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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2006
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 000-30973
MBT FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Michigan 38-3516922
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 E. FRONT STREET
MONROE, MICHIGAN 48161
(Address of principal executive offices)
(Zip Code)
(734) 241-3431
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act (check
one).
Large accelerated filer [ ] Accelerated Filer [X] Non-accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of August 4, 2006, there were 16,872,577 shares of the Company's Common Stock
outstanding.
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MBT FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2006 DECEMBER 31,
Dollars in thousands (UNAUDITED) 2005
------------- ------------
ASSETS
Cash and Cash Equivalents
Cash and due from banks $ 31,049 $ 32,330
Federal funds sold -- 5,000
---------- ----------
Total cash and cash equivalents 31,049 37,330
Securities - Held to Maturity 62,528 76,467
Securities - Available for Sale 378,690 444,021
Federal Home Loan Bank stock - at cost 13,221 13,221
Loans held for sale 489 434
Loans - Net 1,006,822 975,252
Accrued interest receivable and other assets 74,603 65,000
Premises and Equipment - Net 31,263 26,631
---------- ----------
Total assets $1,598,665 $1,638,356
========== ==========
LIABILITIES
Deposits:
Non-interest bearing $ 142,450 $ 178,116
Interest-bearing 973,580 1,006,594
---------- ----------
Total deposits 1,116,030 1,184,710
Federal Home Loan Bank advances 256,500 256,500
Federal funds purchased 35,200 --
Repurchase agreements 40,000 35,000
Other short-term borrowings 1,622 --
Interest payable and other liabilities 10,490 10,527
---------- ----------
Total liabilities 1,459,842 1,486,737
---------- ----------
STOCKHOLDERS' EQUITY
Common stock (no par value) -- --
Additional paid-in capital 9,190 14,417
Retained Earnings 137,585 142,205
Accumulated other comprehensive income (loss) (7,952) (5,003)
---------- ----------
Total stockholders' equity 138,823 151,619
---------- ----------
Total liabilities and stockholders' equity $1,598,665 $1,638,356
========== ==========
The accompanying notes to consolidated financial statements are integral part of
these statements.
-2-
MBT FINANCIAL CORP.
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED JUNE 30,
---------------------------
Dollars in thousands, except per share data 2006 2005
------- -------
INTEREST INCOME
Interest and fees on loans $17,840 $15,721
Interest on investment securities-
Tax-exempt 1,085 1,264
Taxable 5,014 4,932
Interest on federal funds sold 1 2
------- -------
Total interest income 23,940 21,919
------- -------
INTEREST EXPENSE
Interest on deposits 7,266 5,485
Interest on borrowed funds 4,752 3,743
------- -------
Total interest expense 12,018 9,228
------- -------
NET INTEREST INCOME 11,922 12,691
PROVISION FOR LOAN LOSSES 6,675 600
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,247 12,091
------- -------
OTHER INCOME
Income from trust services 1,070 1,024
Service charges and other fees 1,566 1,469
Net gain (loss) on sales of securities (4,927) 123
Other 1,051 1,048
------- -------
Total other income (1,240) 3,664
------- -------
OTHER EXPENSES
Salaries and employee benefits 5,340 4,875
Occupancy expense 712 835
Other 4,000 2,500
------- -------
Total other expenses 10,052 8,210
------- -------
INCOME BEFORE PROVISION
FOR INCOME TAXES (6,045) 7,545
PROVISION FOR INCOME TAXES (2,469) 2,176
------- -------
NET INCOME $(3,576) $ 5,369
======= =======
BASIC EARNINGS PER COMMON SHARE $ (0.21) $ 0.31
======= =======
DILUTED EARNINGS PER COMMON SHARE $ (0.21) $ 0.31
======= =======
COMMON STOCK DIVIDENDS DECLARED PER SHARE $ 0.17 $ 0.16
======= =======
The accompanying notes to consolidated financial statements are integral part of
these statements.
-3-
MBT FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
SIX MONTHS ENDED JUNE 30,
-------------------------
Dollars in thousands, except per share data 2006 2005
------- -------
INTEREST INCOME
Interest and fees on loans $35,009 $30,754
Interest on investment securities-
Tax-exempt 2,242 2,522
Taxable 10,362 9,431
Interest on federal funds sold 55 131
------- -------
Total interest income 47,668 42,838
------- -------
INTEREST EXPENSE
Interest on deposits 14,763 10,405
Interest on borrowed funds 8,815 7,120
------- -------
Total interest expense 23,578 17,525
------- -------
NET INTEREST INCOME 24,090 25,313
PROVISION FOR LOAN LOSSES 7,350 1,200
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 16,740 24,113
------- -------
OTHER INCOME
Income from trust services 2,132 2,087
Service charges and other fees 3,030 2,776
Net gain on sales of securities (4,907) 286
Other 2,089 1,961
------- -------
Total other income 2,344 7,110
------- -------
OTHER EXPENSES
Salaries and employee benefits 10,518 9,547
Occupancy expense 1,479 1,784
Other 6,544 5,608
------- -------
Total other expenses 18,541 16,939
------- -------
INCOME BEFORE PROVISION
FOR INCOME TAXES 543 14,284
PROVISION FOR INCOME TAXES (607) 4,036
------- -------
NET INCOME $ 1,150 $10,248
======= =======
BASIC EARNINGS PER COMMON SHARE $ 0.07 $ 0.59
======= =======
DILUTED EARNINGS PER COMMON SHARE $ 0.07 $ 0.59
======= =======
COMMON STOCK DIVIDENDS DECLARED PER SHARE $ 0.34 $ 0.32
======= =======
The accompanying notes to consolidated financial statements are integral part of
these statements.
-4-
MBT FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
SIX MONTHS ENDED JUNE 30,
-------------------------
Dollars in thousands 2006 2005
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,150 $ 10,248
Adjustments to reconcile net income to net cash from operating activities
Depreciation 1,256 1,581
Provision for loan losses 7,350 1,200
(Increase) decrease in net deferred Federal income tax asset (1,842) 715
Net amortization of investment premium and discount 55 109
Net increase in interest payable and other liabilities (32) (436)
Net decrease in interest receivable and other assets (4,582) (2,685)
Equity Compensation 240 --
Net (gain) loss on sales of securities 4,907 (286)
Increase in cash surrender value of life insurance (575) (548)
-------- ---------
Net cash provided by operating activities $ 7,927 $ 9,898
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and redemptions of investment securities held to maturity $ 15,522 $ 10,937
Proceeds from maturities and redemptions of investment securities available for sale 3,435 44,113
Proceeds from sales of investment securities held to maturity -- 2,994
Proceeds from sales of investment securities available for sale 52,387 48,023
Net increase in loans (38,975) (23,479)
Proceeds from sales of other real estate owned 1,976 4,010
Proceeds from sales of other assets 44 71
Purchase of investment securities held to maturity (1,574) (5,451)
Purchase of Bank Owned Life Insurance (2,138) --
Purchase of investment securities available for sale -- (119,775)
Purchase of bank premises and equipment (6,731) (2,831)
-------- ---------
Net cash provided by (used for) investing activities $ 23,946 $ (41,388)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $(68,680) $ 5,469
Net increase in Federal funds purchased 35,200 24,500
Net increase in securities sold under repurchase agreements 5,000 --
Net increase in short term borrowings 1,622 --
Proceeds from issuance of common stock 179 1,090
Repurchase of common stock (5,651) (4,966)
Dividends paid (5,824) (5,589)
-------- ---------
Net cash provided by (used for) financing activities $(38,154) $ 20,504
-------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (6,281) $ (10,986)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 37,330 34,540
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 31,049 $ 23,554
-------- ---------
The accompanying notes to consolidated financial statements are integral part of
these statements.
-5-
MBT FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED
ACCUMULATED
ADDITIONAL OTHER
PAID-IN RETAINED COMPREHENSIVE
Dollars in thousands CAPITAL EARNINGS INCOME (LOSS) TOTAL
---------- -------- ------------- --------
BALANCE - JANUARY 1, 2006 $14,417 $142,205 $(5,003) $151,619
Repurchase of Common Stock (337,174 shares) (5,651) -- -- (5,651)
Issuance of Common Stock (11,741 shares)
Stock options exercised (5,999 shares) 81 -- -- 81
Other stock issued (5,742 shares) 98 -- -- 98
Tax benefit from exercise of options 5 -- 5
Equity Compensation 240 -- -- 240
Dividends declared ($0.34 per share) -- (5,770) -- (5,770)
Comprehensive income:
Net income -- 1,150 -- 1,150
Change in net unrealized loss on securities
available for sale - Net of tax effect of $3,305 -- -- (6,139) (6,139)
Reclassification adjustment for losses included
in net income - Net of tax effect of ($1,717) -- -- 3,190 3,190
------- -------- ------- --------
Total Comprehensive Income -- 1,150 (2,949) (1,799)
------- -------- ------- --------
BALANCE - JUNE 30, 2006 $ 9,190 $137,585 $(7,952) $138,823
======= ======== ======= ========
The accompanying notes to consolidated financial statements are integral part of
these statements.
-6-
MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The unaudited consolidated financial statements include the accounts of MBT
Financial Corp. (the "Company") and its subsidiary, Monroe Bank & Trust (the
"Bank"). The Bank includes the accounts of its wholly owned subsidiaries, MBT
Credit Company, Inc. and MB&T Financial Services, Inc. The Bank operates twenty
branches in Monroe County, Michigan and five branches in Wayne County, Michigan.
MBT Credit Company, Inc. operates a mortgage loan office in Monroe County. The
Bank's primary source of revenue is from providing loans to customers, who are
predominantly small and middle-market businesses and middle-income individuals.
The Company's sole business segment is community banking.
The accounting and reporting policies of the Bank conform to practice within the
banking industry and are in accordance with accounting principles generally
accepted in the United States. Preparation of financial statements in conformity
with generally accepted accounting principles requires Management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant changes in
the near term are the determination of the allowance for loan losses and the
valuation of other real estate owned.
The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. However, such
information reflects all adjustments (consisting of normal recurring
adjustments), which are, in the opinion of Management, necessary for fair
statement of results for the interim periods.
The significant accounting policies are as follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiary. All material intercompany transactions and balances have been
eliminated. Certain prior period amounts have been reclassified to conform to
the current period presentation.
COMPREHENSIVE INCOME
Accounting principles generally require that revenue, expenses, gains, and
losses be included in net income. Certain changes in assets and liabilities,
however, such as unrealized gains and losses on securities available for sale,
are reported as a separate component of the equity section of the balance sheet.
Such items, along with net income, are components of comprehensive income.
BUSINESS SEGMENTS
While the Company's chief decision makers monitor the revenue streams of various
products and services, operations are managed and financial performance is
evaluated on a company wide basis. Accordingly, all of the Company's operations
are considered by management to be aggregated in one reportable segment.
-7-
MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
STOCK-BASED COMPENSATION
On January 1, 2006, the Company adopted SFAS 123(R), "Accounting for Stock Based
Compensation" for all share based payments to employees, including grants of
stock options and restricted stock units. The amount of compensation is measured
at the fair value of the options when granted, and this cost is expensed over
the required service period, which is normally the vesting period of the
options.
SFAS 123(R) applies to awards granted or modified after January 1, 2006.
Compensation cost is also recorded for prior option grants that vest after the
date of adoption.
The Company's as reported and pro forma earnings information for the quarter and
six months ended June 30 were as follows:
Three Months Six Months
Ended June 30, Ended June 30,
---------------- ----------------
Dollars in thousands, except per share data 2006 2005 2006 2005
------- ------ ------ -------
Net Income as Reported $(3,576) $5,369 $1,150 $10,248
Add: Stock based compensation determined under
the fair value method, net of related
tax effects included in Net Income $ 78 $ -- $ 156 $ --
Less: Stock based compensation determined under
the fair value method, net of related
tax effects included in Net Income $ (78) $ (115) $ (156) $ (230)
------- ------ ------ -------
Pro Forma Net Income $(3,576) $5,254 $1,150 $10,018
======= ====== ====== =======
Earnings per Share as Reported
Basic ($0.21) $ 0.31 $ 0.07 $ 0.59
Diluted ($0.21) $ 0.31 $ 0.07 $ 0.59
Pro Forma Earnings per Share
Basic ($0.21) $ 0.30 $ 0.07 $ 0.58
Diluted ($0.21) $ 0.30 $ 0.07 $ 0.57
Compensation expense in the pro forma disclosures is not indicative of future
amounts, as options vest over several years and additional grants are generally
made each year.
The weighted average fair value of options granted was $3.61 in 2006 and $5.10
in 2005. The fair value of each option grant is estimated on the date of the
grant using the Black-Scholes option pricing model with the following
assumptions: expected option lives of seven years for both years; expected
volatility of 22.9% in 2006 and 24.3% in 2005; and risk-free interest rates of
4.5% in 2006 and 3.8% in 2005.
-8-
MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
2. EARNINGS PER SHARE
The calculation of net income per common share for the three months ended June
30 is as follows:
2006 2005
----------- -----------
BASIC
Net income $(3,576,000) $ 5,369,000
Less preferred dividends -- --
Net income applicable to common stock $(3,576,000) $ 5,369,000
Average common shares outstanding 16,969,365 17,337,452
Earnings per common share - basic $ (0.21) $ 0.31
2006 2005
----------- -----------
DILUTED
Net income $(3,576,000) $ 5,369,000
Less preferred dividends -- --
Net income applicable to common stock $(3,576,000) $ 5,369,000
Average common shares outstanding 16,969,365 17,337,452
Stock based compensation adjustment 31,198 74,490
Average common shares outstanding - diluted 17,000,563 17,411,942
Earnings per common share - diluted $ (0.21) $ 0.31
The calculation of net income per common share for the six months ended June 30
is as follows:
2006 2005
----------- -----------
BASIC
Net income $ 1,150,000 $10,248,000
Less preferred dividends -- --
Net income applicable to common stock $ 1,150,000 $10,248,000
Average common shares outstanding 17,040,245 17,417,283
Earnings per common share - basic $ 0.07 $ 0.59
2006 2005
----------- -----------
DILUTED
Net income $ 1,150,000 $10,248,000
Less preferred dividends -- --
Net income applicable to common stock $ 1,150,000 $10,248,000
Average common shares outstanding 17,040,245 17,417,283
Stock based compensation adjustment 35,529 85,558
Average common shares outstanding - diluted 17,075,774 17,502,841
Earnings per common share - diluted $ 0.07 $ 0.59
The following table summarizes the options that have been granted to
non-employee directors and certain key executives in accordance with the
Long-Term Incentive Compensation Plan that was approved by shareholders at the
Annual Meeting of Shareholders on April 6, 2000.
-9-
MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Weighted Average
Shares Exercise Price
------- ----------------
Options Outstanding, January 1, 2006 432,642 $17.99
Granted 86,000 16.24
Exercised 5,999 13.45
Forfeited 2,500 20.72
------- ------
Options Outstanding, June 30, 2006 510,143 $17.74
------- ------
Options Exercisable, June 30, 2006 296,322 $16.59
------- ------
On January 3, 2006, performance restricted stock units were awarded to certain
key executives in accordance with the Long-Term Incentive Compensation Plan that
was approved by shareholders at the Annual Meeting of Shareholders on April 6,
2000. Each performance stock unit (PSU) is equivalent to one share of MBT
Financial Corp. common stock. Stock will be issued to the participants following
a three year performance period that ends on December 31, 2008 based on the
cumulative earnings per share during that three year period. The PSUs vest on
December 31, 2008. There were 21,800 PSUs granted, and none will be considered
vested and earned for payment if the Company's three year cumulative earnings
per share is less than $4.06.
3. LOANS
The Bank grants commercial, consumer, and mortgage loans primarily to customers
in Monroe County, Michigan, southern Wayne County, Michigan, and surrounding
areas. Although the Bank has a diversified loan portfolio, a substantial portion
of its debtors' ability to honor their contracts is dependent on the automotive,
manufacturing, and real estate development economic sectors.
Loans consist of the following (000s omitted):
June 30, December 31,
2006 2005
---------- ------------
Real estate loans $ 859,507 $813,953
Loans to finance agricultural production and
other loans to farmers 4,411 3,519
Commercial and industrial loans 97,486 100,289
Loans to individuals for household, family,
and other personal expenditures 63,765 71,244
All other loans (including overdrafts) 505 1,635
---------- --------
Total loans, gross 1,025,674 990,640
Less: Deferred loan fees 1,350 1,763
---------- --------
Total loans, net of deferred loan fees 1,024,324 988,877
Less: Allowance for loan losses 17,502 13,625
---------- --------
$1,006,822 $975,252
========== ========
-10-
MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Loans are placed in a nonaccrual status when, in the opinion of Management, the
collection of additional interest is doubtful. All loan relationships over
$250,000 that are classified by Management as nonperforming are reviewed for
impairment. Allowances for loans determined to be impaired are included in the
allowance for loan losses. All cash received on nonaccrual loans is applied to
the principal balance. Nonperforming assets consist of nonaccrual loans, loans
90 days or more past due, restructured loans, and other real estate owned. Other
real estate owned includes real estate that has been acquired in full or partial
satisfaction of loan obligations or upon foreclosure and real estate that the
bank has purchased but no longer intends to use for bank premises.
The following table summarizes nonperforming assets (000's omitted):
June 30, December 31,
2006 2005
-------- ------------
Nonaccrual loans $22,132 $16,212
Loans 90 days past due 85 101
Restructured loans 2,485 1,813
------- -------
Total nonperforming loans $24,702 $18,126
Other real estate owned 7,748 8,336
------- -------
Total nonperforming assets $32,450 $26,462
======= =======
Nonperforming assets to total assets 2.03% 1.62%
Allowance for loan losses to
nonperforming assets 53.94% 51.49%
4. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses was as follows (000's omitted):
June 30, December 31,
2006 2005
-------- ------------
Balance beginning of year $13,625 $13,800
Provision for loan losses 7,350 6,906
Loans charged off (4,625) (9,340)
Transfer to establish reserve for
unfunded loan commitments -- (275)
Recoveries 1,152 2,534
------- -------
Balance end of period $17,502 $13,625
======= =======
For each period, the provision for loan losses in the income statement is based
on Management's estimate of the amount required to maintain an adequate
Allowance for Loan Losses.
-11-
MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
To serve as a basis for making this provision, the Bank maintains an extensive
credit risk monitoring process that considers several factors including: current
economic conditions affecting the Bank's customers, the payment performance of
individual loans and pools of homogeneous loans, portfolio seasoning, changes in
collateral values, and detailed reviews of specific loan relationships. For
loans deemed to be impaired due to an expectation that all contractual payments
will probably not be received, impairment is measured by comparing the Bank's
recorded investment in the loan to the present value of expected cash flows
discounted at the loan's effective interest rate, or the fair value of the
collateral, or the loan's observable market price.
The provision for loan losses increases the Allowance for Loan Losses, a
valuation account which is netted against loans on the consolidated statements
of condition. When it is determined that a customer will not repay a loan, the
loan is charged off, reducing the Allowance for Loan Losses. If, subsequent to a
charge off, the Bank is able to collect additional amounts from the customer or
sell collateral worth more than earlier estimated, a recovery is recorded.
5. INVESTMENT SECURITIES
The following is a summary of the Bank's investment securities portfolio as of
June 30, 2006 and December 31, 2005 (000's omitted):
June 30, 2006 December 31, 2005
------------------------ ------------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
--------- ------------ --------- ------------
Held to Maturity
Obligations of U.S. Government Agencies $ 11 $ 11 $ 11 $ 12
Obligations of States and Political
Subdivisions 62,517 62,873 76,456 77,293
Other Securities -- -- -- --
------- ------- ------- -------
$62,528 $62,884 $76,467 $77,305
======= ======= ======= =======
June 30, 2006 December 31, 2005
------------------------ ------------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
--------- ------------ --------- ------------
Available for Sale
Obligations of U.S. Government Agencies $328,122 $317,143 $358,412 $351,074
Obligations of States and Political
Subdivisions 24,513 24,010 26,206 26,081
Other Securities 38,289 37,537 67,098 66,866
-------- -------- -------- --------
$390,924 $378,690 $451,716 $444,021
======== ======== ======== ========
The increase in unrealized losses on investment securities is primarily the
result of increases in market interest rates and not the result of credit
quality of the issuers of the securities. The Company has the ability and intent
to hold most of these securities until recovery, which may be until maturity.
For securities in which the Company no longer has the intent to hold until
recovery, the securities are treated as other than temporarily impaired and the
amount of impairment is charged to earnings. In June 2006, the Company decided
to sell $83.25 million of investment securities at a loss of $4.99 million.
Although this transaction was not completed until the third quarter, a charge to
recognize the impairment was recorded in the second quarter.
-12-
MBT FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Those instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the consolidated
statements of condition.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those instruments.
The Bank uses the same credit policies in making commitments and conditional
obligations as it does for its other lending activities.
Financial instruments whose contractual amounts represent off-balance sheet
credit risk were as follows (000s omitted):
CONTRACTUAL AMOUNT
-----------------------
JUNE 30, DECEMBER 31,
2006 2005
-------- ------------
Commitments to extend credit:
Unused portion of commercial lines of credit $102,820 $130,496
Unused portion of credit card lines of credit 7,501 7,529
Unused portion of home equity lines of credit 20,674 20,258
Standby letters of credit and financial guarantees written 13,250 12,736
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Most
commercial lines of credit are secured by real estate mortgages or other
collateral, and generally have fixed expiration dates or other termination
clauses. Since the lines of credit may expire without being drawn upon, the
total committed amounts do not necessarily represent future cash requirements.
Credit card lines of credit have various established expiration dates, but are
fundable on demand. Home equity lines of credit are secured by real estate
mortgages, a majority of which have ten year expiration dates, but are fundable
on demand. The Bank evaluates each customer's creditworthiness on a case-by-case
basis. The amount of the collateral obtained, if deemed necessary by the Bank
upon extension of credit, is based on Management's credit evaluation of the
counterparty.
Standby letters of credit written are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements and
other business transactions.
-13-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
MBT Financial Corp. (the "Company) is a bank holding company with one
subsidiary, Monroe Bank & Trust ("the Bank"). The Bank is a commercial bank with
two wholly owned subsidiaries, MBT Credit Company, Inc. and MB&T Financial
Services. MBT Credit Company, Inc. conducts lending operations for the Bank and
MB&T Financial Services is an insurance agency which sells insurance policies to
the Bank. The Bank operates 20 branch offices in Monroe County, Michigan and 5
offices in Wayne County, Michigan. The Bank's primary source of income is
interest income on its loans and investments and its primary expense is interest
expense on its deposits and borrowings.
Certain statements contained herein are not based on historical facts and are
"forward-looking statements" within the meaning of Section 21A of the Securities
Exchange Act of 1934. Forward-looking statements which are based on various
assumptions (some of which are beyond the Company's control), may be identified
by reference to a future period or periods, or by the use of forward-looking
terminology, such as "may," "will," "believe," "expect," "estimate,"
"anticipate," "continue," or similar terms or variations on those terms, or the
negative of these terms. Actual results could differ materially from those set
forth in forward-looking statements, due to a variety of factors, including, but
not limited to, those related to the economic environment, particularly in the
market areas in which the Company operates, competitive products and pricing,
fiscal and monetary policies of the U.S. Government, changes in government
regulations affecting financial institutions, including regulatory fees and
capital requirements, changes in prevailing interest rates, acquisitions and the
integration of acquired businesses, credit risk management, asset/liability
management, changes in the financial and securities markets, including changes
with respect to the market value of our financial assets, the availability of
and costs associated with sources of liquidity, and the ability of the Company
to resolve or dispose of problem loans.
The Company does not undertake, and specifically disclaims any obligation, to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
Critical Accounting Policies
The Company's Allowance for Loan Losses is a "critical accounting estimate"
because it is an estimate that is based on assumptions that are highly
uncertain, and if different assumptions were used or if any of the assumptions
used were to change, there could be a material impact on the presentation of the
Company's financial condition. These assumptions include, but are not limited
to, collateral values and the effect of economic conditions on the financial
condition of the borrowers. To determine the Allowance for Loan Losses, the
Company estimates losses on all loans that are not classified as non accrual or
renegotiated by applying historical loss rates to those loans in accordance with
SFAS 5. In addition, all loans that are non accrual or renegotiated are
individually tested for impairment. Any amount of monetary impairment is
included in the Allowance for Loan Losses in accordance with SFAS 114.
Financial Condition
During the first six months of 2006, the Company's local deposit market became
increasingly competitive, with some banks offering retail rates higher than
national market rates for money market deposits and higher than wholesale or
brokered rates for certificates of deposit. The flat yield curve has narrowed
the spread between bank asset yields and funding costs, so the Company has
adopted two strategies to control the decline in its net interest margin. The
first
-14-
part of the strategy is to change the mix of assets, decreasing the percent
invested in securities and increasing the percent invested in loans. The Company
successfully increased its loans to assets ratio from 60.4% at December 31, 2005
to 64.1% at June 30, 2006, and the yield on earning assets increased from 5.85%
in the first half of 2005 to 6.33% for the first half of 2006. The second part
of the strategy to control the decline in the net interest margin is to limit
the increase in the cost of funds by keeping deposit rates close to national
averages instead of participating in the locally high pricing. As expected, this
has caused a decrease in the amount of deposits. Total deposits decreased $68.7
million, or 5.8% in the first six months of 2006.
Since December 31, 2005, total loans increased $35.5 million (3.6%), total cash
and investments decreased $85.6 million (15.0%), and total assets decreased
$39.7 million (2.4%). Loan growth efforts are focused on real estate secured
loans, particularly home equity lending. The loan growth and the decline in
deposits were funded by the decrease in investment securities and an increase in
short term borrowings. Also, capital decreased $12.8 million, or 8.4% as the
company repurchased 337,174 shares of its stock for $5.7 million, the unrealized
loss on securities available for sale increased $2.9 million, and dividends
declared exceeded net income by $4.6 million. The capital to assets ratio
decreased from 9.25% at December 31, 2005 to 8.68% at June 30, 2006, but it
remains above industry standards.
The amount of nonperforming assets ("NPAs") increased $6.0 million or 22.6%
since year end as one credit relationship valued at $8.5 million returned to non
accrual status in the second quarter. Primarily due to that credit, the Company
increased its Allowance for Loan and Lease Losses ("ALLL") $3.9 million since
December 31, 2005. The ALLL is now 1.71% of loans, compared to 1.38% at year
end. The ALLL is 53.9% of NPAs, an increase from 51.5% at year end. Because a
significant portion of the Bank's lending is secured by real estate, we believe
that at this level the ALLL adequately estimates the losses in the loan
portfolio. We plan to continue to analyze various strategies to reduce the
amount of NPAs in the second half of 2006.
Results of Operations - Second Quarter 2006 vs. Second Quarter 2005
Net Interest Income - A comparison of the income statements for the three months
ended June 30, 2006 and 2005 shows a decrease of $769,000, or 6.1% in Net
Interest Income. Interest income on loans increased $2.1 million or 13.5% as the
average loans outstanding increased $63.6 million and the average yield on loans
increased from 6.61% to 7.04%. Interest income on investments and fed funds sold
decreased $98,000 as the average amount of investments and fed funds sold
decreased $37.3 million and the yield on these assets only increased from 4.72%
to 5.00%. The yields on assets increased slightly due to the increases in market
interest rates. The shorter term market interest rates increased more rapidly
than the longer term rates, which caused funding costs to rise faster than asset
yields. The interest expense on deposits increased $1.8 million, or 32.5% as
average deposits increased $38.9 million and the average cost of those deposits
increased from 1.99% to 2.61%. The cost of borrowed funds increased $1.0 million
as the average amount of borrowed funds increased $28.5 million and the average
cost of the borrowings increased from 4.86% to 5.65%. The fed rate increases
that began late in the second quarter of 2004 and continued through the second
quarter of 2006 had a positive impact on our income as our loan portfolio
contains approximately $230 million of variable rate, prime indexed loans and
our investment portfolio contains about $26 million in LIBOR based floating rate
securities. The increase in interest rates only affected short term rates, and
this flattening of the yield curve prevented our loan and investment yields from
increasing more.
Provision for Loan Losses - The Provision for Loan Losses increased from
$600,000 in the second quarter of 2005 to $6,675,000 in the second quarter of
2006 to provide for the potential loss on a single credit that returned to non
performing status in 2006. Net charge offs were $3.4 million and non performing
assets increased $5.6 million during the second quarter of 2006. Each quarter,
the Company conducts a review and analysis of its ALLL to ensure its adequacy.
-15-
This analysis involves specific allocations for impaired credits and a general
allocation for losses expected based on historical experience adjusted for
current conditions.
Other Income - Non interest income, excluding securities gains and losses,
increased $146,000 or 4.1% in the second quarter of 2006 compared to the second
quarter of 2005. The table below compares the components of Other Income for the
two quarters:
Quarters Ended
---------------------
(Dollars in Thousands) 6/30/2006 6/30/2005 % Change
--------- --------- --------
Trust Income $ 1,070 $1,024 4.5%
Deposit Account Service Charges 259 291 -11.0%
Other Deposit Account Related Fees 1,307 1,178 11.0%
Origination Fees/Gains on Loans Sold 136 198 -31.3%
Gains (Losses) on Securities Transactions (4,927) 123 -4105.7%
BOLI Earnings 292 274 6.6%
Other Income 623 576 8.2%
------- ------ -------
$(1,240) $3,664 -133.8%
In June 2006, the Company decided to restructure a portion of its investment
portfolio. The restructuring involved selling callable federal agency debt
securities with a par value of $83.25 million and a weighted average yield of
approximately 4%. This sale was completed early in July, resulting in a loss of
$4.99 million. The securities were classified as Available for Sale, and because
the Company no longer had the intent to hold the securities until the fair value
recovered, the impairment was recognized through a charge to earnings in the
second quarter of 2005. After the sale was completed, the Company purchased $80
million of federal agency securities that included callable debt securities,
amortizing notes, and mortgage backed securities. These replacement securities
have a weighted average yield of approximately 6.5%, and compared to the assets
they replaced, they have higher coupons and longer call protection or
amortization of principal. These features will reduce the amount of call risk
and the amount of extension risk in the Company's investment portfolio. This
restructuring is expected to improve interest income by over $400,000 in the
third quarter of 2006.
The Deposit Account Service Charges decreased as more customers moved to our
free checking product that was introduced in 2004. Also, as interest rates rise,
the earnings credit on business accounts offsets more of the service charge
income. Other Deposit Account Related Fees, which primarily consists of NSF and
Stop Payment fees increased $129,000, or 11.0%. Origination Fees and Gains on
Mortgage Loans Sold decreased as increasing mortgage rates began to slow
refinance activity and housing market activity began to decrease. Other income
increased due to increased ATM and debit card activity.
Other Expenses - Total non interest expenses increased $1.8 million or 22.4%
compared to the second quarter of 2005. Excluding gains, losses, and expenses
associated with Other Real Estate Owned ("OREO"), non interest expenses
increased $400,000 or 4.9%. Salaries and Employee Benefits increased $465,000,
or 9.5%, as the adoption of FAS 123(R) required expensing $120,000 for our stock
based compensation plan and the cost of life insurance programs increased
$204,000. Occupancy Expense decreased $123,000, or 14.7%, compared to the second
quarter of 2005. In the second quarter of 2005 the Company accelerated the
depreciation of a parking lot that is now the site of our future headquarters
building. The following table compares the components of the Other Expenses for
the two quarters:
-16-
Quarters Ended
---------------------
(Dollars in Thousands) 6/30/2006 6/30/2005 % Change
--------- --------- --------
Business Development $ 345 $ 342 0.9%
Insurance 116 107 8.4%
Printing and Office Supplies 151 141 7.1%
Equipment 425 418 1.7%
Computer and Software 322 311 3.5%
Professional Fees 288 408 -29.4%
OREO Losses (Gains) and expenses 1,411 (31) -4651.6%
Other Expenses 942 804 17.2%
------ ------ -------
$4,000 $2,500 60.0%
Other Expenses increased $1.5 million or 60.0% primarily due to the increase of
$1.4 million in OREO losses and expenses. In the second quarter of 2006, the
Company wrote down the value of one its largest OREO properties by $1.0 million
as it accepted an offer for the property. That transaction is expected to close
in the third quarter, which will reduce NPAs by another $2.3 million.
As a result of the above activity, the Income Before Income Taxes decreased
$13.6 million to a loss of $6.0 million. The Income Tax decreased $4.6 million
from an expense of $2.2 million to a benefit of $2.4 million, and reflects an
effective tax rate of 40.8% compared to the effective tax rate of 28.8% in the
second quarter of 2005. The Net Loss of $3.6 million is a decrease of $8.9
million from the Income of $5.4 earned in the second quarter of 2005.
Results of Operations - Year to Date June 30, 2006 vs. June 30, 2005
Net Interest Income - A comparison of the income statements for the six months
ended June 30, 2006 and 2005 shows a decrease of $1.2 million, or 4.8% in Net
Interest Income. Interest income on loans increased $4.3 million or 13.8% as the
average loans outstanding increased $55.7 million and the average yield on loans
increased from 6.52% to 7.01%. Interest income on investments and fed funds sold
increased $575,000 as the average amount of investments and fed funds sold
decreased $15.6 million but the yield on these assets increased from 4.63% to
5.00%. The interest expense on deposits increased $4.4 million, or 41.9% as
average deposits increased $32.5 million and the average cost of those deposits
increased from 1.89% to 2.60%. The cost of borrowed funds increased $1.7 million
as the average amount of borrowed funds increased $20.5 million and the average
cost of the borrowings increased from 4.81% to 5.57%.
Provision for Loan Losses - The Provision for Loan Losses increased from $1.2
million in 2005 to $7.4 million in 2006 due to loan growth and to provide for
the potential loss on a single credit that returned to non performing status in
2006. Net charge offs were $3.5 million in 2006, an increase of 1.3 million, or
61.5% compared to the first six months of 2005.
Other Income - Non interest income, excluding securities gains and losses,
increased $427,000 or 6.3% compared to the first six months of 2005. The
following table compares the components of Other Income for the two periods:
-17-
Six Months Ended
---------------------
(Dollars in Thousands) 6/30/2006 6/30/2005 % Change
--------- --------- --------
Trust Income $ 2,132 $2,087 2.2%
Deposit Account Service Charges 534 607 -12.0%
Other Deposit Account Related Fees 2,496 2,169 15.1%
Origination Fees on Loans Sold 276 304 -9.2%
Gains (Losses) on Securities Transactions (4,907) 286 -1815.7%
BOLI Earnings 575 548 4.9%
Other Income 1,238 1,109 11.6%
------- ------ -------
$ 2,344 $7,110 -67.0%
In June 2006, the Company decided to restructure a portion of its investment
portfolio. The restructuring involved selling callable federal agency debt
securities with a par value of $83.25 million and a weighted average yield of
approximately 4%. This sale was completed early in July, resulting in a loss of
$4.99 million. The securities were classified as Available for Sale, and because
the Company no longer had the intent to hold the securities until the fair value
recovered, the impairment was recognized through a charge to earnings in the
second quarter of 2005. After the sale was completed, the Company purchased $80
million of federal agency securities that included callable debt securities,
amortizing notes, and mortgage backed securities. These replacement securities
have a weighted average yield of approximately 6.5%, and compared to the assets
they replaced, they have higher coupons and longer call protection or
amortization of principal. These features will reduce the amount of call risk
and the amount of extension risk in the Company's investment portfolio. This
restructuring is expected to improve interest income by over $400,000 in the
third quarter of 2006.
The Deposit Account Service Charges decreased as customers continue to move to
our free checking product that was introduced in 2004. Also, as interest rates
rise, the earnings credit on business accounts offsets more of the service
charge income. Other Deposit Account Related Fees, which primarily consists of
NSF and Stop Payment fees increased $327,000, or 15.1%. Origination Fees and
Gains on Mortgage Loans Sold decreased as increasing mortgage rates began to
slow refinance activity and housing market activity began to decrease. Other
income increased due to increased ATM and debit card activity.
Other Expenses - Total non interest expenses increased $1.6 million or 9.5%
compared to the first six months of 2005. Excluding gains, losses, and expenses
associated with OREO, non interest expenses increased $193,000 or 1.1%. Salaries
and Employee Benefits increased $971,000, or 10.2%, as the adoption of FAS
123(R) required expensing $240,000 for our stock based compensation plan,
salaries increased $123,000, incentive plan expense increased $158,000, the cost
of life insurance programs increased $205,000, and medical and disability
insurance increased $91,000. Occupancy Expense decreased $305,000, or 17.1%,
compared to the first six months of 2005. In 2005 the Company accelerated the
depreciation of a parking lot that is now the site of our future headquarters
building. The following table compares the components of the Other Expenses for
the two six month periods:
-18-
Six Months Ended
---------------------
(Dollars in Thousands) 6/30/2006 6/30/2005 % Change
--------- --------- --------
Business Development $ 718 $ 633 13.4%
Insurance 176 289 -39.1%
Printing and Office Supplies 276 361 -23.5%
Equipment 862 888 -2.9%
Computer and Software 683 642 6.4%
Professional Fees 616 885 -30.4%
OREO Losses (Gains) and expenses 1,419 10 14090.0%
Other Expenses 1,794 1,900 -5.6%
------ ------ -------
$6,544 $5,608 16.7%
Liquidity and Capital
The Company has maintained sufficient liquidity to fund its loan growth and
allow for fluctuations in deposit levels. Internal sources of liquidity are
provided by the maturities of loans and securities as well as holdings of
securities Available for Sale. External sources of liquidity include a line of
credit with the Federal Home Loan Bank of Indianapolis, the Federal funds lines
that have been established with correspondent banks, and Repurchase Agreements
with money center banks that allow us to pledge securities as collateral for
borrowings. As of June 30, 2006, the Bank utilized $256.5 million of its
authorized limit of $275 million with the Federal Home Loan Bank of Indianapolis
and $35.2 million of its $110 million of federal funds lines with its
correspondent banks.
Total stockholders' equity of the Company was $138.84 million at June 30, 2006
and $151.6 million at December 31, 2005. The ratio of equity to assets was 8.7%
at June 30, 2006 and 9.3% at December 31, 2005. Federal bank regulatory agencies
have set capital adequacy standards for Total Risk Based Capital, Tier 1 Risk
Based Capital, and Leverage Capital. These standards require banks to maintain
Leverage and Tier 1 ratios of at least 4% and a Total Capital ratio of at least
8% to be adequately capitalized. The regulatory agencies consider a bank to be
well capitalized if its Total Risk Based Capital is at least 10% of Risk
Weighted Assets, Tier 1 Capital is at least 6% of Risk Weighted Assets, and the
Leverage Capital Ratio is at least 5%.
The following table summarizes the capital ratios of the Company:
Minimum to be
June 30, 2006 December 31, 2005 Well Capitalized
------------- ----------------- ----------------
Leverage Capital 9.1% 9.6% 5.0%
Tier 1 Risk Based Capital 12.9% 13.7% 6.0%
Total Risk Based Capital 14.2% 15.0% 10.0%
At June 30, 2006 and December 31, 2005, the Bank was in compliance with the
capital guidelines and is considered "well-capitalized" under regulatory
standards.
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 2005.
-19-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Bank faces market risk to the extent that the fair values of its financial
instruments are affected by changes in interest rates. The Bank does not face
market risk due to changes in foreign currency exchange rates, commodity prices,
or equity prices. The asset and liability management process of the Bank seeks
to monitor and manage the amount of interest rate risk. This is accomplished by
analyzing the differences in repricing opportunities for assets and liabilities,
by simulating operating results under varying interest rate scenarios, and by
estimating the change in the net present value of the Bank's assets and
liabilities due to interest rate changes.
Each month, the Asset and Liability Committee (ALCO), which includes the senior
management of the Bank, estimates the effect of interest rate changes on the
projected net interest income of the Bank. The sensitivity of the Bank's net
interest income to changes in interest rates is measured by using a computer
based simulation model to estimate the impact on earnings of a gradual increase
or decrease of 100 basis points in the prime rate. The net interest income
projections are compared to a base case projection, which assumes no changes in
interest rates.
The Bank's ALCO has established limits in the acceptable amount of interest rate
risk, as measured by the change in the Bank's projected net interest income, in
its policy. Throughout the first six months of 2006, the estimated variability
of the net interest income was within the Bank's established policy limits.
The ALCO also monitors interest rate risk by estimating the effect of changes in
interest rates on the economic value of the Bank's equity each month. The actual
economic value of the Bank's equity is first determined by subtracting the fair
value of the Bank's liabilities from the fair value of the Bank's assets. The
fair values are determined in accordance with Statement of Financial Accounting
Standards Number 107, Disclosures about Fair Value of Financial Instruments. The
Bank estimates the interest rate risk by calculating the effect of market
interest rate shocks on the economic value of its equity. For this analysis, the
Bank assumes immediate parallel shifts of plus or minus 100 and 200 basis points
in interest rates. The discount rates used to determine the present values of
the loans and deposits, as well as the prepayment rates for the loans, are based
on Management's expectations of the effect of the rate shock on the market for
loans and deposits.
The Bank's ALCO has established limits in the acceptable amount of interest rate
risk, as measured by the change in economic value of the Bank's equity, in its
policy. Throughout the first six months of 2006, the estimated variability of
the economic value of equity was within the Bank's established policy limits.
The Bank's interest rate risk, as measured by the net interest income and
economic value of equity simulations, has not changed significantly from
December 31, 2005.
ITEM 4. CONTROLS AND PROCEDURES
The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures as of
June 30, 2006, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective as of June 30, 2006,
in alerting them in a timely manner to material information relating to the
Company (including its consolidated subsidiaries) required to be included in the
Company's periodic SEC filings.
-20-
There was no change in the Company's internal control over financial reporting
that occurred during the Company's fiscal quarter ended June 30, 2006, that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
MBT Financial Corp. and its subsidiaries are not a party to, nor is any of their
property the subject of any material legal proceedings other than ordinary
routine litigation incidental to their respective businesses, nor are any such
proceedings known to be contemplated by governmental authorities.
ITEM 1A. RISK FACTORS
There have been no material changes in the risk factors disclosed by the Company
in its Report on Form 10-K for the fiscal year ended December 31, 2005.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The Company has a stock repurchase program which it publicly announced on
January 5, 2006. On that date, the Board of Directors authorized the repurchase
of 2 million of the Company's common shares, which authorization will expire on
December 31, 2006. The following table summarizes the repurchase activity of the
Company's stock during the three months ended June 30, 2006:
Total Number of Shares Maximum Number of
Average Purchased as Part of Shares that May Yet
Total Number of Price Paid Publicly Announced Be Purchased Under
Shares Purchased per Share Plans or Programs the Plans or Programs
---------------- ---------- ---------------------- ---------------------
April 1, 2006 - April 30, 2006 35,974 $16.16 35,974 1,819,926
May 1, 2006 - May 31, 2006 107,400 $16.30 107,400 1,712,526
June 1, 2006 - June 30, 2006 49,700 $16.41 49,700 1,662,826
------- ------ -------
Total 193,074 $16.30 193,074
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of MBT Financial Corp. was held on May 4,
2006. The following directors were elected to a new term of office:
Peter H. Carlton
H. Douglas Chaffin
Joseph S. Daly
Thomas M. Huner
Rocque E. Lipford
William D. McIntyre, Jr.
Michael J. Miller
Debra J. Shah
Philip P. Swy
Karen M. Wilson
-21-
The Annual Meeting of Shareholders of MBT Financial Corp. was held for the
following purposes:
1. To elect a Board of Directors for the ensuing year;
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The results of the voting are as follows:
Proposal 1, Election of Directors:
Withhold
For Authority
---------- ---------
Peter H. Carlton 13,733,028 267,150
H. Douglas Chaffin 13,828,042 172,136
Joseph S. Daly 13,394,474 605,704
Thomas M. Huner 13,788,350 211,828
Rocque E. Lipford 11,421,280 2,578,898
William D. McIntyre, Jr. 12,677,943 1,322,235
Michael J. Miller 13,823,985 176,193
Debra J. Shah 13,357,348 642,830
Philip P. Swy 13,740,953 259,225
Karen M. Wilson 13,396,277 603,901
ITEM 5. OTHER INFORMATION
No matters to be reported.
ITEM 6. EXHIBITS
The following exhibits are filed as a part of this report:
3.1 Restated Articles of Incorporation of MBT Financial Corp. Previously filed
as Exhibit 3.1 to MBT Financial Corp.'s Form 10-K for its fiscal year ended
December 31, 2000.
3.2 Amended and Restated Bylaws of MBT Financial Corp. Previously filed as
Exhibit 3.2 to MBT Financial Corp.'s Form 10-K for its fiscal year ended
December 31, 2004.
31.1 Certification by Chief Executive Officer required by Securities and
Exchange Commission Rule 13a-14.
31.2 Certification by Chief Financial Officer required by Securities and
Exchange Commission Rule 13a-14.
32.1 Certification by Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification by Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
-22-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MBT Financial Corp.
(Registrant)
August 7, 2006 By /s/ H. Douglas Chaffin
Date -------------------------------------
H. Douglas Chaffin
President &
Chief Executive Officer
August 7, 2006 By /s/ John L. Skibski
Date -------------------------------------
John L. Skibski
Executive Vice President and
Chief Financial Officer
-23-
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
- ------- -----------------------
3.1 Restated Articles of Incorporation of MBT Financial Corp. Previously
filed as Exhibit 3.1 to MBT Financial Corp.'s Form 10-K for its fiscal
year ended December 31, 2000.
3.2 Amended and Restated Bylaws of MBT Financial Corp. Previously filed as
Exhibit 3.2 to MBT Financial Corp.'s Form 10-K for its fiscal year
ended December 31, 2004.
31.1 Certification by Chief Executive Officer required by Securities and
Exchange Commission Rule 13a-14.
31.2 Certification by Chief Financial Officer required by Securities and
Exchange Commission Rule 13a-14.
32.1 Certification by Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification by Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.