Thursday, April 21, 2011

From the CEO’s Desk April 2011

Our financial results for the first quarter of 2011 reflected some challenges that remain in our local market. While we reported a loss for the quarter, our performance was improved from the fourth quarter of 2010 which is indicative of the progress we have made in a number of areas. We continue to see encouraging trends in our local economy, which we anticipate will continue to be reflected in our financial results:

1. The unemployment rate in Monroe County declined in February for the 7th month in a row to 10.5%, its lowest level since November of 2008. In addition, the increase of total employed workers in Monroe County continued, with 62,913 workers employed at the end of February of 2011. That’s a 2,082 increase from February of 2010, and a strong indicator of early signs of a recovery.

2. While we continue to see residential property values well below their peak in 2007, home prices have remained stable for the past two years.

3. Credit-related costs for Monroe Bank & Trust declined compared to the fourth quarter of 2010, and total past due loans had declined significantly as of March 31st, 2011. Most encouraging is the continued downward trend of loans that are past due in the 30 to 89 day category. As mentioned in earlier comments, this category of past due loans is a key indicator for future trends in total problem loans.

4. Loan demand has improved, and we now have a consistent backlog of commercial loans that have been approved, waiting to be closed. While loan demand is still modest, this is a significant improvement from the lackluster demand of the past two years. As local economic trends remain positive, this should be reflected in increased levels of confidence by consumers and businesses, increasing demand for loans (and ultimately revenues) even further.

While the economic recovery in southeast Michigan continues at a slow pace as expected, the stability noted above in unemployment levels and property values allows us to feel optimistic that the worst of the financial crisis is now behind us. You may review our first quarter results as well as our quarterly comments to investors in greater detail by accessing the Investor Relations section on our website at Please look for future public announcements concerning our quarterly results, and how you can access our quarterly investor conference calls for more detailed information on our progress.

Our capital ratios remain adequate by regulatory standards, and our cash resources are near their highest level in our history. This means that we have the resources necessary to meet the demands of our loan and deposit customers, and we continue to actively pursue new business. As mentioned in previous reports, we believe that additional capital is warranted during challenging times. We continue to seek new sources of capital as required by our regulatory agreement, and hope to have additional capital options at our disposal once our market fully recovers and opportunities for growth return. We have asked shareholder approval to authorize additional capital securities at our annual shareholder meeting on May 5th. We will be evaluating the results of these proposals over the next few weeks, and will determine an appropriate capital offering after the close of the second quarter.

How We Help Our Customers:
Previous Stakeholder Reports have discussed at great length our commitment to our local communities, and the variety of initiatives we have taken to contribute to the quality of life in our local area. These initiatives include creative partnerships that do not necessarily require financial support, but instead contributions of time and resources to assist local schools, municipalities, agencies and organization as we jointly respond to today’s economic challenges. As I speak with our customers about finding solutions to their financial needs, many times I receive a response that includes the comment “I didn’t know you did that type of thing.” Here are just a few examples:

Interest Income and Investment Returns
Interest rates have remained at low levels for the past several years. While that is good news for borrowers, it is very challenging for retirees and others who rely on interest received from CDs and other sources to supplement their income. Many people continue to prefer the safety and security of maintaining their investments in FDIC insured deposits with their local bank. While rates remain low, we have a variety of deposit alternatives that allow our customers to improve their interest income in some cases. What’s more, deposit insurance is now available for up to $250,000, and can be increased further in certain cases. Please speak with your local branch manager if you have questions concerning deposit alternatives and FDIC insurance.

For those investors who are willing to accept additional risk, we offer a variety of non-insured investment products that earn higher rates of interest as compared to today’s typical certificate of deposit. MBT Investment Services was created in 2003 to provide these alternative investment products for customers who wish to invest as little as $5000. During 2010, our MBT Investment Services team reached the $100 million threshold for total investments on behalf of their clients. Additionally, our Wealth Management Group continues to grow, receiving great accolades from their customers for their expertise in guiding them through the volatility of today’s investment market. These highly-trained professionals assist clients with investment portfolios ranging from $300,000 to $20 million or greater. Please speak with any MBT banker if you have questions concerning our various investment options and they will be happy to arrange a meeting for you.

Small Business Services
Small business lending is a cornerstone of our business, and we have continued to lend to credit-worthy customers throughout the financial crisis. Since many of our customers are still cautious about taking on additional debt when revenues are down, demand for new loans has been slow as mentioned above. However, our Business Services team has been extremely active in helping our small business customers find ways to improve their cash flow and lower their costs. Improving access to account information, managing merchant credit card offerings, providing remote deposit services, and lowering the cost of managing payroll and payroll compliance reporting are just a few examples of how our Business Services professionals can help. We created the Business Services Group in 2001, and continue to update the technology required in today’s ever-changing business environment. New products and services are introduced almost yearly, so please call us if you have a business challenge. Chances are we can help.

Keeping Up With Debt Obligations
Being out of work, having reduced hours or benefits, or losing the secondary income of a spouse can place a tremendous financial stress on a family. With high rates of local unemployment, we are all aware of friends, neighbors, and family members who have struggled to meet their financial obligations. At MBT we make every effort to work with our customers who find themselves in this situation, and find solutions for them daily. While it is impossible to “save” someone who is unwilling to help themselves, we have a very good track record of helping those with the right frame of mind. While this requires sacrifices by everyone involved, many times it is a much better alternative to foreclosure or litigation. If you are aware of someone faced with these challenges, please encourage them to meet with a MBT banker before the situation becomes serious. They will be treated with respect and compassion.

Our strategic plan continues to be focused on improving asset quality, earnings, and capital ratios. While doing so, we are committed to maintaining our presence as a major influence on the quality of life in the communities we serve. Our partnerships with local community organizations, our superior products and services, and our customer-oriented approach to doing business continue to provide value that we feel ultimately will reflect on our shareholders and stakeholders alike. We thank you for your continued loyalty and support.

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