assets and liabilities for the 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 enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The deferred tax assets can be recognized in future periods depending upon a number of factors, including the ability to realize the asset through carry back or carry forward to taxable income in prior or future years, the future reversal of existing taxable temporary differences, future taxable income, and the possible application of future tax planning strategies. If we are not able to recognize deferred tax assets in future periods, it could have a material adverse effect on our financial condition and results of operations. Based on our analysis of all positive and negative evidence, we believed that it was appropriate to reduce our valuation allowance by $5 million as of December 31, 2012. The valuation allowance was $19.4 million at June 30, 2013, compared to the deferred tax asset of $24.4 million. We will continue to assess all positive and negative evidence and if it is determined that recognition of that deferred tax asset is “more likely than not” under ASC 740, we will recognize additional tax benefits in 2013 if it is determined that recognition of that deferred tax asset is “more likely than not” under ASC 740. In the event we are unable to do so, such inability would have an adverse effect on our business and results of operations.

We are subject to changes in federal and state tax laws and changes in interpretation of existing laws.

Our financial performance is impacted by federal and state tax laws. Given the current economic and political environment, and ongoing state budgetary pressures, the enactment of new federal or state tax legislation may occur. The enactment of such legislation, or changes in the interpretation of existing law, including provisions impacting tax rates, apportionment, consolidation or combination, income, expenses, and credits, may have a material adverse effect on our financial condition and results of operations.

We are subject to changes in accounting principles, policies, or guidelines.

Our financial performance is impacted by accounting principles, policies, and guidelines. Changes in these are continuously occurring and, given the current economic environment, more drastic changes may occur. The implementation of such changes could have a material adverse effect on our financial condition and results of operations.

We may not be able to attract and retain skilled people.

Our successful operation will be greatly influenced by our ability to retain the services of our existing senior management and to attract and retain qualified additional senior and middle management. The unexpected loss of the services of any of our key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial results.

We are a bank holding company and our sources of funds are limited.

We are a bank holding company, and our operations are primarily conducted by the Bank, which is subject to significant federal and state regulation. Cash available to pay dividends to our shareholders is derived primarily from dividends received from the Bank. Our ability to receive dividends or loans from the Bank is restricted. Under the terms of the Bank’s Consent Order with the FDIC and the Michigan DIFS Bank & Trust Division, the Bank is presently prohibited from paying dividends without the consent of the FDIC and the Michigan DIFS Bank & Trust Division. Dividend payments by the Bank to us in the future will require generation of future earnings by the Bank, and, even if the Consent Order is terminated, could require regulatory approval if the proposed dividend is in excess of prescribed guidelines. Further, our right to participate in the assets of the Bank upon its liquidation, reorganization, or otherwise will be subject to the claims of the Bank’s creditors, including depositors, which will take priority.

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Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact the Bank’s business.

Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on the Bank’s ability to conduct business. Such events could affect the stability of the Bank’s deposit base, impair the ability of borrowers to repay outstanding loans, reduce the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Bank to incur additional expenses. Although management has established disaster recovery policies and procedures, the occurrence of any such event could have a material adverse effect on the Bank’s business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Managing reputational risk is important to attracting and maintaining customers, investors, and employees.

Threats to the Bank’s reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, and questionable or fraudulent activities of our customers. The Bank has policies and procedures in place that seek to protect our reputation and promote ethical conduct. Nonetheless, negative publicity may arise regarding the Bank’s business, employees, or customers, with or without merit, and could result in the loss of customers, investors, and employees; costly litigation; a decline in revenues; and increased governmental regulation.

Risks Associated With the Common Stock and the Offering

This offering may cause the trading price of our common stock to decrease immediately, and this decrease may continue.

The subscription price at which we are selling shares pursuant to the standby commitments, rights offering and the public reoffer is less than recent trading prices in the current quarter. Additionally, the number of shares we propose to issue and ultimately expect to issue if we complete the rights offering and the public reoffer may result in an immediate decrease in the market value of the common stock. If the holders of the shares purchased in this offering choose to sell some or all of those shares, the resulting sales could further depress the market price of our common stock.

The public reoffer is not underwritten on a firm commitment basis.

While we have retained Donnelly Penman & Partners as a sales agent to assist us in connection with sales of the common stock in the offering, Donnelly Penman & Partners will act on a “best efforts” basis only and will not have any obligation or commitment to sell any dollar amount or number of shares or to acquire any shares for its own account or with a view to their distribution in the public reoffer. Donnelly Penman & Partners’ services cannot be construed as any assurance that the offering will be successful. Pursuant to the written standby commitments that we have received from the standby purchasers, they have agreed to purchase all shares that remain unsold after the conclusion of the rights offering and the public reoffer. However, because the offering is not underwritten by a broker-dealer on a firm commitment basis, and the standby commitments are subject to certain conditions outside of our control, there can be no assurance that the offering will be successful. In order to close the offering we must receive subscriptions proceeds for at least the minimum offering amount of $10,000,000.

Your ownership may be diluted by the offering.

In the event the offering is fully subscribed at the maximum offering amount of $17,500,000 and an existing shareholder does not purchase any shares in the offering, such shareholder’s ownership would be diluted by      %. If the offering is fully subscribed at the variable maximum amount of $20,000,000, for      shares, and a shareholder exercises all of his or her basic subscription rights in the rights offering, such shareholder’s ownership will be diluted by the shares issued to the standby purchasers, and shares sold under the variable maximum offering amount of $20,000,000 or      %.

You will not be able to sell the common shares you buy in this rights offering until the shares you elect to purchase are issued to you.

If you purchase shares in this rights offering by submitting a completed and signed subscription materials and payment, we will issue your shares as soon as practicable following the expiration of this rights offering.

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If your shares are held by a broker, dealer, custodian bank or other nominee and you purchase shares, your nominee will be credited with the shares you purchase and your account will be credited by your nominee. Until the common shares you elect to purchase are issued to you, you may not be able to sell the shares subscribed for even though the common shares issued in this rights offering are expected to be listed for trading on the NASDAQ Global Select Market. The stock price may decline between the time you decide to sell your shares and the time you are actually able to sell your shares.

Significant sales of our common stock, or the perception that significant sales may occur in the future, could adversely affect the market price for our common stock.

Sales of substantial amounts of our common stock in the public market, and the availability of shares for future sale, could adversely affect the prevailing market price of our common stock and could cause the market price of our common stock to remain low for a substantial amount of time. We cannot foresee the impact of such potential sales on the market, but it is possible that if a significant percentage of such available shares were attempted to be sold within a short period of time, the market for our shares would be adversely affected. It is also unclear whether or not the market for our common stock could absorb a large number of attempted sales in a short period of time, regardless of the price at which they might be offered. Even if a substantial number of sales do not occur within a short period of time, the mere existence of this “market overhang” could have a negative impact on the market for our common stock and our ability to raise additional capital.

We may cancel the offering at any time, and neither we nor the subscription agent will have any obligation to you except to return your payments.

We may, in our sole discretion, decide not to continue with the offering or cancel the offering. If the offering is canceled, all subscription payments received by the subscription agent will be returned promptly, without interest.

Our stock price can be volatile.

Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive. Our stock price can fluctuate significantly in response to a variety of factors including:

General market fluctuations, industry factors, and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes, or credit loss trends, could also cause our stock price to decrease regardless of operating results.

The trading volume in our common stock is less than that of other larger financial services institutions so attempts to sell substantial numbers of shares could cause the price to decline.

Although our common stock is listed for trading on the NASDAQ Global Select Market, the trading volume in our common stock is less than that of many other, larger financial services companies. A public

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trading market having the desired characteristics of depth, liquidity, and orderliness depends on the presence in the marketplace of willing buyers and sellers of the stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. Given the low trading volume of our common stock in the past, significant sales of our common stock, or the expectation of these sales, could cause our common stock price to fall.

An investment in our common stock is not an insured deposit.

Our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund, or by any other public or private entity. Investment in our common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this prospectus and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire our common stock, you could lose some or all of your investment.

Our articles of incorporation, by-laws, as well as certain banking laws may have an anti-takeover effect.

Provisions of our articles of incorporation and bylaws, and federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial by our shareholders. The combination of these provisions may inhibit a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of our common stock.

We may issue additional securities, which could further dilute the ownership percentage of holders of our common stock.

After completion of the offering, we may issue additional securities to raise additional capital or finance acquisitions or upon the exercise or conversion of outstanding options, and, if we do, the ownership percentage of holders of our common stock could be further diluted.

We are not currently able to pay dividends and we cannot assure you of our ability to pay dividends in the future.

We suspended the payment of dividends on August 27, 2009. We do not have any plans to reintroduce our quarterly dividend in the near future. We rely on dividends from the Bank to pay dividends to shareholders and the Bank is presently prohibited under the terms of its Consent Order with the FDIC and the Michigan DIFS Bank & Trust Division from paying any dividends without regulatory permission.

In addition, the Federal Reserve has issued Federal Reserve Supervision and Regulation Letter SR-09-4, which requires bank holding companies to inform and consult with Federal Reserve supervisory staff prior to declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid. Under this regulation, if we experience losses in a series of consecutive quarters, we may be required to inform and consult with the Federal Reserve supervisory staff prior to declaring or paying any dividends. In this event, there can be no assurance that our regulators will approve the payment of such dividends.

While we do not presently have any debt obligations, should we issue any notes, including subordinated debt instruments, or borrow money from another financial institution, any such debt obligations would have priority over our common stock with respect to payment in the event of liquidation, dissolution, or winding-up.

In the event of our liquidation, dissolution, or winding up, our common stock would rank below all debt claims against us. As a result, holders of our common stock will not be entitled to receive any payment or other distribution of assets upon our liquidation, dissolution, or winding-up until after all of our obligations to our debt holders have been satisfied.

Federal banking laws may impose restrictions on investors that acquire “control” of us.

The Federal Reserve Act provides that no company may acquire control of a bank holding company, such as us, without the prior approval of the Federal Reserve. Pursuant to applicable regulations, control of a bank or its holding company is conclusively deemed to have been acquired by, among other things, the acquisition of more than 25% of any class of voting stock of a bank or its holding company or the ability to control the

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election of a majority of the directors of either entity. In addition, control is presumed to have been acquired, subject to rebuttal, upon the acquisition of more than 10% of any class of voting stock of a bank or its holding company, where one or more enumerated “control factors” are also present. Any investor that is deemed to control us could be subject to certain ongoing reporting procedures and restrictions under federal banking laws and regulations.

Because our management will have broad discretion over the use of the net proceeds from the offering, you may not agree with how we use the proceeds, and we may not invest the proceeds successfully.

We currently anticipate that we will use the net proceeds primarily to invest in the Bank to improve its regulatory capital position. See “Use of Proceeds.” We may retain a portion of the proceeds of the offering at MBT Financial Corp. Accordingly, you will be relying on the judgment of our management with regard to the use of the proceeds from the offering, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used is a way you might deem appropriate.

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USE OF PROCEEDS

We estimate that the net proceeds of this offering at the maximum offering amount will be approximately $16 million after deducting expenses and sales commissions estimated at $1.5 million in the aggregate.

We intend to use up to $16.0 million of the net proceeds of this offering to further capitalize the Bank and support its anticipated growth. We may retain any remaining net proceeds at the holding company for general corporate purposes.

DETERMINATION OF THE OFFERING PRICE

In determining the subscription price, our board of directors considered a number of factors, including: the price at which they believed our shareholders might be willing to participate in the rights offering, historical and current trading prices for our common stock, the need for liquidity and capital, negotiations with the standby purchasers resulting in the standby commitments, and the desire to provide an opportunity to our shareholders to participate in the rights offering on a pro rata basis. In conjunction with its review of these factors, our board of directors also reviewed our history and prospects, including our past and present earnings, our prospects for future earnings, our current financial condition and regulatory status. The subscription price is not necessarily related to our book value or any other established criteria of value and may or may not be considered the fair value of our common stock to be offered in the rights offering. You should not assume or expect that, after the stock offering, our shares of common stock will trade at or above the $     purchase price.

CAPITALIZATION

The following table sets forth our capitalization, our per common share book values, and the Bank’s regulatory capital ratios, each as of June 30, 2013, as well as on a pro forma basis after giving effect to the issuance of the common stock in this offering.

		As of June 30, 2013 As Adjusted
		(Dollars in thousands, except per share data)
		Actual				Minimum Offering(1)				Maximum Offering(2)				Variable Maximum Offering Amount(3)
Shareholders’ equity:
Common stock, 50,000,000 authorized shares no par; 17,909,898 shares issued and outstanding, as adjusted(1)(2)(3)			4,223				13,323				20,373				22,723
Retained earnings			83,890				83,890				83,890				83,890
Unearned compensation			(15	)			(15	)			(15	)			(15	)
Accumulated other comprehensive loss, net of tax			(9,023	)			(9,023	)			(9,023	)			(9,023	)
Total shareholders’ equity			79,075				88,175				95,225				97,575
Per Common Share:
Common book value per share			4.42
Tangible book value per common share			4.42
Regulatory Capital Ratios for the Bank:
Tier 1 leverage ratio			6.86	%			7.61	%			8.19	%			8.38	%
Tier 1 risk-based capital			10.82	%			12.00	%			12.91	%			13.21	%
Total risk-based capital			12.09	%			13.27	%			13.27	%			14.48	%

Note: We estimate total expenses and sales commissions payable by us in the amount of $0.9 million, $1.35 million and $1.5 million at the minimum, maximum and variable maximum offering amounts, respectively.

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DILUTION

The table below illustrates the effects of the shares of common stock offered hereby on the net tangible book value per common share. Net tangible book value per common share is determined by subtracting our total liabilities from our total tangible assets and dividing the remainder by the aggregate number of shares of common stock outstanding.

Our net tangible book value was $78.29 million, or $4.42 per common share based upon average outstanding shares of 17,712,310 for the quarter ended June 30, 2013. We estimate total expenses and sales commissions payable by us in the amount of $0.9 million, $1.35 million and $1.5 million at the minimum, maximum and variable maximum offering amounts respectively. Because the offering price per share is less than our tangible book value investors in the offering will experience immediate positive dilution in connection an investment of $     per share, $     per share and $     per share, at the minimum, maximum and variable maximum offering amounts respectively.

The following table presents the pro forma impact of this offering on the net tangible book value per common share as of June 30, 2013.

		June 30, 2013
						Pro Forma
(Dollars in thousands, except share and per share amounts)		Actual				Minimum				Maximum				Variable Maximum
Net Tangible Book Value Per Common Share:
Net tangible book value		$	78,288			$				$				$
Total shares outstanding (average for the period plus additional issued in connection with the offering)			17,712,310
Tangible book value per common share		$	4.42			$				$				$

PRICES FOR COMMON STOCK, DIVIDENDS AND
RELATED SHAREHOLDER MATTERS

Prices for Common Stock and Dividends

Our common stock is traded on the NASDAQ Global Select Market under the symbol “MBTF.” Below is a schedule of the dividends paid and the high and low trading price for the past two full years by quarter and the first three quarters of 2013. The closing price for our common stock on            , 201 , as quoted by the NASDAQ Global Select Market, was $    .

		Year Ended December 31, 2013
		3rd Quarter				2nd Quarter				1st Quarter
High		$	4.30			$	4.20			$	4.37
Low		$	3.53			$	3.46			$	2.35
Dividends Paid		$	—			$	—			$	—

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		Year Ended December 31, 2012
		4th Quarter				3rd Quarter				2nd Quarter				1st Quarter
High		$	2.98			$	3.10			$	3.70			$	2.50
Low		$	2.21			$	2.57			$	1.82			$	0.96
Dividends Paid		$	—			$	—			$	—			$	—

		Year Ended December 31, 2011
		4th Quarter				3rd Quarter				2nd Quarter				1st Quarter
High		$	1.46			$	1.60			$	1.75			$	2.00
Low		$	0.80			$	1.13			$	1.29			$	1.46
Dividends Paid		$	—			$	—			$	—			$	—

As of September 20, 2013, the number of holders of record of our common shares was 1,178.

We suspended cash dividends on our common stock on August 27, 2009. The payment of future cash dividends is at the discretion of the board of directors and is subject to a number of factors, including results of operations, general business conditions, growth, financial condition, and other factors deemed relevant. Further, our ability to pay future cash dividends is subject to certain regulatory restrictions and requirements and is primarily dependent upon our receipt of dividends from the Bank. The Bank’s ability to pay dividends is presently restricted under the terms of the Bank’s Consent Order with the FDIC and the Michigan DIFS Bank & Trust Division. Dividend payments by the Bank to us in the future will require generation of future earnings by the Bank, and, even if the Consent Order is terminated, could require regulatory approval if the proposed dividend is in excess of prescribed guidelines. Given our operating results and need to raise additional capital, management’s expectation is that the payment of dividends will continue to be suspended for the foreseeable future.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following provides a narrative discussion and analysis of our results of operations and financial condition as of and for the periods indicated. This Management’s Discussion and Analysis should be read in conjunction with the consolidated financial statements included elsewhere in this prospectus. The financial statements reflect the consolidated financial condition and results of operations of MBT Financial Corp. and its wholly-owned subsidiary, the Bank.

Introduction

We are a bank holding company with one commercial bank subsidiary, Monroe Bank & Trust (the “Bank”). The Bank is operated as a community bank, primarily providing loan, deposit, and wealth management services to the people, businesses, and communities in its market area. The Bank operates 17 branch offices in Monroe country, Michigan and 7 branches in Wayne County, Michigan. The Bank’s primary source of income is interest income on its loans and investments and its primary expense is interest expense on its deposits and borrowings. In addition to our commitment to our mission of serving the needs of our local communities, we are focused on improving our asset quality, profitability, and capital. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and footnotes.

Critical Accounting Policies

Our Allowance for Loan Losses, Deferred Tax Asset Valuation Allowance, Fair Value of Investment Securities, and Other Real Estate Owned are “critical accounting estimates” because they are estimates that are based on assumptions that are highly uncertain, and if different assumptions were used or if any of the assumptions used were to change, there could be a material impact on the presentation of our financial condition. These assumptions include, but are not limited to, collateral values, the effect of economic conditions on the financial condition of the borrowers, us, and the issuers of investment securities, market interest rates, and our projected earnings.

The Bank’s Allowance for Loan Losses is a “critical accounting estimate” because it is an estimate that is based on assumptions that are highly uncertain, and if different assumptions were used or if any of the assumptions used were to change, there could be a material impact on the presentation of our financial condition. These assumptions include, but are not limited to, collateral values and the effect of economic conditions on the financial condition of the Bank’s borrowers. To determine the Allowance for Loan Losses, the Bank estimates losses on all loans that are not classified as nonaccrual or renegotiated by applying historical loss rates, adjusted for environmental factors, to those loans. This portion of the analysis utilizes the loss history for the most recent twelve quarters, adjusted for qualitative factors including recent delinquency rates, real estate values, and economic conditions. In addition, all loans over $250,000 that are nonaccrual and all loans that are renegotiated are individually tested for impairment. Impairment exists when the carrying value of a loan is greater than the estimated realizable value of the collateral pledged to secure the loan or the present value of the cash flow of the loan. Any amount of monetary impairment is included in the Allowance for Loan Losses. Management is of the opinion that the Allowance for Loan Losses of $17,195,000 as of June 30, 2013, was adequate.

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of fair value less costs to sell or the loan carrying amount at the date of foreclosure. Subsequent to foreclosure, appraisals or other independent valuations are periodically obtained by management and the assets are carried at the lower of carrying amount or fair value less costs to sell.

Income tax accounting standards require companies to assess whether a valuation allowance should be established against deferred tax assets based on the consideration of all evidence using a “more likely than not” standard. We reviewed our deferred tax asset, considering both positive and negative evidence and analyzing changes in near term market conditions as well as other factors that may impact future operating results. Significant negative evidence is our net operating losses for the years 2009 through 2011, combined with a difficult economic environment and the slow pace of the economic recovery in southeast Michigan. Positive evidence includes our history of strong earnings prior to 2008, our eighth consecutive quarterly profit ending in the second quarter of 2013, our capital position, our steady core earnings, our improving asset

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quality, our noninterest expense control initiatives, and our projections for future taxable earnings. Based on our analysis of the evidence, we believed that it was appropriate to reduce our valuation allowance by $5 million in the fourth quarter of 2012. At June 30, 2013, the valuation allowance was $19.4 million compared to the deferred tax asset of $24.4 million. We will continue to assess the evidence and if the amount of positive evidence continues to increase and our projections of future taxable income supports, we may recognize additional tax benefits in 2013.

The Bank holds three pooled Trust Preferred Collateralized Debt Obligation (CDO) securities in its investment securities portfolio. Due to the lack of an active market for securities of this type, the Bank utilizes an independent third party valuation firm to calculate fair values. This valuation analysis includes a determination of the portion of the fair value impairment that is the result of credit losses. The portion of the impairment that is the result of credit losses is recognized in earnings as Other Than Temporary Impairment and the impairment related to all other factors is recognized in Other Comprehensive Income.

The other-than-temporary-impairment analysis of each of the CDO securities owned by the Bank is conducted by projecting the expected cash flows from the security, discounting the cash flows to determine the present value of future cash flows, and comparing the present value to the amortized cost basis of each individual security to determine if an impairment exists. The cash flow projection for each security is developed using estimated prepayment speeds, estimated rates at which payments will be deferred, estimated rates at which issuers will default, and the severity of the losses on the securities which default. Prepayment estimates are negatively impacted by the lack of an active market for issuers to refinance their trust preferred securities; however, prepayment of trust preferred securities is expected to increase due to recent restrictions on the treatment of trust preferred debt as regulatory capital. The size and creditworthiness of each institution in the CDO pool are the most significant pieces of evidence in estimating prepayment speeds. Deferral and default rates are the key drivers of the cash flow projections for each of the securities. Deferral of interest payments is allowed for up to five years, and estimates of deferral rates are determined by examining the current deferral status of the issuers, the current financial condition of the issuers, and the historical deferral levels of the issuers in each CDO pool. Key evidence examined includes whether or not an issuer has received TARP funding, the most recent credit ratings from outside services, stock price information, capitalization, asset quality, profitability, and liquidity. The most significant evidence in estimating deferrals is the comparison of key financial ratios to industry benchmarks. Near term (next 12 months) deferral rates are estimated for each security by analyzing the credit characteristics of each individual issuer in the pool. When an issuer is expected to defer interest payments, the analysis assumes that the deferral will continue for the entire five year period allowed and then, depending on the individual credit characteristics of that issuer, begin performing or move to default. Longer term annual default rates for each CDO are estimated using the credit analysis of each individual issuer compared to industry benchmarks to modify the historical default rates of financial companies. Finally, loss severity is estimated using analytical research provided by Standard and Poor’s and Moody’s, which supports the assumption that a small percentage of defaulted trust preferred securities recover without loss. The projected cash flows are discounted using the contractual rate of each security.

Recent Accounting Pronouncements

No recent accounting pronouncements are expected to have a significant impact on our financial statements. Accounting Standards Update 2011-02 (ASU 2011-02), “A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring” was issued by the Financial Accounting Standards Board (FASB) in April 2011. ASU 2011-02 provides additional guidance to help creditors determine whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. The amendments in this update were effective for us for the year ended December 31, 2011. The impact of the adoption of this standard on our financial disclosures is reflected in Note 5 to our consolidated financial statements.

Accounting Standards Update 2011-04 (ASU 2011-04), “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” was issued by FASB in May 2011. ASU 2011-04 clarifies existing fair value measurement and disclosure requirements and changes existing principles and disclosure guidance. Clarification was made to disclosure of quantitative information about the unobservable inputs for level 3 fair value measurements. Changes to existing principles and disclosures

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included measurement of financial instruments managed within a portfolio, the application of premiums and discounts in fair value measurement, and additional disclosures related to fair value measurements. The updated guidance and requirements are effective for financial statements issued for the first annual period beginning after December 15, 2011. The adoption of this standard did not have a material impact on our financial statements.

Accounting Standards Update 2011-05 (ASU 2011-05), “Comprehensive Income” was issued by FASB in June 2011. ASU 2011-05 requires an entity to present the total of comprehensive income, the components of comprehensive income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but continuous statements. This standard eliminated the option to present the components of other comprehensive income as a part of the statement of changes in stockholders’ equity. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 31, 2011. The implementation of this standard only changed the presentation of comprehensive income; it did not have an impact on our financial position or results of operations. ASU 2011-12 was issued by FASB in December 2011. ASU 2011-12 deferred the requirement to present reclassification adjustments for each component of OCI in both net income and OCI and the face of the financial statements until fiscal years, and interim periods within those fiscal years, beginning after December 15, 2012. The other requirements of ASU 2011-05 were not affected by ASU 2011-12. As a result of adopting ASU 2011-05, we are presenting the total of comprehensive income and the components of comprehensive income and other comprehensive income in a single continuous statement.

Accounting Standards Update 2013-02 (ASU 2013-02), “Comprehensive Income: Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income” was issued in February 2013. ASU 2013-02 requires an entity to provide information about the amounts reclassified out of Accumulated Other Comprehensive Income (AOCI) by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. ASU 2013-02 is effective for interim and annual periods beginning on or after December 15, 2012. The adoption of ASU 2013-02 is not expected to have a material impact on our consolidated financial condition or results of operations.

Year to Date Comparisons

Executive Overview.

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

The national economic recovery is continuing slowly, and the recovery in southeast Michigan is gaining strength. Local unemployment rates improved significantly since 2011, and while they are now comparable to the state and national averages, they remain above the historical norms. Commercial and residential development property values are beginning to improve slightly, but remain below pre-recession levels. Our total problem assets, which include nonperforming loans, other real estate owned, nonaccrual investments, and performing loans that are internally classified as potential problems, improved significantly during the second quarter of 2013. Problem assets went down $9.8 million, or 7.8% during the second quarter of 2013, and decreased $11.1 million or 8.7% compared to a year ago. Overall asset quality has improved over the past year and net charge offs were only $1.1 million in the second quarter of 2013, enabling us to decrease our allowance for loan and lease losses (ALLL) from $17.9 million to $17.2 million in the second quarter. The decrease in the ALLL was mainly due to a decrease of $0.4 million in the general allocation. The smaller general allocation was caused by improving economic conditions, improving historical loss ratios, and the decrease in the amount of the portfolio subject to the general allocation. The specifically identified impairments decreased $0.3 million. The loan portfolio held for investment decreased $0.06 million during the quarter, and the ALLL as a percent of loans held for investment decreased slightly from 2.91% to 2.79%. We

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anticipate that the recovery in our local markets will continue at a slow pace though 2013, which may result in increased lending activity and problem asset reductions. We will continue to focus our efforts on improving asset quality, maintaining liquidity, strengthening capital, and controlling expenses.

Net Interest Income for the second quarter of 2013 decreased $695,000 compared to the second quarter of 2012, as the average earning assets decreased $12.7 million, or 1.1% and the net interest margin decreased from 3.15% to 2.92%. The provision for loan losses decreased from $1.05 million in the second quarter of 2012 to $0.4 million in the second quarter of 2013. Decreases in the historical loss rates and in the amount of loans compared to a year ago decreased the amount of ALLL required. Also, net charge offs were $1.1 million in the second quarter of 2013 compared to $2.0 million in the second quarter of 2012, allowing the reduction in the provision for loan losses. Noninterest income for the quarter increased $425,000, or 11.9%, primarily due to an increase in wealth management fees. Noninterest expenses increased $560,000, or 5.8%, as salaries and employee benefits increased and losses on sales of other real estate owned (OREO) increased. The increase in OREO losses was due to the liquidation of several properties at an auction, and we expect credit related expenses to decrease in the second half of 2013 due to this planned reduction in OREO.

Earnings for the Bank are usually highly reflective of the net interest income. In 2008, during the economic crisis, the Federal Open Market Committee (FOMC) of the Federal Reserve lowered the fed funds rate target to 0 – 0.25%, where it remained through June 30, 2013. The yield curve shape became steeply, positively sloped in 2009 and through 2010. Due to continued high unemployment and the absence of inflation, the Fed extended its quantitative easing program through 2012 in an attempt to keep longer term market rates low and encourage borrowing, which reduced the slope from the yield curve. Loan and investment yields follow long term market yields, and the yield on our loans decreased from 5.70% in 2010 to 5.53% in 2011 to 5.30% in 2012 and to 5.04% in the first six months of 2013. The yields on our investment securities also decreased each year, from 2.78% in 2010 to 2.31% in 2011 to 1.96% in 2012 and to 1.63% in the first six months of 2013. In the current environment of historically low interest rates, we have been reinvesting our investment portfolio cash flow into shorter maturity securities and maintaining large cash reserves, which contributed to the decline in the investment yield in 2011, 2012 and the first six months of 2013. Funding costs are more closely tied to the short term rates, and the average cost of our deposits decreased from 1.28% in 2010 to 1.04% in 2011 to 0.62% in 2012 and to 0.45% in the first six months of 2013. Borrowed funds costs are primarily based on the 3 month LIBOR, which increased late in 2011 before decreasing slightly in 2012. As a result, our average cost of borrowed funds decreased from 3.52% in 2010 to 2.76% in 2011 and remained relatively stable at 2.85% in 2012. A large portion of our high cost borrowed funds matured in the second quarter of 2013 and the cost of borrowed funds decreased to 2.71% in the first six months of 2013. This caused our net interest margin to decrease from 3.10% in 2010 to 3.07% in 2011 to 3.02% in 2012 and to 2.82% in the first six months of 2013. The average cost of interest bearing deposits was 0.74%, 1.22%, and 1.49%, for 2012, 2011, and 2010, respectively, and 0.54% for the first six months of 2013. The following table shows selected financial ratios for the same three years and the six months ended June 30, 2013.

		Six months ended June 30, 2013 (annualized)				2012				2011				2010
Return on Average Assets			0.42	%			0.69	%			-0.30	%			-0.92	%
Return on Average Equity			6.14	%			11.03	%			-5.11	%			-14.06	%
Dividend Payout Ratio			0.00	%			0.00	%			0.00	%			0.00	%
Average Equity to Average Assets			6.87	%			6.23	%			5.84	%			6.42	%

Results of Operations.

Second Quarter 2013 vs. Second Quarter 2012

Net Interest Income — A comparison of the income statements for the three months ended June 30, 2012 and 2013 shows a decrease of $695,000, or 7.9%, in net interest income. Interest income on loans decreased $1.3 million, or 15.0%, as the average loans outstanding decreased $50.7 million and the average yield on loans decreased from 5.38% to 4.93%. The interest income on investments, fed funds sold, and interest bearing balances due from banks decreased $254,000 as the average amount of investments, fed funds sold,

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and interest bearing balances due from banks increased $38.0 million but the yield decreased from 2.04% to 1.69%. The yield on investments decreased because we are maintaining our strong liquidity position by keeping our excess funds in low yielding, short-term investments and deposits in the Federal Reserve Bank. This liquidity will be available for investment in loans if loan demand improves or invested in higher yielding longer term securities if interest rates increase. A continued low overall level of interest rates and the maturity of some high cost Federal Home Loan Bank borrowings helped reduce the funding costs. The interest expense on deposits decreased $522,000, or 31.9%, even though the average deposits increased $25.1 million because the average cost of deposits decreased from 0.65% to 0.43%. The cost of borrowed funds decreased $376,000 as the average dollar amount of borrowed funds decreased $49.3 million and the average cost of the borrowings decreased from 2.89% to 2.77%.

Provision for Loan Losses — The provision for loan losses decreased from $1.05 million in the second quarter of 2012 to $0.4 million in the second quarter of 2013. Net charge offs were $1.1 million during the second quarter of 2013, compared to $2.0 million in the second quarter of 2012. Each quarter, we conduct a review and analysis of our ALLL to determine its adequacy. This analysis involves specific allocations for impaired credits and a general allocation for losses expected based on historical experience adjusted for current conditions. Due to a decrease in the size of the portfolio, an improvement in portfolio risk indicators, and a decrease in the historical loss percentages, the amount of provision required to maintain an adequate ALLL in the second quarter of 2013 decreased 61.9% compared to the amount required in the second quarter of 2012. The ALLL was 2.79% of loans as of June 30, 2013, and, in light of current economic conditions, we believe that at this level the ALLL adequately estimates the potential losses in our loan portfolio.

Other Income — Non interest income increased $425,000, or 11.9%, compared to the second quarter of 2012. Wealth management income increased $253,000 due primarily to a one-time refund of $172,000 of fees in the second quarter of 2012. In 2012 we refunded fees that were collected from a large employee benefit account. The fees that were refunded in 2012 were included in Wealth Management income in prior periods. The wealth management income also increased in 2013 compared to 2012 due to an increase in the market value of assets managed and new business brought in to the Bank. Securities gains increased $114,000 as the Bank sold available-for-sale securities in the second quarter of 2013 in order to pay off maturing debt. Other noninterest income increased $98,000 primarily due to higher income from brokerage services and rental income on OREO properties.

Other Expenses — Total noninterest expenses increased $560,000, or 5.8%, compared to the second quarter of 2012. Salaries and employee benefits increased $261,000, or 5.3%, as salaries increased due to an increase in the number of employees and annual merit increases. Occupancy expense increased $96,000 due to higher utilities and maintenance costs. Equipment expense decreased $72,000 due to lower computer and data processing expenses. Losses on other real estate owned (OREO) properties increased $517,000 compared to the second quarter of 2012 as several properties were liquidated at losses in an auction in the second quarter of 2013. Other OREO expenses decreased $146,000 as property tax and maintenance costs decreased due to the reduction in the number of properties owned.

As a result of the above activity, the profit before income taxes in the second quarter of 2013 was $1,496,000, a decrease of $180,000 compared to the pretax profit of $1,676,000 in the second quarter of 2012. Due to our net operating loss (NOL) carry forward, we did not record a federal income tax expense in the second quarter of 2013. If we did not have the benefit of the NOL carry forward, we would have incurred a federal income tax expense of $297,000, for an effective tax rate of 19.9%. The income tax expense of $1,423,000 that was accrued in the second quarter of 2012 was recorded due to management’s review of all pertinent information regarding the IRS audit that required recognition of the expense as an estimate of the potential liability due. The net profit for the second quarter of 2013 was $1,496,000, an increase of 491.3% compared to the net profit of $253,000 in the second quarter of 2012.

Six months ended June 30, 2013 vs. Six months ended June 30, 2012

Net Interest Income — A comparison of the income statements for the six months ended June 30, 2013 and 2012 shows a decrease of $1,579,000, or 8.9%, in net interest income. Interest income on loans decreased $2.6 million or 14.3% as the average loans outstanding decreased $50.6 million and the average yield on

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loans decreased from 5.42% to 5.04%. The interest income on investments, fed funds sold, and interest bearing balances due from banks decreased $652,000 as the average amount of investments, fed funds sold, and interest bearing balances due from banks increased $60.4 million but the yield decreased from 2.11% to 1.63%. The yield on investments decreased because we are maintaining our strong liquidity position by keeping our excess funds in low yielding, short-term investments and deposits in the Federal Reserve Bank. A continued low overall level of interest rates and the maturity of some high cost borrowings and brokered certificates of deposit helped reduce the funding costs. The interest expense on deposits decreased $1,148,000, or 33.0%, even though the average deposits increased $27.9 million because the average cost of deposits decreased from 0.68% to 0.45%. The cost of borrowed funds decreased $501,000 as the average amount of borrowed funds decreased $27.2 million and the average cost of the borrowings decreased from 2.91% to 2.71%.

Provision for Loan Losses — The provision for loan losses decreased from $3.3 million in the first six months of 2012 to $1.9 million in the first six months of 2013. Net charge offs were $2.0 million during the first six months of 2013, compared to $4.7 million in the first six months of 2012. Each quarter, we conduct a review and analysis of our ALLL to determine its adequacy. This analysis involves specific allocations for impaired credits and a general allocation for losses expected based on historical experience adjusted for current conditions. Due to a decrease in the size of the portfolio, an improvement in portfolio risk indicators, and a decrease in the historical loss percentages, the amount of provision required to maintain an adequate ALLL in the first six months of 2013 decreased 42.4% compared to the amount required in the first six months of 2012. The ALLL was 2.79% of loans as of June 30, 2013, and, in light of current economic conditions, we believe that at this level the ALLL adequately estimates the potential losses in our loan portfolio.

Other Income — Non interest income decreased $264,000, or 3.2%, compared to the first six months of 2012. The income in the first six months of 2012 included gains on securities transactions that were the result of restructuring activity in the investment portfolio. Excluding securities gains in both years, noninterest income increased $712,000 or 10.0%. Wealth management income increased $382,000 due to an increase in the market value of assets managed, new business brought in to the bank, and because the 2012 income was negatively impacted by a refund of fees paid to a large employee benefit account. Origination fees on mortgage loans sold increased $147,000, or 45.1%, due to an increase in mortgage loan origination volume compared to 2012, and other noninterest income increased $239,000 primarily due to income on brokerage services and rental income on OREO properties.

Other Expenses — Total noninterest expenses decreased $34,000, or 0.2%, compared to the first six months of 2012. Salaries and employee benefits increased $478,000, or 4.8%, as salaries increased due to an increase in the number of employees and annual merit increases. Equipment expense decreased $175,000 due to lower computer and data processing expenses. Losses on other real estate owned (OREO) properties increased $208,000 compared to the first six months of 2012. Although property values stabilized over the last year, requiring fewer write downs of properties owned and producing some gains on the sales of select OREO property sales, we liquidated some large properties at losses in 2013. Other OREO expenses decreased $241,000 as property tax and maintenance costs were lower due to the decrease in the number of properties owned.

As a result of the above activity, the profit before income taxes in the first six months of 2013 was $2,610,000, a decrease of $409,000 compared to the pretax profit of $3,019,000 in the first six months of 2012. Due to our net operating loss carry forward, we did not record a federal income tax expense in the first six months of 2013. If we did not have the benefit of the NOL carry forward, we would have incurred a federal income tax expense of $452,000, for an effective tax rate of 17.3%. The income tax expense of $1,549,000 that was accrued in 2012 was recorded due to management’s review of all pertinent information regarding the IRS audit that required recognition of the expense as an estimate of the potential liability due. The net profit for the first six months of 2013 was $2,610,000, an increase of 77.6% compared to the net profit of $1,470,000 in the first six months of 2012.

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Cash Flows.  Cash flows provided by operating activities increased $0.9 million compared to the first six months of 2012 as the noncash charge for the provision for loan losses that is included in net income decreased $1.4 million. Cash flows from investing activities increased $8.9 million in the first six months of 2013 compared to the first six months of 2012 as the amount of securities available for sale that were sold increased $17.7 million as the Bank sold investments to generate cash to pay off maturing debt. The decrease of $87.3 million in maturities and redemptions of securities caused a decrease of $76.2 million in securities purchases. The amount of cash used for financing activities increased $96.6 million due to the repayment of $95.0 million of maturing Federal Home Loan Bank advances in the first six months of 2013. We also issued $1.7 million of common stock in a private placement in the first six months of 2013. Total cash and cash equivalents decreased $77.0 million in the first six months of 2013 compared to the increase of $9.8 million in the first six months of 2012.

Liquidity and Capital.  We believe the Bank has sufficient liquidity to fund its lending activity and allow for fluctuations in deposit levels. Internal sources of liquidity include the maturities of loans and securities in the ordinary course of business as well as its available-for-sale securities portfolio. External sources of liquidity include a line of credit with the Federal Home Loan Bank of Indianapolis, the Federal funds line that has been established with our correspondent bank, and Repurchase Agreements with money center banks that allow us to pledge securities as collateral for borrowings. As of June 30, 2013, the Bank utilized $12 million of its authorized limit of $265 million with the Federal Home Loan Bank of Indianapolis, none of its $10 million overdraft line of credit with the Federal Home Loan Bank of Indianapolis, and none of its $25 million of federal funds line with a correspondent bank.

Our Funds Management Policy includes guidelines for desired amounts of liquidity and capital. The Funds Management Policy also includes contingency plans for liquidity and capital that specify actions to take if liquidity and capital ratios fall below the levels contained in the policy. Throughout the first six months of 2013, we were in compliance with our Funds Management Policy regarding liquidity and capital.

Our total stockholders’ equity was $79.1 million at June 30, 2013 and $83.6 million at December 31, 2012. Longer term market interest rates increased sharply late in the second quarter of 2013, causing a decrease in the value of our securities that are classified as available for sale (AFS). This caused a decrease of $8.9 million in the Accumulated Other Comprehensive Income (AOCI) component of our capital. The issuance of 514,000 shares of stock during the six months ended June 30, 2013 added $1.8 million to our capital, and the net income of $2.6 million increased our retained earnings by that amount. These three items combined to result in the decrease of $4.5 million in our total stockholders’ equity. However, total assets decreased $105.9 million and the ratio of equity to assets increased to 6.80% at June 30, 2013 from 6.59% at December 31, 2012.

Federal bank regulatory agencies have set capital adequacy standards for total risk based capital, Tier 1 Risk-Based Capital, and Leverage Capital. These standards require banks to maintain Leverage and Tier 1 ratios of at least 4% and a Total Capital ratio of at least 8% to be adequately capitalized. The regulatory agencies consider a bank to be well capitalized if its Total Risk-Based Capital is at least 10% of Risk Weighted Assets, Tier 1 Capital is at least 6% of Risk Weighted Assets, and the Leverage Capital Ratio is at least 5%.

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The following table summarizes the capital ratios for us and the Bank:

		Actual								Minimum to Qualify as Well Capitalized
		Amount				Ratio				Amount				Ratio
As of June 30, 2013:
Total Capital to Risk-Weighted Assets
Consolidated		$	94,371				12.19	%		$	77,410				10	%
Monroe Bank & Trust			93,497				12.09	%			77,333				10	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated			84,598				10.93	%			46,446				6	%
Monroe Bank & Trust			83,693				10.82	%			46,400				6	%
Tier 1 Capital to Average Assets
Consolidated			84,598				6.93	%			61,021				5	%
Monroe Bank & Trust			83,693				6.86	%			60,982				5	%

		Actual								Minimum to Qualify as Well Capitalized
		Amount				Ratio				Amount				Ratio
As of December 31, 2012:
Total Capital to Risk-Weighted Assets
Consolidated		$	89,615				11.53	%		$	77,691				10	%
Monroe Bank & Trust			88,992				11.46	%			77,623				10	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated			79,776				10.27	%			46,615				6	%
Monroe Bank & Trust			79,113				10.19	%			46,574				6	%
Tier 1 Capital to Average Assets
Consolidated			79,776				6.43	%			62,041				5	%
Monroe Bank & Trust			79,113				6.38	%			62,008				5	%

On July 12, 2010, the Bank entered into a Consent Order with its state and federal regulators. While the Bank is under the Consent Order, it is classified as “adequately capitalized” even though its ratios meet the “well capitalized” guidelines. The Consent Order requires the Bank to raise its Tier 1 leverage ratio to 9% and its total risk based capital Ratio to 12%. As of June 30, 2013, the Bank is in compliance with the total risk based capital Ratio requirement but not in compliance with the Tier 1 leverage ratio requirement of the Consent Order. The table below indicates the amount of capital the Bank needed to be in compliance with the Consent Order as of June 30, 2013:

		Actual Capital								Minimum Capital Required by Consent Order								Additional Capital Required to Comply with Consent Order
		Amount				Ratio				Amount				Ratio
Tier 1 Capital to Average Assets		$	83,693				6.86	%		$	109,838				9	%		$	26,145

In 2011, we increased our authorized common shares from 30 million to 50 million shares. Since the date that the Consent Order was issued and up through the end of the most recent fiscal year, we did not believe that the market conditions were suitable for a bank holding company of our size located in the Midwest to conduct an offering large enough to generate the amount of capital required to comply with the Consent Order. While under the Consent Order, we completed two private placement offerings, raising a total of $3.1 million, of which $2.5 million has been invested in the Bank. Conditions in the capital markets have improved somewhat recently, and we continue our efforts to improve our capital position by generating capital by improving our earnings and reducing the size of our balance sheet by repaying our nondeposit funding as it matures.

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Market risk for the Bank, as is typical for most banks, consists mainly of interest rate risk and market price risk. The Bank’s earnings and the economic value of its equity are exposed to interest rate risk and market price risk, and monitoring this risk is the responsibility of the Asset/Liability Management Committee (ALCO) of the Bank. The Bank’s market risk is monitored monthly and it has not changed significantly since year-end 2012.

Internal Revenue Service Audit.  Since the fourth quarter of 2010, the Internal Revenue Service (IRS) has been conducting an audit of our tax returns for the 2004, 2005, 2007, 2008, 2009, and 2010 tax years. The IRS is nearing completion of the audit and has proposed adjustments to our taxable income, mainly challenging our treatment of interest on nonaccrual loans, Other Real Estate Owned (“OREO”) valuations, OREO carrying costs, and loan charge-offs. Although our loan charge-offs were in compliance with state and federal bank regulatory agency guidelines, the IRS examining agent conducting the audit has called into question the deductibility of certain charge-offs for income tax purposes based on the facts and circumstances of a loan at the time of the charge-off and certain differences between tax and financial accounting for charge-offs. We believe that the charge-off deductions were proper when taken, and our belief is supported by confirmation of our charge off methodology by our federal and state banking regulators.

According to ASC 740, Accounting for Uncertainty in Income Taxes, an entity is required to evaluate the validity of uncertain tax positions and determine if the relevant taxing authority would conclude that it is more likely than not (greater than fifty percent) that the position taken will be sustained, based upon technical merits, upon examination. We have reviewed our tax positions and have concluded that it is appropriate to record a liability for potential reimbursement to the IRS. Since the audit began in 2010, we have incurred over $200,000 of professional fees expenses with our accountants and lawyers for assistance in resolving the audits. In order to resolve the audits without incurring significant additional expenses, we offered a settlement proposal to the IRS in the third quarter of 2012 to resolve all open tax years subject to the audits. Our proposal resulted in a current tax liability of $2.0 million. The audit is ongoing as of June 30, 2013. We have been monitoring potential Internal Revenue Code changes that have been brought to our attention by the field examiner and we have concluded that our $2.0 million offer to settle is the best estimate of potential liability at this time. We expect the audits to be resolved without incurring significant additional tax or professional fees expenses. Settlement of the audit has by mutual agreement been placed on hold pending the issuance of guidance by the IRS that may affect the IRS position concerning certain issues raised by our field examiner in the audit. Although the timing of the resolution and/or closure of the audits remains highly uncertain, we believe it is reasonably possible that the IRS will conclude these audits in the near term. Adjustments could be necessary in future periods to the estimated potential federal income tax payable noted above based on issues raised by the IRS. Management will continue to re-evaluate the estimate quarterly based on current, relevant and supportable facts.

Comparison of 2012 to 2011

Executive Overview.

Our total problem assets, which include nonperforming loans, other real estate owned, nonaccrual investments, and performing loans that are internally classified as potential problems, decreased $11.5 million, or 8.4%, during 2012. The improvement in our asset quality during 2012, the decrease in our net charge offs from $14.2 million in 2011 to $10.9 million in 2012, and the decrease in our total loans outstanding allowed us to decrease our allowance for loan and lease losses (ALLL) from $20.9 million to $17.3 million in 2012. The portfolio of loans held for investment decreased $52.2 million during the year, and the ALLL as a percent of loans decreased from 3.07% to 2.76%.

Net interest income decreased $478,000 in 2012 compared 2011 even though the average earning assets increased $0.9 million, or 0.1%, as the net interest margin decreased from 3.07% to 3.02%. The provision for loan losses decreased from $13.8 million in 2011 to $7.35 million in 2012. Decreases in the historical loss rates, the size of the loan portfolio, and the amount of specific allocations during 2012 decreased the amount of ALLL required. As a result, we were able to record a provision that was smaller than the net charge offs for the year. Noninterest income decreased $1.8 million, or 9.8%, due to a life insurance benefit received in 2011. Noninterest expenses decreased $4.1 million, or 9.6%, due to a death benefit payment in 2011 and smaller losses on other real estate owned (OREO) and OREO carrying costs.

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Results of Operations.  We recorded a net profit of $8.5 million in 2012, compared to the net loss of $3.8 million in 2011, mainly due to the decrease of $6.45 million in the provision for loan losses, a $5.0 million reduction in the valuation allowance on our deferred tax asset (which net of our then current provisions resulted in a decrease of $4.0 million in federal income tax expense), and the decrease of $4.1 million in noninterest expenses. The primary source of earnings for the Bank is its net interest income, which decreased $0.5 million, or 1.4% compared to 2011. Net interest income decreased as the net interest margin decreased from 3.07% to 3.02% and the average earning assets increased less than 0.1%. Earning assets were little changed during 2012 as loan demand remained weak and management continued its efforts to improve the Bank’s capital ratios by restricting asset growth. Interest income decreased $5.0 million during 2012 as the yield on earnings assets decreased from 4.33% to 3.89%, while the amount of earning assets was essentially unchanged at $1.14 billion. Interest expense decreased $4.5 million compared to 2011 as the average amount of interest bearing liabilities decreased $29.4 million and the cost of the interest bearing liabilities decreased from 1.43% in 2011 to 1.01% in 2012. The decrease in the average cost of funds was due to the historically low level of market interest rates throughout the year and because the outstanding balances of interest bearing liabilities shifted from higher cost borrowed funds, certificates of deposit, and money market deposits to lower cost savings and interest bearing demand deposits.

The provision for loan losses decreased 46.7% from $13.8 million in 2011 to $7.4 million in 2012 as the amount of net charge offs decreased from $14.2 million in 2011 to $10.9 million in 2012. The slowly improving economic conditions and continued high credit standards and collection efforts and the stabilization or real estate market values has contributed to the decrease in charge offs. The net charge offs exceeded the provision by $3.6 million, causing a decrease of that amount in our allowance for loan losses. The allowance as a percent of loans decreased from 3.07% as of December 31, 2011 to 2.76% as of December 31, 2012, as the allowance decreased by 17.1% while the loan portfolio decreased by 7.7%.

Other income decreased 9.8% from $18.2 million in 2011 to $16.4 million in 2012. Security gains increased $0.2 million as the Bank realized more gains on sales of securities in 2012 as interest rates moved lower. Mortgage loan origination income increased 87.1% from 2011 to 2012 as the real estate market conditions improved slightly and refinance activity increased sharply. Income from bank owned life insurance decreased $2.1 million, or 59.6%, due to the proceeds of a death claim received for one of our directors in 2011.

Other expenses decreased $4.1 million, or 9.6%, in 2012 compared to 2011. Salaries and benefits expense increased $838,000, or 4.3%, as salaries increased due to increases in salary rates and the number of employees, and retirement benefits, health care, and payroll taxes all increased. Occupancy expense decreased 13.7% mainly due to a reduction in maintenance costs due to an accrual of $340,000 in 2011 for additional environmental cleanup costs at our Temperance branch location. Depreciation and property tax expenses also decreased. Professional fees decreased 8.6% from $2.5 million in 2011 to $2.3 million in 2012 as a decrease in legal fees due to reduced collection activity was partially offset by higher accounting and legal fees due to an ongoing IRS audit. Expenses and losses on other real estate owned decreased $3.1 million, or 54.6%, as real estate values began to recover, decreasing the need to write down our properties. Maintenance, insurance, and property tax costs on OREO properties also decreased. Death benefit obligation expense decreased $1.6 million due to the accrual of a death benefit payable to the beneficiary of one of our board members in 2011. Other expenses increased $783,000, or 22.5%, due to an interest accrual associated with the proposed IRS audit settlement, an excise tax paid on a retirement plan ERISA violation, various legal settlements, and increased employee training expenses.

Our net income for 2012, before provision for income taxes, was $5.0 million, an increase of $8.3 million compared to the pretax loss of $3.3 million in 2011. In 2011, we recorded a tax expense to accrue $500,000 for an estimated adjustment to our 2009 tax return resulting from the ongoing IRS audit of our tax returns filed for our 2004, 2005, 2007, 2008, 2009, and 2010 tax years. The ultimate resolution of the audit is still uncertain. The issues being challenged mainly involve the timing of income recognition and would normally result in an increase in the deferred tax asset. In 2012 we proposed a settlement to the IRS and recorded an additional tax expense accrual of $1.5 million to reflect the amount of that proposed settlement. In 2012, we also recorded a tax benefit of $5.0 million to reduce the valuation allowance on our deferred tax asset (see “Deferred Tax Asset Valuation Allowance” below). Our total tax recorded in 2012 was

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a benefit of $3.5 million, for an effective tax rate of (69.5%). Our net income in 2012 was $8.5 million, an improvement of $12.3 million compared to the loss of $3.8 million in 2011.

Financial Condition.  Compared to 2011, our total assets increased $30.6 million, or 2.5%. The growth was the result of growth in deposit funding, which increased $26.5 million. We continue to reduce our non-core funding and, in 2012, $7.7 million in brokered certificates of deposit and $5.0 million in repurchase agreements matured and were not replaced. We reduced our total brokered CDs from $24.0 million at December 31, 2011 to $16.2 million at December 31, 2012. Loan demand improved in 2012, but it was not sufficient to replace the amount of principal payments received and charged off during the year. As a result, total loans held for investment decreased $52.2 million, or 7.7%. Due to the increase in deposit funding and the decrease in loans, our cash and investment securities increased $78.8 million. The investment portfolio primarily consists of mortgage backed securities issued by GNMA, and debt securities issued by U.S. government agencies and states and political subdivisions. Due to the low interest rate environment and our anticipated cash needs for 2013, we held more of our excess funds in cash and cash equivalents instead of investing it in securities. Capital increased $7.9 million, primarily due to the earnings of $8.5 million, partially offset by a reduction in accumulated other comprehensive income that was mainly caused by a reduction in the unrealized gains on our available-for-sale investment securities.

Cash Flow.  Cash flows provided by operations decreased compared to 2011 even though net income increased from a loss of $3.8 million to a profit of $8.5 million. This occurred because the primary contributors to the improved earnings were the reduction in the provision for loan losses and the decrease in the deferred tax asset valuation allowance, and both of these are noncash items. Cash flows used for investing activities decreased slightly from $3.4 million to $2.5 million 2011 to 2012, because in both years the amount of cash generated by loan payments and securities maturities and sales was reinvested into investment securities. Cash flows from financing activity increased $47.8 million in 2012 due to a smaller amount of debt repayments and growth in deposits. As a result, total cash and cash equivalents increased $36.5 million in 2012 as the Bank increased its cash held at the Federal Reserve.

Deferred Tax Asset Valuation Allowance.  ASC 740 guidance requires that a corporation assess whether a valuation allowance should be established against its deferred tax asset based on the consideration of all available evidence using a “more likely than not” standard. In making such judgments, the corporation should consider both positive and negative evidence and analyze changes in near term market conditions as well as other factors which may impact future operating results. We first established a valuation allowance of $13.8 million against our $17 million deferred tax asset effective December 31, 2009. The valuation allowance was increased to 100% of the $20.9 million deferred tax asset effective December 31, 2010. The valuation allowance was maintained at 100% of the deferred tax asset, which increased to $24.2 million during 2011.

The negative evidence evaluated as of December 31, 2012 consisted primarily of the economic conditions and our financial results during the 2008-2010 period. In 2008, the southeast Michigan region led the nation into a prolonged recession due to weak sales in the automotive sector. In the years leading up to the recession, housing values increased rapidly, and when unemployment began to rise, the housing market suffered and real estate values declined. The decline in real estate values resulted in an abrupt reduction in mortgage loan originations and the ability of homeowners to use the equity in their homes to fund their spending. The Bank’s loan portfolio primarily consisted of loans secured by real estate, including residential and commercial development and 1 – 4 family residential property, and we experienced significant increases in defaults in these loans. Nonperforming loans as a percent of total loans increased from 3.39% as of December 2007 to 10.84% as of December 31, 2010, and net charge offs as a percent of average loans increased from 0.49% in 2007 to 2.89% in 2010. Due to the deterioration of the Bank’s loan portfolio, we needed to increase our allowance for loan losses from $13.8 million at the end of 2006 to $24.1 million at the end of 2009. This required an increase in our provision for loan losses from $11.4 million in 2007 to $36.0 million in 2009, and our net income decreased from a profit of $7.7 million in 2007 to a loss of $34.3 million in 2009.

The positive evidence evaluated as of December 31, 2012 consisted of the improvements in the economic conditions in 2011 and 2012, the improvements in the Bank’s asset quality and earnings in 2011 and 2012, the expectations of our future earnings improvements, and our long history of strong financial performance prior to 2008. During the recession, the national unemployment rate increased from 5.0% at the end of 2007 to its

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peak of 10.0% in October, 2009. Since the recovery began, the national unemployment rate declined to 7.8% at the end of 2012. During the same period, the unemployment rate for Michigan increased from 7.2% to a high of 14.2% in August, 2009 and had declined to 8.9% at the end of 2012. From December 2007 to July 2009, the Case Shiller housing price index for southeast Michigan decreased 32.3%, and from that low point, the index recovered 14.9% as of December 2012. These economic improvements have resulted in asset quality and earnings improvements at the Bank. Problem assets declined $35.3 million, or 22.4% from 2010 to 2012 and net charge offs decreased 53.2% from $23.3 million in 2010 to $10.9 million in 2012. The improvement in asset quality enabled the Bank to reduce its allowance for loan losses 18.5% over the same two-year period. The asset quality improvement led to an improvement in earnings, and posted six consecutive quarterly profits through the end of 2012 and had positive cumulative earnings for eight quarters through the end of 2012. Prior to 2008, we had consistently strong financial performance, and since our formation have not had any net operating loss carry forwards expire unused. Throughout the recent economic challenges, we maintained strong core earnings and only experienced losses recently due to high credit related costs. The two-year budget and five-year financial projections indicated that we would be able to utilize a sufficient amount of our net operating loss carry forwards to make it “more likely than not” that we would be able to realize at least $5 million of our deferred tax assets. Based on our evaluation of the positive and negative evidence, we reduced our deferred tax asset valuation allowance by $5 million as of December 31, 2012.

Liquidity and Capital.  Our total stockholders’ equity was $83.6 million at December 31, 2012 and $75.7 million at December 31, 2011. The stockholders’ equity increased $7.9 million during the year, the ratio of equity to assets increased from 6.12% as of December 31, 2011 to 6.59% as of December 31, 2012. Federal bank regulatory agencies have set capital adequacy standards for Total Risk-Based Capital, Tier 1 Risk-Based Capital, and Leverage Capital. These regulatory standards require banks to maintain Leverage and Tier 1 ratios of at least 4% and a Total Capital ratio of at least 8% to be adequately capitalized. The regulatory agencies consider a bank to be “well capitalized” if its Total Risk-Based Capital is at least 10% of Risk Weighted Assets, Tier 1 Capital is at least 6% of Risk Weighted Assets, the Leverage Capital Ratio is at least 5%, and the Bank is not subject to any written agreements or order issued by the FDIC pursuant to Section 8 of the Federal Deposit Insurance Act.

The following table summarizes the capital ratios of the Bank at December 31, 2012 and 2011:

		December 31, 2012				December 31, 2011				Minimum to be Well Capitalized
Tier 1 leverage ratio			6.43	%			6.07	%			5	%
Tier 1 risk-based capital			10.27	%			9.21	%			6	%
Total risk based capital			11.53	%			10.48	%			10	%

Comparison of 2011 to 2010

Executive Overview.

Our net loss decreased from $11.9 million in 2010 to $3.8 million in 2011 mainly due to the decrease of $6.7 million in the provision for loan losses and the decrease of $2.7 million in federal income tax expense. The slowly improving economic conditions and continued high credit standards and collection efforts contributed to a decrease in charge offs for the year, which contributed significantly to the reduction in the provision expense for the year. Interest income decreased $7.0 million during 2011 as the yield on earnings assets decreased from 4.77% to 4.33% primarily as a result of the historically low level of market interest rates throughout the year. The amount of earning assets also decreased slightly due to the continued low levels of loan demand as well as management’s efforts to improve the Bank’s capital position by restricting asset growth. The average cost of funds also decreased, primarily as a result of historically low interest rates and the Bank’s reduction in the average balances of it higher cost borrowings.

Results of Operation.

Our net loss decreased by $8.1 million from $11.9 million in 2010 to $3.8 million in 2011 mainly due to the decrease of $6.7 million in the provision for loan losses and the decrease of $2.7 million in federal income tax expense. The primary source of earnings for the Bank is its net interest income, which decreased $1.7 million, or 4.6%, compared to 2010. Net interest income decreased as the net interest margin decreased

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from 3.10% to 3.07% and the average earning assets decreased $41.6 million, or 3.5%. Earning assets decreased due to the continued low loan demand and management’s efforts to improve the Bank’s capital ratios by reducing its assets. Interest income decreased $7.0 million during 2011 as the yield on earning assets decreased from 4.77% to 4.33%, while the amount of earning assets decreased slightly from $1.19 billion to $1.14 billion. Interest expense decreased $5.3 million compared to 2010 as the average amount of interest bearing liabilities decreased $58.5 million and the cost of the interest bearing liabilities decreased from 1.85% in 2010 to 1.43% in 2011. The decrease in the average cost of funds was due to the historically low level of market interest rates throughout the year and because most of the reduction in the outstanding balances of interest bearing liabilities occurred in reduction in the balances of higher cost borrowed funds.

The provision for loan losses decreased 32.7% from $20.5 million in 2010 to $13.8 million in 2011 as the amount of net charge offs decreased from $23.3 million in 2010 to $14.2 million in 2011. The slowly improving economic conditions and continued high credit standards and collection efforts contributed to the decrease in charge offs. The net charge offs exceeded the provision by $358,000, causing a decrease of that amount in our allowance for loan losses. Due to the decrease in the size of the portfolio, the allowance as a percent of loans increased from 2.82% as of December 31, 2010 to 3.07% as of December 31, 2011.

Other income decreased 6.2% from $19.4 million in 2010 to $18.2 million in 2011. Service charges and other fees decreased $603,000, or 11.4%, as NSF fee income decreased due to lower overdraft activity. Security gains decreased $2.2 million due to the large amount of gains on sales of securities in 2010 that were the result of selling investments to pay off Federal Home Loan Bank advances. The gains recorded in 2011 were primarily the result of bonds owned at discounts being called at par. Mortgage loan origination income decreased 32.8% from 2010 as the weak real estate market conditions had a negative impact on the amount of sales and refinance activity. Income from bank owned life insurance increased $1.7 million, or 85.5%, due to the proceeds of a death claim for one of our directors in 2011. Other noninterest income increased 6.6% due to an increase in ATM and debit card interchange income.

Other expenses decreased $1.7 million, or 3.7%, in 2011 compared to 2010. Salaries and benefits expense increased $369,000, or 1.9%, as small reductions in salaries and retirement benefits were offset by increases in insurance costs and payroll taxes. Occupancy expense increased 8.2% as property taxes, utilities, and maintenance expenses all increased. The increase in maintenance expense includes an accrual of $340,000 for additional environmental cleanup costs at our Temperance branch location. Equipment expense decreased $229,000, or 7.2%, due to lower depreciation and maintenance costs. Professional fees increased 14.9% from $2.1 million in 2010 to $2.5 million in 2011 as legal fees increased due to collection activity and accounting fees increased due to IRS audit assistance costs. Expenses and losses on other real estate owned decreased $660,000, or 10.4%, as the decline in real estate values slowed, decreasing the need to write down our properties. Maintenance, insurance, and property tax costs on OREO properties also decreased. Debt prepayment penalty expense decreased $2.5 million, or 100%, due to the one-time cost associated with prepaying Federal Home Loan Bank advances in 2010. Death benefit obligation expense increased $1.6 million due to the accrual of a death benefit payable to the beneficiary of one of our board members in 2011.

Our net loss for 2011, before provision for income taxes, was $3.3 million, a decrease of $5.4 million compared to the pretax loss of $8.7 million in 2010. In 2010, we recorded a tax expense of $3.2 million to increase the valuation allowance to 100% of our deferred tax assets. In 2011, we recorded a tax expense of $500,000 for an estimated adjustment to our 2009 tax return resulting from our ongoing IRS audit. The net loss in 2011 was $3.8 million, an improvement of $8.1 million compared to the loss of $11.9 million in 2010.

Financial Condition.  Due to the poor asset quality and the losses recorded in 2009 and 2010, the Bank faced increased regulatory scrutiny, including a requirement to increase its capital ratios. In 2010, we continued to focus our balance sheet strategy on restricting asset growth and actively managing capital. During the year, assets decreased $124.0 million, or 9.0%, as the Bank used loan maturities and investment sales to fund the prepayment of Federal Home Loan Bank advances. This balance sheet strategy continued throughout 2011, with assets decreasing another $21.4 million, or 1.7%, and total borrowed funds decreasing 11.5% from $143.5 million to $127.0 million. The investment portfolio primarily consisted of mortgage backed securities issued by GNMA, and debt securities issued by U.S. government agencies and states and

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political subdivisions. During 2011, as economic conditions began to improve nationally, we purchased a small amount of intermediate term corporate debt securities. We also continued to hold three pooled trust preferred securities issued by banks and insurance companies. Due to the lack of an active market for pooled trust preferred collateralized debt obligations (trust preferred CDOs), we utilize an independent third party to value that portion of our investment portfolio. Based on these third party valuations, the values of these securities were significantly below our cost. The fair values of each of the three trust preferred CDOs improved during 2010 and 2011, and no other than temporary impairment was been recognized since 2009. Our loan portfolio decreased $70.4 million as the slowly recovering economic conditions have not resulted in an increase in local loan demand.

The largest decreases in the loan portfolio were in construction real estate loans, down $22.9 million, or 49.4%, and commercial and residential real estate loans, which decreased 5.0% and 5.1%, respectively. The soft real estate market and the high amount of charge offs in these areas contributed to their declines. Deposits decreased $9.6 million, or 0.9%, to $1.022 billion in 2011. We continued to allow our brokered certificates of deposit to mature without being renewed and replaced that funding with in market deposit growth. We reduced our total brokered CDs from $46.8 million at December 31, 2010 to $23.9 million at December 31, 2011. The mix of deposits changed during 2011 as the low interest rate environment caused many customers to put their maturing certificate of deposits into checking and savings accounts. We also did not replace our maturing FHLB advances and repurchase agreements in 2011, bringing the total amount of nondeposit funding down from $143.5 million at December 31, 2010 to $127.0 million at December 31, 2011. This change in the funding structure, along with the decrease in interest rates, contributed to the decrease in interest expense in 2011.

Cash Flow.  Cash flows provided by operations decreased compared to 2010 as the impact of the smaller loss and the increase in interest payables and other liabilities was offset by the smaller decrease in interest receivable and other assets and the change in the deferred tax asset. The increase in other liabilities was primarily due to the accrual of a death benefit payable of $1.6 million. Cash flows provided by investing activities decreased $108.4 million from 2010 to 2011 due to the large amount of securities sold in 2010 to repay Federal Home Loan Bank Advances. Cash used for financing activity decreased from $113.5 million in 2010 to $26.0 million in 2011 primarily due to a decrease in the amount of borrowed funds that were repaid. Total cash and cash equivalents decreased $10.3 million in 2011 as the Bank moved a portion of its cash held at the Federal Reserve into investment securities.

Liquidity and Capital.  Our total stockholders’ equity was $75.7 million at December 31, 2011 and $74.0 million at December 31, 2010. The stockholders’ equity increased $1.7 million during the year, the ratio of equity to assets increased from 5.9% as of December 31, 2010 to 6.1% as of December 31, 2011.

The following table summarizes the capital ratios of the Bank at December 31, 2011 and 2010:

		December 31, 2011				December 31, 2010				Minimum to be Well Capitalized
Tier 1 leverage ratio			6.07	%			6.24	%			5	%
Tier 1 risk-based capital			9.21	%			8.97	%			6	%
Total risk based capital			10.48	%			10.24	%			10	%

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Statistical Disclosures By Bank Holding Companies

The following table shows the investment portfolio for the last three years and the interim period year-to-date (000s omitted).

Investment Portfolio

		Held to Maturity
		June 30, 2013								December 31, 2012								December 31, 2011								December 31, 2010
		Amortized Cost				Estimated Market Value				Amortized Cost				Estimated Market Value				Amortized Cost				Estimated Market Value				Amortized Cost				Estimated Market Value
Mortgage Backed Securities issued by U.S. Government Agencies		$	—			$	—			$	—			$	—			$	—			$	—			$	6			$	6
Obligations of states and political subdivisions in the U.S.			36,219				36,507				38,286				39,630				35,364				35,812				23,798				23,836
Corporate Debt Securities			500				500				500				500				—				—				—				—
Total		$	36,719			$	37,007			$	38,786			$	40,130			$	35,364			$	35,812			$	23,804			$	23,842
Pledged securities		$	185			$	188			$	335			$	339			$	1,111			$	1,125			$	4,502			$	4,544

		Available for Sale
		June 30, 2013								December 31, 2012								December 31, 2011								December 31, 2010
		Amortized Cost				Estimated Market Value				Amortized Cost				Estimated Market Value				Amortized Cost				Estimated Market Value				Amortized Cost				Estimated Market Value
Obligations of U.S. Government agencies		$	242,472			$	235,145			$	222,099			$	225,451			$	161,483			$	165,532			$	127,065			$	127,291
Mortgage Backed Securities issued by U.S. Government Agencies			105,935				106,003				127,082				129,818				156,883				160,168				139,708				139,744
Obligations of states and political subdivisions in the U.S.			15,542				15,764				17,804				18,370				14,616				15,178				14,881				14,725
Trust Preferred CDO Securities			9,517				5,515				9,525				5,406				9,542				5,467				9,563				5,188
Corporate Debt Securities			11,965				12,091				11,961				12,077				6,070				5,979				—				—
Equity securities			2,580				2,560				2,580				2,645				2,567				2,575				2,553				2,417
Total		$	388,011			$	377,078			$	391,051			$	393,767			$	351,161			$	354,899			$	293,770			$	289,365
Pledged securities		$	110,554			$	111,328			$	131,678			$	137,706			$	131,616			$	137,220			$	139,278			$	140,031

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The following table shows average daily balances, interest income or expense amounts, and the resulting average rates for interest earning assets and interest bearing liabilities for the last three years and the interim period year-to-date. Also shown are the net interest income, total interest rate spread, and the net interest margin for the same periods.

Average Balances

		Six Months Ended June 30,																								Years Ended December 31,
		2013												2012												2012												2011												2010
(Dollars in Thousands)		Average Daily Balance				Interest Earned or Paid				Average Yield				Average Daily Balance				Interest Earned or Paid				Average Yield				Average Daily Balance				Interest Earned or Paid				Average Yield				Average Daily Balance				Interest Earned or Paid				Average Yield				Average Daily Balance				Interest Earned or Paid				Average Yield
Investments
Interest Bearing Balances Due From Banks		$	83,400			$	106				0.26	%		$	70,141			$	89				0.26	%		$	76,079			$	195				0.26	%		$	58,558			$	151				0.26	%		$	49,972			$	131				0.26	%
Obligations of US Government Agencies			365,150				3,058				1.69	%			325,748				3,678				2.27	%			332,119				6,944				2.09	%			304,422				7,722				2.54	%			258,859				7,888				3.05	%
Obligations of States & Political Subdivisions(1)			52,526				741				2.84	%			48,425				800				3.32	%			48,355				1,552				3.21	%			43,235				1,542				3.57	%			48,614				1,955				4.02	%
Other Securities			30,850				396				2.59	%			27,189				386				2.85	%			28,204				794				2.82	%			20,720				433				2.09	%			22,405				602				2.69	%
Total Investments			531,926				4,301				1.63	%			471,503				4,953				2.11	%			484,757				9,485				1.96	%			426,935				9,848				2.31	%			379,850				10,576				2.78	%
Loans
Commercial			435,088				10,862				5.03	%			466,214				12,546				5.41	%			459,797				24,423				5.31	%			495,581				27,380				5.52	%			554,474				31,384				5.66	%
Mortgage			172,556				4,045				4.73	%			189,908				4,780				5.06	%			186,778				9,239				4.95	%			204,311				10,469				5.12	%			171,417				9,021				5.26	%
Consumer			12,550				594				9.54	%			14,648				751				10.31	%			14,125				1,388				9.83	%			17,880				1,863				10.42	%			80,702				5,605				6.95	%
Total Loans(2)			620,194				15,501				5.04	%			670,770				18,077				5.42	%			660,700				35,050				5.30	%			717,772				39,712				5.53	%			806,593				46,010				5.70	%
Federal Funds Sold			—				—				n/a				—				—				n/a				—				—				n/a				41				—				n/a				—				—				n/a
Total Interest Earning Assets			1,152,120				19,802				3.47	%			1,142,273				23,030				4.05	%			1,145,457				44,535				3.89	%			1,144,748				49,560				4.33	%			1,186,443				56,586				4.77	%
Cash & Non Interest Bearing Due From Banks			15,012												18,003												18,187												18,207												17,239
Interest Receivable and Other Assets			83,720												78,272												77,524												86,614												100,620
Total Assets		$	1,250,852											$	1,238,548											$	1,241,168											$	1,249,569											$	1,304,302
Savings Accounts		$	155,470			$	46				0.06	%		$	137,142			$	93				0.14	%		$	141,949			$	194				0.14	%		$	121,378			$	219				0.18	%		$	114,657			$	300				0.26	%
Interest Bearing DDA & NOW Accounts			126,277				36				0.06	%			117,819				101				0.17	%			161,545				286				0.18	%			109,587				266				0.24	%			103,236				545				0.53	%
Money Market Deposits			308,858				245				0.16	%			283,503				354				0.25	%			244,710				555				0.23	%			267,650				758				0.28	%			266,139				983				0.37	%
Certificates of Deposit			275,781				2,001				1.46	%			322,016				2,928				1.83	%			308,116				5,295				1.72	%			376,806				9,455				2.51	%			395,887				11,266				2.85	%
Fed Funds Purch & Other Borrowings			3				—				0.00	%			3				—				0.00	%			138				11				7.97	%			135				11				8.15	%			3				—				0.00	%
Repurchase Agreements			15,000				351				4.72	%			20,000				457				4.60	%			17,842				828				4.64	%			23,918				1,101				4.60	%			30,000				1,388				4.63%

TABLE OF CONTENTS

		Six Months Ended June 30,																								Years Ended December 31,
		2013												2012												2012												2011												2010
(Dollars in Thousands)		Average Daily Balance				Interest Earned or Paid				Average Yield				Average Daily Balance				Interest Earned or Paid				Average Yield				Average Daily Balance				Interest Earned or Paid				Average Yield				Average Daily Balance				Interest Earned or Paid				Average Yield				Average Daily Balance				Interest Earned or Paid				Average Yield
FHLB Advances			84,790				990				2.35	%			107,000				1,385				2.60	%			107,000				2,717				2.54	%			111,197				2,623				2.36	%			159,185				5,276				3.31	%
Total Interest Bearing Liabilities			966,179				3,669				0.77	%			987,483				5,318				1.08	%			981,300				9,886				1.01	%			1,010,671				14,433				1.43	%			1,069,107				19,758				1.85	%
Non-interest Bearing Deposits			184,944												162,993												169,592												155,504												141,409
Other Liabilities			15,029												11,878												12,977												10,370												9,998
Total Liabilities			1,166,152												1,162,354												1,163,869												1,176,545												1,220,514
Stockholders' Equity			84,700												76,194												77,299												73,024												83,788
Total Liabilities & Stockholders' Equity		$	1,250,852											$	1,238,548											$	1,241,168											$	1,249,569											$	1,304,302
Net Interest Income						$	16,133											$	17,712											$	34,649											$	35,127											$	36,828
Interest Rate Spread											2.70	%											2.97	%											2.88	%											2.90	%											2.92	%
Net Interest Income as a percent of average earning assets											2.82	%											3.12	%											3.02	%											3.07	%											3.10	%