MBT Financial Corp. Reports Third Quarter 2006 Loss

MONROE, Mich., Oct. 19 /PRNewswire-FirstCall/ -- MBT Financial Corp., , the parent company of Monroe Bank & Trust, reported a third quarter net loss of $1,118,000, or $0.07 per share, basic and diluted. This is consistent with our estimate of a six to nine cent loss that was announced on September 28, and is a decrease from the $0.15 per share profit earned in the third quarter of 2005. Year to date earnings were $32,000, down from $12.8 million in the first nine months of 2005 ($0.00 versus $0.74 per share, basic and diluted). The loss in the third quarter was due to the previously announced sale of $25 million of problem credit assets at a loss of $10.4 million. The sale included non performing loans, performing loans, and Other Real Estate Owned (OREO).

H. Douglas Chaffin, President and CEO, commented, "In the third quarter we decided to aggressively reduce our non performing assets by selling a large pool of credit related assets at auction. Although we improved our lending policies, procedures, and staff over the past few years, we continued to struggle with resolving some long time problem credit relationships. This sale eliminated credits within our portfolio that we considered to have the most significant downside risk. This will enable us to focus on our remaining problem and NPA portfolio through more traditional methods." Non performing assets decreased from $32.5 million to $19.3 million during the third quarter and now represent 1.21% of total assets compared to 2.03% as of June 30, 2006. The Allowance for Loan Losses is $13.5 million, or 1.34% of total loans as of September 30, 2006.

Mr. Chaffin further commented on the Company's core earnings for the quarter. "Net Interest Income decreased $1.7 million compared to the third quarter of 2005. The persistent flattening of the yield curve that began early in 2005 continues to put significant pressure on our net interest margin, with our funding costs rising considerably faster than our asset yields. We have attempted to manage the increase in our funding costs by pricing our deposit products to be more closely aligned with the national market, which is low in relation to our local competition. This has restricted our deposit growth. However, we continue to experience growth in non interest income even though local economic conditions are causing a decrease in mortgage origination activity and fees. Excluding mortgage origination fees and securities gains and losses, all other non interest income increased 2.9% compared to the third quarter of 2005."

Mr. Chaffin added, "The interest rate environment and the economic conditions in southeast Michigan are not favorable for bank growth. We do see some areas of growth in our markets, and we opened a new branch on the west side of Dundee this week. Dundee is the fastest growing community in Monroe County, and we are proud to be the first bank to serve that community with two branches. In addition, we are pleased to announce that we will be making an investment in a new bank that is being formed in Oakland County. We will be a minority shareholder in First Michigan Bancorp, Inc., the parent of First Michigan Bank (FMB), which recently received regulatory approval. We look forward to a prosperous relationship with FMB. Although our investment is a relatively small one at less than 5% of the Initial Public Offering, we expect to be able to provide assistance to them by participating on their larger credit relationships. Our Downriver offices continue to provide a significant portion of new loan volume as we continue to grow market share among traditional commercial and industrial businesses. We also recently moved into our new headquarters building in downtown Monroe. The new building adds approximately 45,000 square feet of office space and it houses our commercial loan, wealth management, and various administrative departments."

Total assets were $1.59 billion at September 30, 2006, a decrease of 1.4% from a year earlier. Loans grew $36.0 million, or 3.7% over the year, funded by a decrease of $61.1 million in investment securities. Deposits decreased $20.6 million, or 1.8% over the same period. Shareholders' equity at September 30, 2006 was $140.0 million, a twelve-month decrease of $14.2 million due to the decrease in the market value of securities available for sale and the repurchase of over 426,000 shares of stock over the past twelve months. Average equity to assets for the third quarter was 8.93% and total shares outstanding at quarter end were 16,873,671. Mr. Chaffin concluded, "Our strong capital position makes it possible for us to take advantage of strategic opportunities, such as the NPA sale, First Michigan investment, Dundee branch, and new headquarters. It also helps us get through difficult economic periods while continuing to provide our shareholders with strong dividend performance. We recently increased our quarterly dividend for the 24th consecutive year, and we continued to be classified as 'well capitalized' by the banking regulators."

Conference Call

MBT Financial Corp. will hold a conference call to discuss third quarter results on Friday, October 20, at 10:00 a.m. Eastern Time. The call will be webcast and can be accessed at the Investor Relations/Corporate Profile page of MBT Financial Corp.'s web site http://www.mbandt.com/ . The call can also be accessed by calling [phone]. The event will be archived on the Company's web site and available for three months following the call.

About the Company

MBT Financial Corp., a single bank holding company headquartered in Monroe, Michigan is the parent company of Monroe Bank & Trust (MBT). Founded in 1858, MBT is one of the largest community banks in Southeast Michigan, with $1.6 billion in assets. MBT is a full service bank offering personal and business accounts and complete credit options, and MBT's Wealth Management Group is one of the largest in the area. With 26 offices, 39 ATMs, PhoneLink telephone banking and eLink online banking, MBT prides itself on an incomparable level of service and access for its customers. Visit MBT's web site at http://www.mbandt.com/ .

Forward-Looking Statements

Certain statements contained herein are not based on historical facts and are "forward-looking statements" within the meaning of Section 21A of the Securities Exchange Act of 1934. Forward-looking statements which are based on various assumptions (some of which are beyond the Company's control), may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "estimate," "anticipate," "continue," or similar terms or variations on those terms, or the negative of these terms. Actual results could differ materially from those set forth in forward-looking statements, due to a variety of factors, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset/liability management, change 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 undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

MBT FINANCIAL CORP. CONSOLIDATED FINANCIAL HIGHLIGHTS - UNAUDITED Quarterly (dollars in thousands except 2006 2006 2006 per share data) 3rd Qtr 2nd Qtr 1st Qtr EARNINGS Net interest income $11,380 $11,922 $12,168 FTE Net interest income $11,803 $12,369 $12,650 Provision for loan and lease losses $7,950 $6,675 $675 Non-interest income $3,723 $(1,240) $3,584 Non-interest expense $9,418 $10,052 $8,489 Net income (loss) $(1,118) $(3,576) $4,726 Basic earnings (loss) per share $(0.07) $(0.21) $0.28 Diluted earnings (loss) per share $(0.07) $(0.21) $0.28 Average shares outstanding 16,872,826 16,969,365 17,111,913 Average diluted shares outstanding 16,894,504 17,000,563 17,162,737 PERFORMANCE RATIOS Return on average assets -0.28% -0.90% 1.17% Return on average common equity -3.15% -9.61% 12.67% Base Margin 2.95% 3.08% 3.13% FTE Adjustment 0.11% 0.12% 0.13% Loan Fees 0.10% 0.09% 0.09% FTE Net Interest Margin 3.16% 3.29% 3.35% Efficiency ratio 55.94% 53.73% 52.22% Full-time equivalent employees 416 418 416 CAPITAL Average equity to average assets 8.93% 9.34% 9.27% Book value per share $8.30 $8.23 $8.76 Cash dividend per share $0.18 $0.17 $0.17 ASSET QUALITY Loan Charge-Offs $12,407 $3,880 $744 Loan Recoveries $497 $504 $648 Net Charge-Offs $11,910 $3,376 $96 Allowance for loan and lease losses $13,542 $17,502 $14,204 Nonaccrual Loans $13,334 $22,132 $16,553 Loans 90 days past due $99 $85 $91 Restructured loans $944 $2,485 $1,847 Total nonperforming loans $14,377 $24,702 $18,491 Other real estate owned $4,873 $7,748 $8,395 Nonperforming investment securities $- $- $- Total nonperforming assets $19,250 $32,450 $26,886 Problem Loans Still Performing $39,782 $55,202 $63,937 Total problem assets $59,032 $87,652 $90,823 Net loan charge-offs to average loans 4.61% 1.33% 0.04% Allowance for losses to total loans 1.34% 1.71% 1.42% Nonperforming assets to Gross Loans 1.91% 3.17% 2.68% Nonperforming assets to total assets 1.21% 2.03% 1.66% Allowance to nonperforming assets 70.35% 53.94% 52.83% END OF PERIOD BALANCES Loans and leases $1,008,914 $1,024,813 $1,003,757 Total earning assets $1,473,804 $1,479,252 $1,509,020 Total assets $1,588,374 $1,598,665 $1,615,099 Deposits $1,124,784 $1,116,030 $1,147,385 Interest Bearing Liabilities $1,284,862 $1,305,280 $1,294,008 Shareholders' equity $140,017 $138,823 $149,392 Total Shares Outstanding 16,873,671 16,871,683 17,059,170 AVERAGE BALANCES Loans and leases $1,025,729 $1,017,097 $997,756 Total earning assets $1,480,840 $1,506,062 $1,530,018 Total assets $1,578,802 $1,597,107 $1,631,602 Deposits $1,113,447 $1,115,672 $1,171,907 Interest Bearing Liabilities $1,291,485 $1,298,117 $1,308,967 Shareholders' equity $140,954 $149,195 $151,268 Quarterly (dollars in thousands except 2005 2005 per share data) 4th Qtr 3rd Qtr EARNINGS Net interest income $12,686 $13,113 FTE Net interest income $13,243 $13,659 Provision for loan and lease losses $1,606 $4,100 Non-interest income $3,656 $3,683 Non-interest expense $7,856 $9,023 Net income (loss) $5,160 $2,571 Basic earnings (loss) per share $0.30 $0.15 Diluted earnings (loss) per share $0.29 $0.15 Average shares outstanding 17,222,943 17,282,699 Average diluted shares outstanding 17,274,577 17,366,349 PERFORMANCE RATIOS Return on average assets 1.26% 0.64% Return on average common equity 13.22% 6.45% Base Margin 3.20% 3.32% FTE Adjustment 0.14% 0.14% Loan Fees 0.11% 0.15% FTE Net Interest Margin 3.45% 3.61% Efficiency ratio 45.10% 43.09% Full-time equivalent employees 413 421 CAPITAL Average equity to average assets 9.54% 9.88% Book value per share $8.82 $8.93 Cash dividend per share $0.17 $0.17 ASSET QUALITY Loan Charge-Offs $1,423 $4,575 Loan Recoveries $877 $465 Net Charge-Offs $546 $4,110 Allowance for loan and lease losses $13,625 $12,565 Nonaccrual Loans $16,212 $14,872 Loans 90 days past due $101 $100 Restructured loans $1,813 $2,731 Total nonperforming loans $18,126 $17,703 Other real estate owned $8,336 $8,894 Nonperforming investment securities $- $- Total nonperforming assets $26,462 $26,597 Problem Loans Still Performing $64,041 $57,504 Total problem assets $90,503 $84,101 Net loan charge-offs to average loans 0.22% 1.70% Allowance for losses to total loans 1.38% 1.29% Nonperforming assets to Gross Loans 2.67% 2.73% Nonperforming assets to total assets 1.62% 1.65% Allowance to nonperforming assets 51.49% 47.24% END OF PERIOD BALANCES Loans and leases $989,311 $972,936 Total earning assets $1,528,020 $1,507,371 Total assets $1,638,356 $1,610,286 Deposits $1,184,710 $1,145,411 Interest Bearing Liabilities $1,298,094 $1,295,735 Shareholders' equity $151,619 $154,219 Total Shares Outstanding 17,197,116 17,272,923 AVERAGE BALANCES Loans and leases $977,770 $969,498 Total earning assets $1,523,391 $1,499,601 Total assets $1,623,108 $1,600,591 Deposits $1,163,964 $1,139,831 Interest Bearing Liabilities $1,299,820 $1,279,137 Shareholders' equity $154,857 $158,097 MBT FINANCIAL CORP. CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED Dollars in thousands Quarter Ended September 30, (except per share data) 2006 2005 Interest Income Interest and fees on loans $18,080 $16,841 Interest on investment securities- Tax-exempt 1,041 1,242 Taxable 5,039 5,037 Interest on federal funds sold 5 57 Total interest income 24,165 23,177 Interest Expense Interest on deposits 7,954 6,218 Interest on borrowed funds 4,831 3,846 Total interest expense 12,785 10,064 Net Interest Income 11,380 13,113 Provision For Loan Losses 7,950 4,100 Net Interest Income After Provision For Loan Losses 3,430 9,013 Other Income Income from trust services 1,060 1,045 Service charges and other fees 1,591 1,555 Net gain (loss) on sales of securities 6 (13) Origination fees on mortgage loans sold 152 232 Bank Owned Life Insurance income 310 276 Other 604 588 Total other income 3,723 3,683 Other Expenses Salaries and employee benefits 4,728 4,368 Occupancy expense 805 723 Other 3,885 3,932 Total other expenses 9,418 9,023 Income (Loss) Before Income Taxes (2,265) 3,673 Income Tax Expense (Benefit) (1,147) 1,102 Net Income (Loss) $(1,118) $2,571 Basic Earnings (Loss) Per Common Share $(0.07) $0.15 Diluted Earnings (Loss) Per Common Share $(0.07) $0.15 Dividends Declared Per Common Share $0.18 $0.17 MBT FINANCIAL CORP. CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED Dollars in thousands Nine Months Ended September 30, (except per share data) 2006 2005 Interest Income Interest and fees on loans $53,089 $47,595 Interest on investment securities- Tax-exempt 3,283 3,764 Taxable 15,401 14,468 Interest on federal funds sold 60 188 Total interest income 71,833 66,015 Interest Expense Interest on deposits 22,717 16,623 Interest on borrowed funds 13,646 10,966 Total interest expense 36,363 27,589 Net Interest Income 35,470 38,426 Provision For Loan Losses 15,300 5,300 Net Interest Income After Provision For Loan Losses 20,170 33,126 Other Income Income from trust services 3,192 3,132 Service charges and other fees 4,621 4,331 Net gain (loss) on sales of securities (4,901) 273 Origination fees on mortgage loans sold 428 537 Bank Owned Life Insurance income 885 824 Other 1,842 1,696 Total other income 6,067 10,793 Other Expenses Salaries and employee benefits 15,246 13,915 Occupancy expense 2,284 2,507 Other 10,429 9,540 Total other expenses 27,959 25,962 Income (Loss) Before Income Taxes (1,722) 17,957 Income Tax Expense (Benefit) (1,754) 5,138 Net Income $32 $12,819 Basic Earnings Per Common Share $- $0.74 Diluted Earnings Per Common Share $- $0.74 Dividends Declared Per Common Share $0.52 $0.49 MBT FINANCIAL CORP. CONSOLIDATED BALANCE SHEETS Sept. 30, Sept. 30, 2006 December 31, 2005 Dollars in thousands (Unaudited) 2005 (Unaudited) Assets Cash and Cash Equivalents Cash and due from banks $25,850 $32,330 $28,399 Federal funds sold - 5,000 1,000 Total cash and cash equivalents 25,850 37,330 29,399 Securities - Held to Maturity 61,562 76,467 75,528 Securities - Available for Sale 390,196 444,021 444,686 Federal Home Loan Bank stock - at cost 13,132 13,221 13,221 Loans held for sale 913 434 640 Loans - Net 994,459 975,252 959,731 Accrued interest receivable and other assets 30,379 28,748 26,738 Bank Owned Life Insurance 39,374 36,252 35,976 Premises and Equipment - Net 32,509 26,631 24,367 Total assets $1,588,374 $1,638,356 $1,610,286 Liabilities Deposits: Non-interest bearing $152,522 $178,116 $151,376 Interest-bearing 972,262 1,006,594 994,035 Total deposits 1,124,784 1,184,710 1,145,411 Federal Home Loan Bank advances 256,500 256,500 256,500 Federal funds purchased 16,100 - 10,200 Repurchase agreements 40,000 35,000 35,000 Interest payable and other liabilities 10,973 10,527 8,956 Total liabilities 1,448,357 1,486,737 1,456,067 Stockholders' Equity Common stock (no par value) - - - Additional paid-in capital 9,341 14,417 15,836 Retained Earnings 133,430 142,205 139,968 Accumulated other comprehensive income (2,754) (5,003) (1,585) Total stockholders' equity 140,017 151,619 154,219 Total liabilities and stockholders' equity $1,588,374 $1,638,356 $1,610,286