~~Table~~UNITED ofSTATES ~~Contents~~

~~UNITED STATES~~ SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 - K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF ~~THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~OF ~~the~~THE ~~fiscal~~SECURITIES ~~year~~EXCHANGE ~~ended~~ACT ~~December 31,~~OF ~~2010~~1934

~~Commission~~For ~~File~~the ~~Number~~fiscal ~~000-52584~~ year ended December 31, 2011

~~BIRMINGHAM~~Commission ~~BLOOMFIELD~~File ~~BANCSHARES,~~Number ~~INC.~~ 000-52584

~~(Exact~~BIRMINGHAM ~~name~~BLOOMFIELD ofBANCSHARES, ~~registrant~~INC. ~~as specified in its charter)~~

Michigan		20-3993452
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

(Exact name of registrant as specified in its charter)

(Address of principal executive offices, including zip code)

Michigan

20-3993452

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

~~(Registrant’s~~33583 ~~telephone~~Woodward ~~number~~Avenue, ~~including~~Birmingham. ~~area~~MI ~~code)~~48009

~~Securities~~(Address ~~registered~~of ~~pursuant~~principal toexecutive ~~Section 12(b)~~offices, ofincluding ~~the~~zip ~~Act:~~code) ~~None~~

~~Securities registered pursuant to Section 12~~(g248) of723-7200 ~~the Act: Common Stock, no par value~~

~~Indicate~~(Registrant’s bytelephone ~~check mark if the registrant is a well-known seasoned issuer~~number, asincluding ~~defined~~area ~~in Rule 405 of~~code) ~~the Securities Act. Yes o No þ~~

~~Indicate~~Securities byregistered ~~check mark if the issuer is not required to file reports~~ pursuant to Section ~~13 or Section 15~~12(db) of the ~~Exchange~~ Act~~. Yes~~: oNone ~~No þ~~

~~Indicate~~Securities byregistered ~~check~~pursuant ~~mark whether the registrant: (1) has filed all reports required~~ to ~~be filed by~~ Section ~~13 or 15~~12(dg) of the ~~Securities Exchange~~ Act: ofCommon ~~1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)~~Stock, ~~and~~no ~~(2) has~~par ~~been subject~~value ~~to such filing requirements for the past 90 days.~~

~~Yes~~Indicate þby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x o

Indicate by check mark ~~whether~~if the ~~registrant~~issuer ~~has~~is ~~submitted~~not ~~electronically and posted on its corporate website, if any, every Interactive Data File~~ required to befile ~~submitted~~reports ~~and posted~~ pursuant to ~~Rule~~Section ~~405~~13 ofor ~~Regulation~~Section ~~S-T~~15(~~section~~d) ~~232.405~~ of ~~this chapter) during~~ the ~~preceding~~Exchange ~~12 months (or for such shorter period that the registrant was required to submit and post such files~~Act. Yes ¨ No x

~~Yes~~Indicate by ocheck 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 ¨ o

Indicate by check mark ifwhether ~~disclosure~~the ofregistrant ~~delinquent~~has ~~filers~~submitted ~~pursuant~~electronically toand ~~Item 405~~posted ofon ~~Regulation S-K is~~its ~~not~~corporate ~~contained~~website, ~~herein~~if any, ~~and~~every ~~will~~Interactive ~~not~~Data File required to be ~~contained,~~submitted and posted pursuant to ~~the~~Rule ~~best~~405 of ~~registrant’s~~Regulation ~~knowledge,~~S-T(section ~~in definitive~~232.405 ~~proxy~~of orthis ~~information~~chapter) ~~statements~~during ~~incorporated~~the bypreceding ~~reference~~12 inmonths ~~Part III~~(or offor such shorter period that the ~~Form~~registrant ~~10-K~~was orrequired ~~any~~to ~~amendment~~submit ofand ~~this~~post ~~Form~~such ~~10-K~~files. Yes ¨ No ¨ o

Indicate by check mark ~~whether~~if ~~the~~disclosure ~~registrant~~of isdelinquent afilers ~~large~~pursuant ~~accelerated~~to ~~filer~~Item 405 of Regulation S-K is not contained herein, anand ~~accelerated~~will ~~filer~~not be contained, orto athe ~~non-accelerated~~best ~~filer.~~of ~~See~~registrant’s ~~definition~~knowledge, ofin ~~“accelerated~~definitive ~~filer~~proxy ~~and~~or ~~large~~information ~~accelerated~~statements ~~filer”~~incorporated (by reference in ~~Rule 12b-2~~ Part III of the ~~Exchange~~Form ~~Act).~~10-K ~~(Check~~or ~~one:)~~any amendment of this Form 10-K. ¨

~~Large~~Indicate by check mark whether the registrant is a large accelerated filer, oan ~~Accelerated~~accelerated filer, oor ~~Non~~a non-accelerated filer. oSee ~~(Do~~definition of ~~not~~“accelerated ~~check~~filer ifand alarge ~~smaller~~accelerated ~~reporting~~filer” ~~company)~~(in ~~Smaller~~Rule ~~reporting~~12b-2 ~~company~~of þthe Exchange Act). (Check one:)

~~Indicate~~Large byaccelerated ~~check~~filer ~~mark~~¨ ~~whether~~Accelerated ~~the~~filer ~~registrant~~¨ isNon-accelerated afiler ~~shell~~¨ ~~company~~Smaller ~~(as~~reporting ~~defined~~company ~~in Rule 12b-2 of the Exchange Act.)~~ x

~~Yes~~Indicate oby check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ¨ No x þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second quarter was $45,~~950~~850,000.

As of March 2130, ~~2011~~2012, 1,~~800~~812,~~000~~662 shares of the common stock of the registrant were issued or outstanding.

~~TABLE~~Documents OFIncorporated ~~CONTENTS~~by Reference:

PART I
	ITEM 1. Business
	ITEM 1A. Risk Factors
	ITEM 1B. Unresolved Staff Comments
	ITEM 2. Properties
	ITEM 3. Legal Proceedings
	ITEM 4. Reserved
PART II
	ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
	ITEM 6. Selected Financial Data
	ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
	ITEM 8. Financial Statements and Supplemental Data
	ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
	ITEM 9A. Controls and Procedures
	ITEM 9B. Other Information
PART III
	ITEM 10. Directors, Executive Officers and Corporate Governance
	ITEM 11. Executive Compensation
	ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
	ITEM 13. Certain Relationships and Related Transactions, and Director Independence
	ITEM 14. Principal Accounting Fees and Services
	ITEM 15. Exhibits and Financial Statement Schedules
SIGNATURES
Exhibit Index
EX-13
EX-21
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-99.1
EX-99.2

Parts I and II – Portions of the Shareholder Report of the issuer for the year ended December 31, 2011.

~~Table~~Part III – Portions of ~~Contents~~the Proxy Statement of the issuer for its May 21, 2012 Annual Meeting.

~~Documents~~2 ~~Incorporated by Reference:~~

~~Parts~~Disclosure IRegarding ~~and~~Forward IILooking —Statements ~~Portions of the Shareholder Report of the issuer for the year ended December 31, 2010.~~

~~Part III~~This —report ~~Portions~~contains forward-looking statements throughout that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation and the Bank. Words such as anticipates, believes, estimates, expects, forecasts, intends, is likely, plans, projects, variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are intended to be covered by the ~~Proxy~~safe-harbor ~~Statement~~provisions of the ~~issuer~~Private ~~for~~Securities ~~its~~Litigation ~~May 16~~Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, ~~2011~~uncertainties ~~Annual~~and ~~Meeting~~assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Actual results and outcomes may materially differ from what may be expressed or forecasted in the forward-looking statements. The Corporation undertakes no obligation to update, amend, or clarify forward looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise.

2Future factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: expected cost savings and synergies from our acquisition activities might not be realized within the expected time frames, and costs or difficulties related to integration matters might be greater than expected; expenses associated with the implementation of our trust and wealth management services might be greater than expected, whether due to a possible need to hire more employees than anticipated or other costs incurred in excess of budgeted amounts; the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; competitive pressures among depository institutions; interest rate movements and their impact on customer behavior and net interest margin; the impact of re-pricing and competitor’s pricing initiatives on loan and deposit products; the ability to adapt successfully to technological changes to meet customers’ needs and development in the market place; our ability to access cost-effective funding; changes in financial markets; changes in economic conditions in general and particularly as related to the automotive and related industries in the Detroit metropolitan area; new legislation or regulatory changes, including but not limited to changes in federal and/or state tax laws or interpretations thereof by taxing authorities; changes in accounting principles, policies or guidelines; and our future acquisitions of other depository institutions or lines of business.

~~Table~~3 ~~of Contents~~

~~Disclosure~~BIRMINGHAM ~~Regarding~~BLOOMFIELD ~~Forward~~BANCSHARES, ~~Looking~~INC. ~~Statements~~

~~This~~PART ~~report~~I contains forward-looking statements throughout that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation and the Bank. Words such as anticipates, believes, estimates, expects, forecasts, intends, is likely, plans, projects, variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are intended to be covered by the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Actual results and outcomes may materially differ from what may be expressed or forecasted in the forward-looking statements. The Corporation undertakes no obligation to update, amend, or clarify forward looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise.

~~Future factors that could cause actual results to differ materially from the results~~ITEM 1. ~~anticipated~~Business or projected include, but are not limited to, the following: expected cost savings and synergies from our acquisition activities might not be realized within the expected time frames, and costs or difficulties related to integration matters might be greater than expected; expenses associated with the implementation of our trust and wealth management services might be greater than expected, whether due to a possible need to hire more employees than anticipated or other costs incurred in excess of budgeted amounts; the credit risks of lending activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; competitive pressures among depository institutions; interest rate movements and their impact on customer behavior and net interest margin; the impact of re-pricing and competitor’s pricing initiatives on loan and deposit products; the ability to adapt successfully to technological changes to meet customers’ needs and development in the market place; our ability to access cost-effective funding; changes in financial markets; changes in economic conditions in general and particularly as related to the automotive and related industries in the Detroit metropolitan area; new legislation or regulatory changes, including but not limited to changes in federal and/or state tax laws or interpretations thereof by taxing authorities; changes in accounting principles, policies or guidelines; and our future acquisitions of other depository institutions or lines of business.

3 Overview

~~Table~~Birmingham Bloomfield Bancshares, Inc. (the “Corporation”) was organized as a Michigan corporation on February 26, 2004 to serve as a bank holding company for the Bank of ~~Contents~~Birmingham (the “Bank”). The Corporation received approval from the Federal Reserve Bank of Chicago to become a bank holding company on May 17, 2006 upon the acquisition of 100% of the common stock of the Bank of Birmingham. The Corporation has no material business operations other than owning and managing the Bank and has no plans for other business operations in the foreseeable future. On April 8, 2005, the organizers of the Bank filed an application with the Michigan Office of Financial and Insurance Regulation (OFIR – previously known as the Michigan Office of Financial and Insurance Services or OFIS) to organize the Bank as a state bank and with the Federal Deposit Insurance Corporation (FDIC) for federal deposit insurance. The Bank received the regulatory approvals of the OFIR on October 21, 2005 and the FDIC on November 9, 2005. The Corporation commenced its initial public offering on November 15, 2005 to raise the capital required to capitalize the Bank of Birmingham. The Corporation continued raising capital until the closing of its offering on September 30, 2006. Early in the fourth quarter of 2006, the Corporation closed on the remaining portion of its equity offering of $4,011,700 bringing its total equity to $18,000,000.

~~BIRMINGHAM~~Philosophy ~~BLOOMFIELD~~and ~~BANCSHARES,~~strategy ~~INC.~~

~~PART~~Bank Iof Birmingham operates as a full-service community bank, offering sophisticated financial products while emphasizing prompt, personalized customer service. We believe that this philosophy, encompassing the service aspects of community banking, distinguishes the Bank from its competitors.

~~ITEM~~To 1.carry ~~Business~~ out this philosophy, the Bank’s business strategy involves the following:

~~Overview~~ • Capitalizing on the diverse community involvement, professional expertise and personal and business contacts of our directors, organizers and executive officers;

~~Birmingham~~• ~~Bloomfield~~Hiring Bancshares, Inc. (the “Corporation”) was organized as a Michigan corporation on February 26, 2004 to serve as a bank holding company for Bank of Birmingham (the “Bank”). The Corporation received approval from the Federal Reserve Bank of Chicago to become a bank holding company on May 17, 2006 upon the acquisition of 100% of the common stock of the Bank of Birmingham. The Corporation has no material business operations other than owning and ~~managing the~~retaining ~~Bank~~experienced and ~~has~~qualified nobanking plans for other business operations in the foreseeable future. On April 8, 2005, the organizers of the Bank filed an application with the Michigan Office of Financial and Insurance Regulation (OFIR — previously known as the Michigan Office of Financial and Insurance Services or OFIS) to organize the Bank as a state bank and with the Federal Deposit Insurance Corporation (FDIC) for federal deposit insurance. The Bank received the regulatory approvals of the OFIR on October 21, 2005 and the FDIC on November 9, 2005. The Corporation commenced its initial public offering on November 15, 2005 to raise the capital required to capitalize the Bank of Birmingham. The Corporation continued raising capital until the closing of its offering on September 30, 2006. Early in the fourth quarter of 2006, the Corporation closed on the remaining portion of its equity offering of $4,011,700 bringing its total equity to $18,000,000.personnel;

~~Philosophy~~• ~~and~~Providing ~~strategy~~ individualized attention with consistent, local decision-making authority;

~~Bank~~• ofUtilizing ~~Birmingham~~technology ~~operates~~and asstrategic aoutsourcing ~~full-service~~to ~~community~~provide ~~bank,~~a ~~offering~~broad ~~sophisticated~~array ~~financial products while emphasizing prompt, personalized customer service. We believe that this philosophy, encompassing the service aspects~~ of ~~community~~convenient ~~banking,~~products ~~distinguishes~~and ~~the Bank from its competitors.~~services;

To• ~~carry~~Operating ~~out~~from ~~this~~highly ~~philosophy,~~visible ~~the~~and ~~Bank’s~~accessible ~~business~~banking ~~strategy~~offices ~~involves~~in ~~the~~close ~~following:~~proximity to a concentration of targeted commercial businesses and professionals;

• ~~Capitalizing~~Attracting onits ~~the~~customer ~~diverse~~base ~~community~~by ~~involvement,~~offering ~~professional~~competitive ~~expertise~~interest ~~and~~rates ~~personal~~on ~~and~~deposit ~~business contacts of our directors, organizers and executive officers;~~accounts.

•4 ~~Hiring and retaining experienced and qualified banking personnel;~~

•Market ~~Providing~~opportunities ~~individualized attention with consistent, local decision-making authority;~~

•Primary ~~Utilizing~~service ~~technology~~areas. Bank of Birmingham’s primary service area is Oakland County and ~~strategic~~surrounding ~~outsourcing~~areas, towith ~~provide~~its headquarters located at 33583 Woodward Avenue, Birmingham, Michigan. The Bank of Birmingham conducts most of its lending transactions from and within its primary service area and derives its deposits locally and through a ~~broad~~national ~~array~~certificate of ~~convenient~~deposit ~~products~~listing service. Compared with other economically less fortunate areas of the state, Oakland County has a stable economy and ~~services;~~population and is one of the most affluent counties in the country. From a wealth accumulation standpoint, the Bank’s specific target market compares favorably with any affluent area in the country. This situation continues to create opportunities for new businesses, including financial service providers such as the Bank, who wish to serve this affluent and distinct market albeit at a slower pace than in the recent past.

•Local ~~Operating~~economy. ~~from~~As ~~highly~~a ~~visible~~community ~~and~~bank, ~~accessible~~Bank ~~banking~~of ~~offices~~Birmingham inis ~~close~~designed ~~proximity~~ to serve athe ~~concentration~~needs of ~~targeted~~the ~~commercial~~residents, small to medium-sized businesses and professionals; •within ~~Attracting~~this ~~its~~county. ~~customer~~Economic ~~base~~conditions byhave ~~offering~~marginally ~~competitive~~improved ~~interest~~in ~~rates~~the onregion ~~deposit~~but ~~accounts~~challenges remain with the level of unemployment and housing sector. While Oakland county is not immune to these issues, the demographics of the Birmingham Bloomfield area somewhat lessen the impact.

4The economic base of the County continues to diversify from the automotive service sector. This trend should lessen the impact on the County of future economic downturns in the automotive sector of the economy. Changes in the local economy may affect the demand for commercial loans and related small to medium business related products. This could have a significant impact on how the Corporation deploys earning assets.

~~Table~~Our oftarget ~~Contents~~area, which while not being as economically challenged as the overall metropolitan area, is still experiencing downward pressure. Residents are increasingly more educated and more diversified in business and professional skills, but are finding employment opportunities increasingly limited. The current economic environment has provided challenges and opportunities. We believe there is a still opportunity for community bank to attract customers by providing specialized service for their unique banking needs.

~~Market~~Competition. ~~opportunities~~The market for financial services is rapidly changing and intensely competitive and is likely to become more competitive as the number and types of market entrants increase. The Bank of Birmingham competes in both lending and attracting funds with other commercial banks, savings and loan associations, credit unions, consumer finance companies, pension trusts, mutual funds, insurance companies, mortgage bankers and brokers, brokerage and investment banking firms, asset-based non-bank lenders, government agencies and certain other non-financial institutions, including retail stores, that may offer more favorable financing alternatives than the bank.

~~Primary~~According ~~service~~to ~~areas.~~information ~~Bank~~disclosed ofon ~~Birmingham~~the FDIC’s ~~primary~~website (www.fdic.gov), ~~service~~as ~~area~~of isJune 30, ~~Oakland~~2011, ~~County~~financial ~~and surrounding~~institutions ~~areas,~~in ~~with~~Oakland ~~its~~County, ~~headquarters~~where ~~located~~the atmain ~~33583~~office ~~Woodward~~is ~~Avenue~~located, ~~Birmingham,~~held ~~Michigan~~approximately $37. ~~The~~4 ~~Bank~~billion ofin ~~Birmingham~~total ~~conducts~~deposits. ~~most~~A significant portion of ~~its~~the ~~lending~~deposits ~~transactions~~held ~~from~~in ~~and~~financial ~~within~~institutions ~~its~~in ~~primary~~our ~~service~~primary ~~area~~banking ~~and~~market ~~derives~~are ~~its~~attributable ~~deposits~~to ~~locally~~branch ~~and~~offices ~~through~~of aout-of-state ~~national~~banks. ~~certificate~~We ofbelieve ~~deposit~~that ~~listing service.~~banks ~~Compared~~headquartered ~~with~~outside ~~other~~of ~~economically~~our ~~less~~primary ~~fortunate~~service areas ofoften lack the ~~state,~~consistency ~~Oakland~~of ~~County~~local ~~has~~leadership ~~a stable~~necessary ~~economy~~to ~~and~~provide ~~population~~efficient ~~and~~service isto individuals ~~one~~and ofsmall- ~~the~~to ~~most~~medium-sized ~~affluent~~business ~~counties~~customers. inThrough ~~the~~our ~~country.~~local ~~From~~ownership ~~a wealth~~and ~~accumulation standpoint~~management, ~~the~~we believe that Bank’s ~~specific~~of ~~target~~Birmingham ~~market~~is ~~compares~~uniquely ~~favorably~~situated ~~with~~to ~~any affluent~~efficiently ~~area~~provide inthese ~~the~~customers ~~country.~~with ~~This~~loan, ~~situation~~deposit ~~continues~~and toother ~~create~~financial ~~opportunities~~products tailored ~~for~~to ~~new~~fit ~~businesses, including~~their ~~financial~~specific ~~service~~needs. ~~providers~~We ~~such~~believe asthat the Bank, ~~who~~can ~~wish~~compete toeffectively ~~serve~~with ~~this~~larger ~~affluent~~and more established banks through an active business development plan and ~~distinct~~ ~~market~~by ~~albeit~~offering atlocal aaccess, ~~slower~~competitive ~~pace~~products ~~than~~and inservices ~~the~~and ~~recent~~more responsive ~~past~~customer service.

~~Local~~5 economy. As a community bank, Bank of Birmingham is designed to serve the needs of the residents, small to medium-sized businesses and professionals within this county. Economic conditions have worsened for businesses including banks particularly in Michigan as the U.S. economy remains stagnant. Michigan has one of the highest foreclosure rates and unemployment rates in the country. While Oakland county is not immune to these issues, the demographics of the Birmingham Bloomfield area somewhat lessen the impact.

~~The~~Business ~~economic~~strategy base of the County continues to diversify from the automotive service sector. This trend should lessen the impact on the County of future economic downturns in the automotive sector of the economy. Changes in the local economy may affect the demand for commercial loans and related small to medium business related products. This could have a significant impact on how the Corporation deploys earning assets.

~~Our~~Management ~~target~~philosophy. ~~area,~~Bank ~~which~~of ~~while~~Birmingham ~~not~~is ~~being~~a asfull-service ~~economically~~commercial ~~challenged~~bank asdedicated to providing superior customer service to the ~~overall~~individuals ~~metropolitan~~and businesses in our community. Its primary focus is ~~area~~on local businesses, isprofessionals ~~still~~and ~~experiencing~~individuals ~~downward~~to ~~pressure.~~whom ~~Residents~~quality ~~are~~banking ~~increasingly~~service ~~more~~is ~~educated~~a ~~and~~critical, ~~more diversified~~but lacking, element in ~~business~~their ~~and~~current ~~professional~~banking ~~skills~~relationships. We believe that this philosophy, ~~but~~encompassing ~~are~~the ~~finding~~service ~~employment~~aspects ~~opportunities~~of community banking, ~~increasingly~~distinguishes ~~limited~~the bank from its competitors. ~~The~~To ~~current~~this ~~economic~~end, ~~environment~~the Bank has ~~provided~~endeavored ~~challenges~~to hire the most qualified and ~~opportunities~~experienced people in the market who share the Bank’s commitment to customer service. We believe there is aan ~~still~~ opportunity for a locally-owned ~~new~~and ~~commercial~~locally-managed community bank to ~~attract~~acquire ~~customers~~a significant market share by ~~providing specialized~~offering an alternative to the less personal service ~~for~~offered ~~their~~by ~~unique~~many ~~banking~~larger ~~needs~~banks. Accordingly, the Bank has implemented the following operating and growth strategies.

~~Competition~~Operating strategy. ~~The~~In ~~market~~order ~~for financial services is rapidly changing and intensely competitive and is likely~~ to ~~become~~achieve ~~more competitive as~~ the ~~number~~level ~~and types~~ of ~~market entrants increase. The Bank of Birmingham competes in both lending and attracting funds with other commercial banks~~prompt, ~~savings~~responsive ~~and~~service ~~loan~~that ~~associations,~~we ~~credit~~believe ~~unions, consumer finance companies, pension~~is ~~trusts,~~necessary ~~mutual~~to ~~funds,~~attract ~~insurance~~customers ~~companies,~~and ~~mortgage~~to ~~bankers~~develop ~~and~~the ~~brokers,~~bank’s ~~brokerage~~image ~~and~~as ~~investment banking~~a ~~firms,~~local ~~asset-based non-~~bank ~~lenders,~~with ~~government~~a ~~agencies~~community ~~and certain other non-financial institutions~~focus, ~~including~~the ~~retail~~Bank ~~stores,~~of ~~that~~Birmingham ~~may~~will ~~offer~~employ ~~more~~the ~~favorable~~following ~~financing~~operating ~~alternatives~~strategies: ~~than the bank.~~

~~According~~• toExperienced ~~information~~senior ~~disclosed~~management. onThe ~~the FDIC~~Bank’s ~~website~~senior ~~(www.fdic.gov),~~management aspossesses ofextensive ~~June 30,~~experience ~~2010, financial institutions~~ in ~~Oakland~~banking ~~County~~industry, ~~where~~as ~~the~~well ~~main~~as ~~office~~substantial isbusiness ~~located,~~and ~~held~~banking ~~approximately $36.8 billion~~contacts in ~~total deposits. A significant portion of the deposits held in financial institutions in~~ our primary ~~banking market are attributable to branch offices of out-of-state banks. We believe that banks headquartered outside of our primary~~ service areas ~~often lack the consistency of local leadership necessary to provide efficient service to individuals and small- to medium-sized business customers~~. Through our local ownership and management, we believe that Bank of Birmingham is uniquely situated to efficiently provide these customers with loan, deposit and other financial products tailored to fit their specific needs. We believe that the Bank can compete effectively with larger and more established banks through an active business development plan and by offering local access, competitive products and services and more responsive customer service.

5 • Quality employees. Bank of Birmingham will strive to hire highly trained and seasoned staff.

~~Table~~• Community-oriented board of ~~Contents~~directors. All of the Bank’s directors are either experienced bankers or local business and community leaders. Most have significant business ties to the Bank’s primary service areas, enabling them to be sensitive and responsive to the needs of the community. Additionally, the board of directors represents a wide variety of business experience and community involvement.

~~Business~~• ~~strategy~~ Highly visible site. The main office is highly visible and located in close proximity to major traffic arteries. The main office is located at 33583 Woodward Avenue, Birmingham, Michigan in an area that provides easy access to potential banking customers traveling in the Birmingham area. We believe that this site gives the Bank a highly visible presence in a market that is dominated by branch offices of banks headquartered out of the area. We believe this enhances the Bank’s image as a strong competitor.

~~Management~~• ~~philosophy~~Individual customer focus. Bank of Birmingham isfocuses aon ~~full-service commercial bank dedicated to~~ providing ~~superior~~individual ~~customer~~ service ~~to the individuals~~ and ~~businesses~~attention into our ~~community.~~target ~~Its primary~~customers, ~~focus~~which isinclude on local businesses, professionals and individuals ~~to whom quality banking service is a critical, but lacking, element in their current banking relationships~~. WeThe ~~believe that this philosophy, encompassing the service aspects of community banking, distinguishes the bank from its competitors. To this end, the~~ Bank’s ~~has~~products ~~endeavored to hire the most qualified~~ and ~~experienced people~~services inare ~~the~~delivered ~~market~~personally ~~who~~though ~~share~~one ~~the Bank’s commitment to customer~~ full-service. Weoffices ~~believe~~and ~~there~~supported isby ~~an opportunity~~effective ~~for~~technical ~~a locally-owned~~ and ~~locally~~non-~~managed~~technical ~~community~~service ~~bank~~delivery tosystems. ~~acquire~~Clients awill ~~significant~~enjoy ~~market share by offering an alternative to~~ the ~~less~~convenience ~~personal~~of ~~service~~on-site ~~offered~~visits by ~~many larger banks. Accordingly,~~ the Bank’s ~~has~~business ~~implemented~~relationship ~~the~~managers ~~following operating~~ and ~~growth~~business ~~strategies~~consultation services.

~~Operating~~• ~~strategy.~~Financial Inand ~~order~~information tocenter. ~~achieve~~Bank ~~the~~of ~~level~~Birmingham ofserves ~~prompt,~~as ~~responsive~~a ~~service~~financial ~~that we~~and ~~believe~~information iscenter ~~necessary~~for tothe ~~attract~~community, ~~customers~~and will assemble and sponsor professionals to ~~develop~~conduct ~~the~~seminars ~~bank’s~~and ~~image~~workshops ason a ~~local~~variety ~~bank~~of ~~with~~subjects ~~a community~~of ~~focus,~~interest ~~the~~to ~~Bank~~assist members of ~~Birmingham~~our ~~will~~community ~~employ~~in ~~the~~developing ~~following~~or ~~operating~~enhancing ~~strategies:~~their personal and professional effectiveness.

•6 ~~Experienced senior management. The Bank’s senior management possesses extensive experience in banking industry, as well as substantial business and banking contacts in our primary service areas.~~

•Growth ~~Quality employees~~strategies. ~~Bank~~Because we believe that the growth and expansion of ~~Birmingham~~the Bank’s ~~will~~operations ~~strive~~is toa ~~hire~~significant ~~highly~~factor ~~trained~~in ~~and~~our ~~seasoned~~success, ~~staff.~~Bank of Birmingham has implemented the following growth strategies:

• ~~Community-oriented~~Capitalize ~~board~~on ofcommunity ~~directors~~orientation. ~~All~~We ofcapitalize on the Bank’s ~~directors~~position ~~are~~as ~~either~~an ~~experienced~~independent, ~~bankers~~locally-owned ~~or local business and~~ community ~~leaders.~~bank ~~Most have significant business ties~~ to ~~the~~attract ~~Bank’s primary service areas~~individuals, ~~enabling~~professionals ~~them to be sensitive~~ and ~~responsive~~local tobusiness ~~the~~customers ~~needs~~that ofmay ~~the~~be ~~community.~~underserved ~~Additionally,~~by ~~the~~larger ~~board~~banking ofinstitutions ~~directors~~in ~~represents~~our amarket ~~wide variety of business experience and community involvement~~area.

• ~~Highly~~Emphasize ~~visible~~local ~~sites~~decision-making. The main office is highly visible and located in close proximity to major traffic arteries. The main office is located at 33583 Woodward Avenue, Birmingham, Michigan in an area that provides easy access to potential banking customers traveling in the Birmingham area. We believe that this site gives the Bank aemphasizes ~~highly~~local ~~visible~~decision-making ~~presence in a market that is dominated~~ by ~~branch~~experienced ~~offices of banks headquartered out of the area~~bankers. WeThis ~~believe~~helps ~~this enhances~~ the Bank’s ~~image~~attract aslocal abusinesses ~~strong~~and ~~competitor~~service-minded customers.

• ~~Individual~~Attract ~~customer~~experienced ~~focus~~lending officers. Bank of Birmingham ~~focuses~~has onhired ~~providing individual service and attention to our target customers~~experienced, ~~which include local businesses, professionals and individuals. The Bank’s products and services are delivered personally though one full~~well-~~service~~trained ~~offices~~lending ~~and supported by effective technical and non-technical service delivery systems~~officers. ~~Clients will enjoy the convenience of on-site visits by the Bank’s business relationship managers, a courier service for non-cash deposits and business consultation services.~~

• ~~Financial~~Offer ~~and~~fee-generating ~~information~~products ~~center~~and services. The Bank’s range of ~~Birmingham~~services, ~~serves~~pricing asstrategies, ainterest ~~financial~~rates paid and ~~information~~charged ~~center~~and ~~for~~hours ~~the~~of ~~community,~~operation ~~and~~are ~~will~~structured ~~assemble~~to attract its target customers and ~~sponsor~~increase ~~professionals~~its market share. Bank of Birmingham strives to ~~conduct~~offer ~~seminars~~the ~~and~~small ~~workshops~~business onperson, aprofessional, ~~variety~~entrepreneur ofand ~~subjects~~consumer ofthe ~~interest~~best toloan ~~assist~~services ~~members~~available ofwhile ~~our~~charging ~~community~~competitively infor ~~developing~~these orservices ~~enhancing~~and ~~their~~utilizing ~~personal~~technology and ~~professional~~strategic ~~effectiveness~~outsourcing to increase fee revenues.

6Lending services

~~Table~~Lending policy. The Bank offers a full range of ~~Contents~~lending products, including commercial loans to small-to medium-sized businesses, professionals, and consumer loans to individuals. The Bank understands that it competes for these loans with competitors who are well established in its primary market area and have greater resources and lending limits. As a result, Bank of Birmingham offers more flexible pricing and terms to attract borrowers. We feel a quick response to credit requests provides the Bank a competitive advantage.

~~Growth~~The ~~strategies.~~Bank’s ~~Because~~loan weapproval ~~believe~~policies ~~that~~provide ~~the~~for ~~growth~~various ~~and~~levels ~~expansion~~ of officer lending authority. When the ~~Bank~~amount of total loans to a single borrower exceeds that individual officer’s lending ~~operations~~authority, ~~will~~an beofficer ~~significant~~with ~~factors~~a inhigher ~~our~~lending ~~success,~~limit or the Bank’s ofloan ~~Birmingham~~committee ~~has~~will ~~implemented~~determine whether to approve the ~~following~~ ~~growth~~loan ~~strategies:~~request.

•Lending ~~Capitalize~~limits. onThe ~~community~~Bank’s ~~orientation.~~lending Weactivities are ~~capitalizing~~subject to a variety of lending limits. Differing limits apply based on the ~~Bank’s~~type ~~position~~of asloan anor ~~independent~~the nature of the borrower, ~~locally-owned~~including ~~community~~the borrower’s ~~bank~~relationship to ~~attract~~the ~~individuals~~Bank. In general, ~~professionals~~however, ~~and~~the ~~local~~Bank ~~business~~is ~~customers~~able ~~that~~to ~~may~~loan beany ~~underserved~~one byborrower ~~larger~~a ~~banking~~maximum ~~institutions~~amount inequal ~~our~~to ~~market~~either: ~~area.~~

• ~~Emphasize~~15% ~~local~~of ~~decision-making. The Bank emphasizes local decision-making by experienced bankers. This will help~~ the Bank’s ~~attract~~capital ~~local businesses~~ and ~~service-minded~~surplus; ~~customers.~~or

• ~~Attract~~upon ~~experienced~~a ~~lending~~2/3 ~~officers.~~vote ~~Bank~~ of ~~Birmingham~~the ~~has~~Bank’s ~~hired~~board ~~experienced~~of directors, ~~well-trained~~25% ~~lending officers capable~~ of ~~soliciting~~its ~~loan~~capital ~~business~~and ~~immediately~~surplus.

•Credit ~~Offer~~risks. ~~fee-generating~~The ~~products~~principal ~~and~~economic ~~services.~~risk ~~The~~associated with each category of loans that the Bank’s ~~range~~makes is the creditworthiness of the ~~services,~~borrower. ~~pricing~~Borrower ~~strategies,~~creditworthiness ~~interest~~is ~~rates~~affected ~~paid~~by ~~and~~general ~~charged~~economic conditions and ~~hours~~the strength of ~~operation~~the ~~are~~relevant ~~structured~~business market segment. General economic factors affecting a borrower’s ability to ~~attract~~repay ~~its~~include ~~target~~inflation and employment rates, as well as other factors affecting a borrower’s customers, suppliers and ~~increase~~employees. ~~its~~The ~~market~~well-established ~~share.~~financial ~~Bank~~institutions ofin ~~Birmingham~~our ~~strives~~primary service areas are likely to ~~offer~~make ~~the~~proportionately ~~small~~more ~~business~~loans ~~person,~~to ~~professional,~~medium- ~~entrepreneur~~to ~~and~~large-sized businesses ~~consumer~~than we will make. Many of the ~~best~~Bank’s ~~loan~~anticipated ~~services~~commercial ~~available~~loans ~~while~~will ~~charging~~likely ~~competitively~~be ~~for~~made ~~these~~to ~~services~~small- ~~and~~to ~~utilizing~~medium-sized ~~technology~~businesses ~~and~~that ~~strategic~~may ~~outsourcing~~be less able to ~~increase~~withstand ~~fee~~competitive, ~~revenues~~economic and financial pressures than larger borrowers.

~~Lending~~7 ~~services~~

~~Lending~~Real ~~policy~~estate loans. ~~The~~ Bank ~~offers a full range~~ of ~~lending~~Birmingham ~~products,~~offers ~~including~~ commercial ~~loans~~real toestate ~~small-to medium-sized businesses~~loans, construction ~~professionals,~~ and ~~consumer~~development loans ~~to individuals.~~and ~~The~~residential ~~Bank~~real ~~understands~~estate ~~that it competes for these~~ loans. ~~with~~The ~~competitors~~following ~~who~~is ~~are~~a ~~well established~~description inof ~~its~~each ~~primary~~of ~~market~~the ~~area~~major ~~and~~categories ~~have~~of ~~greater~~real ~~resources~~estate ~~and~~loans ~~lending~~that ~~limits.~~the ~~As a result,~~ Bank ofmakes ~~Birmingham has initially had to offer more flexible pricing~~ and ~~terms~~the toanticipated ~~attract~~risks ~~borrowers. We~~associated ~~feel~~with aeach ~~quick~~class ~~response~~of ~~to credit requests provides the Bank a competitive advantage~~loan.

~~The~~• ~~Bank’s~~Commercial real estate. Commercial real estate loan ~~approval~~terms ~~policies~~generally ~~provide~~are ~~for~~limited ~~various~~to ~~levels~~five ofyears ~~officer~~or ~~lending~~less, ~~authority~~although payments may be structured on a longer amortization basis. ~~When~~ Interest rates may be fixed or adjustable. The Bank generally will require personal guarantees from the ~~amount~~principal owners of ~~total~~the ~~loans~~property tosupported by a ~~single~~review ~~borrower~~by ~~exceeds~~Bank ~~that~~management ~~individual~~of ~~officer~~the principal owners’s ~~lending authority,~~personal anfinancial ~~officer~~statements. Risks associated with acommercial ~~higher~~real ~~lending~~estate ~~limit~~loans orinclude fluctuations in the ~~Bank~~value of real estate, new job creation trends, tenant vacancy rates and the quality of the borrower’s ~~loan~~management. ~~committee~~The ~~will~~Bank ~~determine whether~~limits toits ~~approve~~risk ~~the~~by ~~loan~~analyzing ~~request~~borrowers’ cash flow and collateral value on an ongoing basis.

~~Lending~~• ~~limits.~~Construction ~~The~~and development loans. Bank’s ~~lending~~of ~~activities~~Birmingham ~~are~~considers ~~subject~~making toowner-occupied construction loans with a ~~variety~~pre-approved oftake-out ~~lending limits~~loan. ~~Differing~~The ~~limits~~Bank ~~apply~~also ~~based~~considers construction and development loans on a pre-sold basis. If the ~~type~~borrower ofhas ~~loan~~entered orinto ~~the~~an ~~nature~~agreement ofto sell the ~~borrower~~property prior to beginning construction, ~~including~~ then the loan is considered to be on a pre-sold basis. If the borrower’s ~~relationship~~has not entered into an agreement to sell the ~~Bank.~~property Inprior ~~general,~~to ~~however~~beginning construction, then the ~~Bank~~loan is ~~able~~considered to ~~loan~~be ~~any~~on ~~one borrower~~a speculative basis. Construction and development loans are generally made with a ~~maximum~~term ~~amount~~of ~~equal~~six to ~~either:~~twelve months and interest is paid quarterly. The ratio of the loan principal to the value of the collateral as established by independent appraisal typically will not exceed industry standards. Speculative loans will be based on the borrower’s financial strength and cash flow position. Loan proceeds will be disbursed based on the percentage of completion and only after the project has been inspected by an experienced construction lender or third-party inspector. Risks associated with construction loans include fluctuations in the value of real estate and new job creation trends.

• ~~15%~~Residential ofreal ~~the~~estate. The Bank’s ~~capital~~residential real estate loans will consist of residential second mortgage loans, residential construction loans and ~~surplus;~~traditional ormortgage lending for one-to-four family residences. The Bank expects that any long-term fixed rate mortgages will be underwritten for resale to the secondary market. It offers primarily adjustable rate mortgages. The majority of fixed rate loans will be sold in the secondary mortgage market. All loans will be made in accordance with our appraisal policy with the ratio of the loan principal to the value of collateral as established by independent appraisal not exceeding 80%, unless the borrower has private mortgage insurance.

•Commercial ~~upon~~loans. aBank ~~2/3~~of Birmingham ~~vote~~expects that loans for commercial purposes in various lines of businesses will be one of the larger components of the Bank’s ~~board~~loan portfolio. The target commercial loan market is small- to medium-sized businesses and the business professional market. The terms of ~~directors~~these loans vary by purpose and by type of underlying collateral. The commercial loans will primarily be underwritten on the basis of the borrower’s ability to service the loan from income. The Bank typically makes equipment loans for a term of five years or less at fixed or variable rates, ~~25%~~with the loan fully amortized over the term. Loans to support working capital will typically have terms not exceeding one year and will usually be secured by accounts receivable, inventory or personal guarantees of the principals of the business. For loans secured by accounts receivable or inventory, principal will typically be repaid as the assets securing the loan are converted into cash, and for loans secured with other types of collateral, principal will typically be due at maturity. The quality of the commercial borrower’s management and its ~~capital~~ability both to properly evaluate changes in the supply and ~~surplus~~demand characteristics affecting its markets for products and services and to effectively respond to such changes are significant factors in a commercial borrower’s creditworthiness.

~~Credit~~Consumer ~~risks~~loans. ~~The~~Bank ~~principal~~of ~~economic~~Birmingham ~~risk~~makes ~~associated~~a ~~with~~variety ~~each category~~ of loans ~~that the~~to ~~Bank~~individuals ~~makes~~for ispersonal, ~~the~~family ~~creditworthiness~~and ofhousehold ~~the~~purposes, ~~borrower.~~including ~~Borrower~~secured ~~creditworthiness~~and isunsecured ~~affected~~installment byand term loans, second mortgages, ~~general~~home ~~economic~~equity ~~conditions~~loans and ~~the~~home ~~strength~~equity lines of ~~the~~credit. ~~relevant~~The ~~business~~amortization ~~market~~of ~~segment~~second mortgages will generally not exceed 15 years. ~~General economic~~Repayment ~~factors~~of ~~affecting~~consumer aloans depends upon the borrower’s ~~ability~~financial stability and is more likely to ~~repay~~be ~~include~~adversely ~~inflation~~affected by ~~and~~divorce, ~~employment~~job ~~rates~~loss, ~~as well~~illness asand personal hardships than repayment of other ~~factors~~loans. ~~affecting~~Because amany ~~borrower’s~~consumer ~~customers~~loans are secured by depreciable assets such as boats, ~~suppliers~~cars and ~~employees~~trailers, the loan will generally be amortized over the useful life of the asset. The ~~well-established~~ ~~financial~~loan ~~institutions~~officer inwill ~~our~~review ~~primary~~the ~~service~~borrower’s ~~areas~~past ~~are~~credit ~~likely~~history, topast ~~make proportionately~~income ~~more~~level, ~~loans~~debt tohistory ~~medium-~~and, towhen ~~large-sized~~applicable, ~~businesses~~cash ~~than~~flow weand ~~will~~determine ~~make.~~the ~~Many~~impact of ~~the Bank’s~~all ~~anticipated~~these ~~commercial~~factors ~~loans~~on ~~will~~the ~~likely~~ability beof ~~made~~the borrower to ~~small-~~make tofuture ~~medium-sized~~payments ~~businesses~~as agreed. We expect that ~~may~~ bethe ~~less~~principal ~~able~~competitors tofor ~~withstand~~consumer ~~competitive,~~loans ~~economic~~will be the established banks and ~~financial~~finance ~~pressures~~companies ~~than~~in ~~larger~~the ~~borrowers~~Bank’s market.

7 8

~~Table~~Investments ~~of Contents~~

~~Real~~In ~~estate~~addition to loans., Bank of Birmingham ~~offers~~makes ~~commercial~~other ~~real~~investments ~~estate~~primarily ~~loans, construction~~in ~~and~~obligations ~~development~~of ~~loans~~the United States or obligations guaranteed as to principal and ~~residential~~interest ~~real~~by ~~estate~~the ~~loans.~~United ~~The~~States ~~following~~and isother ataxable ~~description~~securities. ofNo ~~each~~investment in any of ~~the~~those ~~major~~instruments ~~categories~~will ofexceed ~~real~~any ~~estate~~applicable ~~loans~~limitation ~~that~~imposed by law or regulation. The asset-liability management committee will review the ~~Bank~~investment ~~expects~~portfolio on an ongoing basis in order to ~~make~~ensure ~~and~~that the investments conform to the ~~anticipated~~Bank’s ~~risks~~policy ~~associated~~as ~~with~~set ~~each~~by ~~class~~its board of ~~loan~~directors.

•Asset Commercial real estate. Commercial real estate loan terms generally will be limited to five years or less, although payments may be structured on a longer amortization basis. Interest rates may be fixed or adjustable. The Bank generally will require personal guarantees from the principal owners of the property supported by a review by Bank management of the principal owners’ personal financial statements. Risks associated with commercial real estate loans include fluctuations in the value of real estate, new job creation trends, tenant vacancy rates and ~~the~~liability ~~quality of the borrower’s~~ management. ~~The Bank will limit its risk by analyzing borrowers’ cash flow and collateral value on an ongoing basis.~~

•The ~~Construction and development loans. Bank of Birmingham will consider making owner~~asset-~~occupied~~liability ~~construction~~management ~~loans~~committee ~~with~~oversees athe ~~pre-approved take-out loan. The~~ Bank’s ~~will~~assets ~~also~~and ~~consider~~liabilities ~~construction~~ and ~~development~~strives ~~loans~~to onprovide a ~~pre-sold basis. If the borrower has entered into an agreement to sell the property prior to beginning construction~~stable, ~~then~~optimized ~~the~~net interest ~~loan is considered to be on a pre-sold basis. If the borrower has not entered into an agreement to sell the property prior to beginning construction~~margin, ~~then~~adequate ~~the~~liquidity ~~loan is considered to be on a speculative basis. Construction~~ and ~~development loans are generally made with~~ a ~~term~~profitable ofafter-tax ~~six~~return toon ~~twelve~~assets ~~months~~ and ~~interest~~return ison ~~paid quarterly~~equity. The ~~ratio~~committee ofconducts ~~the~~these ~~loan~~management ~~principal~~functions towithin the ~~value~~framework of ~~the~~written ~~collateral~~loan ~~as established by independent appraisal typically will not exceed industry standards. Speculative loans will be based on the borrower’s financial strength~~ and ~~cash~~investment ~~flow~~policies ~~position.~~that ~~Loan proceeds will be disbursed based on~~ the ~~percentage~~Bank ~~of completion and only after the project~~ has ~~been inspected by an experienced construction lender or third-party inspector~~adopted. ~~Risks~~The committee ~~associated~~attempts ~~with~~to ~~construction~~maintain ~~loans~~a ~~include~~balanced ~~fluctuations~~position inbetween ~~the~~rate ~~value~~sensitive ofassets ~~real estate~~ and ~~new~~rate ~~job~~sensitive ~~creation trends~~liabilities.

•Deposit Residential real estate. The Bank’s residential real estate loans will consist of residential second mortgage loans, residential construction loans and traditional mortgage lending for one-to-four family residences. The Bank expects that any long-term fixed rate mortgages will be underwritten for resale to the secondary market. It will offer primarily adjustable rate mortgages. The majority of fixed rate loans will be sold in the secondary mortgage market. All loans will be made in accordance with our appraisal policy with the ratio of the loan principal to the value of collateral as established by independent appraisal not exceeding 80%, unless the borrower has private mortgage insurance. Commercial loans. Bank of Birmingham expects that loans for commercial purposes in various lines of businesses will be one of the larger components of the Bank’s loan portfolio. The target commercial loan market will be small- to medium-sized businesses and the business professional market. The terms of these loans will vary by purpose and by type of underlying collateral. The commercial loans will primarily be underwritten on the basis of the borrower’s ability to service the loan from income. The Bank will typically make equipment loans for a term of five years or less at fixed or variable rates, with the loan fully amortized over the term. Loans to support working capital will typically have terms not exceeding one year and will usually be secured by accounts receivable, inventory or personal guarantees of the principals of the business. For loans secured by accounts receivable or inventory, principal will typically be repaid as the assets securing the loan are converted into cash, and for loans secured with other types of collateral, principal will typically be due at maturity. The quality of the commercial borrower’s management and its ability both to properly evaluate changes in the supply and demand characteristics affecting its markets for products and services ~~and to effectively respond to such changes are significant factors in a commercial borrower’s creditworthiness.~~

~~Consumer loans.~~ Bank of Birmingham ~~makes~~has established a ~~variety~~broad base of ~~loans~~core ~~to individuals for personal~~deposits, ~~family~~including ~~and~~savings ~~household purposes~~accounts, ~~including~~checking ~~secured~~accounts, ~~and unsecured installment and term~~money ~~loans~~market accounts, ~~second~~NOW ~~mortgages~~accounts, ~~home~~a ~~equity~~variety ~~loans and home equity lines~~ of ~~credit.~~certificates ~~The amortization~~ of ~~second~~ ~~mortgages~~deposit ~~will~~and ~~generally~~individual ~~not~~retirement ~~exceed 15 years~~accounts. ~~Repayment~~In ofaddition, ~~consumer loans depends upon~~ the ~~borrower’s~~ ~~financial~~Bank ~~stability~~has ~~and~~implemented isa ~~more~~marketing ~~likely~~program toin beits ~~adversely~~primary ~~affected~~service byareas ~~divorce, job loss, illness~~ and ~~personal~~will ~~hardships~~feature ~~than~~a ~~repayment~~broad ofproduct ~~other~~line ~~loans.~~and ~~Because many consumer loans are~~competitive ~~secured~~rates byand ~~depreciable~~services. ~~assets~~The ~~such~~primary assources ~~boats,~~of ~~cars~~deposits ~~and trailers, the loan~~ will ~~generally~~ be ~~amortized~~ ~~over~~residents ~~the useful life~~ of, ~~the~~and ~~asset.~~businesses ~~The~~and ~~loan~~their ~~officer~~employees ~~will~~located ~~review~~in, the ~~borrower~~Bank’s ~~past credit~~primary ~~history,~~service ~~past~~areas. ~~income~~Bank ~~level, debt history and, when applicable, cash flow and determine the impact~~ of ~~all~~Birmingham obtains these ~~factors~~deposits onthrough ~~the~~personal ~~ability~~solicitation ofby ~~the~~its ~~borrower to make future payments as agreed. We~~officers ~~expect~~and ~~that~~directors, ~~the~~direct ~~principal~~mail ~~competitors~~solicitations ~~for consumer loans will be the established banks~~ and ~~finance companies~~advertisements published in the ~~Bank’s~~local ~~market~~media.

8 Other banking services

~~Table~~Other banking services include cashier’s checks, travelers’ checks, and direct deposit of ~~Contents~~payroll and Social Security checks, night depository, remote deposit capture, bank-by-mail, Internet banking, automated teller machine cards and debit cards. The Bank is associated with nationwide networks of automated teller machines that its customers can use throughout Michigan and the country. It also may offer expanded financial services, such as insurance, financial planning, investment and trust services; in each case, if offered, we would expect initially that the Bank would do so through strategic partners. The Bank does not currently exercise trust powers and may choose to do so in the future with prior regulatory approval.

~~Investments~~ Employees

InThe ~~addition~~Bank’s tosuccess ~~loans~~depends, ~~Bank of Birmingham will make other investments primarily~~ in ~~obligations of~~part, ~~the~~on ~~United~~its ~~States~~ability ~~or obligations guaranteed as~~ to ~~principal~~attract, retain and ~~interest~~motivate byhighly ~~the~~qualified ~~United~~management ~~States~~ and other ~~taxable securities. No investment in any of those instruments will exceed any applicable~~personnel, ~~limitation~~for ~~imposed~~whom bycompetition ~~law~~is ~~or regulation~~intense. The ~~asset-liability management committee will review the investment portfolio on an ongoing basis in order to ensure that the investments conform to the~~ Bank’s ~~policy~~of asBirmingham ~~set~~operates bywith ~~its~~thirty ~~board~~one offull-time ~~directors~~equivalent employees.

~~Asset~~9 ~~and liability management~~

~~The~~SUPERVISION ~~asset-liability~~AND ~~management~~REGULATION committee oversees the Bank’s assets and liabilities and strives to provide a stable, optimized net interest margin, adequate liquidity and a profitable after-tax return on assets and return on equity. The committee conducts these management functions within the framework of written loan and investment policies that the Bank has adopted. The committee attempts to maintain a balanced position between rate sensitive assets and rate sensitive liabilities.

~~Deposit~~General ~~services~~

~~Bank~~The growth and earnings performance of ~~Birmingham~~the ~~has~~Corporation ~~established~~and athe Bank ~~broad~~can ~~base~~be ofaffected ~~core~~not ~~deposits,~~only ~~including~~by ~~savings~~management ~~accounts, checking~~decisions ~~accounts,~~and ~~money~~general ~~market~~economic ~~accounts~~conditions, ~~NOW~~but ~~accounts,~~also aby ~~variety~~the policies of ~~certificates~~various ofgovernmental ~~deposit~~regulatory ~~and individual~~authorities ~~retirement~~including, ~~accounts.~~but Innot ~~addition~~limited to, the ~~Bank~~Board ~~has~~of ~~implemented~~Governors aof ~~marketing~~the ~~program~~Federal inReserve ~~its~~System (the ~~primary~~“Federal ~~service~~Reserve”), ~~areas~~the ~~and~~Federal ~~will~~Deposit ~~feature~~Insurance aCorporation ~~broad~~(the ~~product~~“FDIC”), ~~line~~the ~~and~~Michigan ~~competitive~~Office ~~rates~~of Financial and ~~services. The~~Insurance ~~primary~~Regulation ~~sources~~(the of“OFIR”), ~~deposits~~the ~~will~~Internal beRevenue ~~residents~~Service ~~of,~~ and ~~businesses~~state taxing authorities. Financial institutions and their ~~employees~~holding ~~located in,~~companies ~~the~~are ~~Bank’s~~extensively ~~primary~~regulated ~~service~~under ~~areas.~~federal ~~Bank~~and ofstate ~~Birmingham~~law. ~~obtains~~The ~~these~~effect ~~deposits~~of ~~through~~such ~~personal solicitation~~statutes, byregulations ~~its~~and ~~officers~~policies ~~and~~can ~~directors~~be significant, ~~direct~~and ~~mail~~cannot ~~solicitations~~be ~~and~~predicted ~~advertisements~~with ~~published in~~a ~~the~~high ~~local~~degree ~~media~~of certainty.

~~Other~~Federal ~~banking~~and ~~services~~state laws and regulations generally applicable to financial institutions, such as the Corporation and the Bank, regulate, among other things, the scope of business, investments, and reserves against deposits, capital levels relative to operations, the nature and amount of collateral for loans, the establishment of branches, mergers, consolidations and dividends. The system of supervision and regulation applicable to the Corporation and the Bank establishes a comprehensive framework for their respective operations and is intended primarily for the protection of the FDIC’s deposit insurance funds and the depositors, rather than the shareholders, of financial institutions.

~~Other~~The ~~banking services include cashier~~Corporation’s ~~checks,~~common ~~travelers’~~stock ~~checks,~~is ~~and~~registered ~~direct deposit of~~with ~~payroll~~the ~~and~~Securities ~~Social Security checks, night depository, remote deposit capture, bank-by-mail, Internet banking, automated teller machine cards~~ and ~~debit~~Exchange ~~cards.~~Commission ~~The~~under ~~Bank~~the isSecurities ~~associated~~Exchange ~~with nationwide~~Act ~~networks~~ of ~~automated~~1934, ~~teller~~as ~~machines~~amended ~~that its customers can use throughout Michigan and~~ (the ~~country~~“Exchange Act”). ~~It also may offer expanded financial services~~Therefore, ~~such~~the asCorporation ~~insurance,~~is ~~financial~~subject ~~planning, investment~~to ~~and~~the ~~trust services; in each case~~information, ifproxy ~~offered~~solicitation, weinsider ~~would~~trading ~~expect~~restrictions ~~initially~~and ~~that the Bank~~other ~~would~~requirements doof sothe ~~through~~Securities ~~strategic partners. The Bank does not currently exercise trust powers~~ and ~~may choose~~Exchange toCommission dounder ~~so in~~ the ~~future~~Exchange ~~with prior regulatory approval~~Act.

~~Employees~~The Corporation’s common stock held by persons who are affiliates (generally officers, directors and principal stockholders) of the Corporation may not be resold without registration unless sold in accordance with certain resale restrictions. If the Corporation meets specified current public information requirements, each affiliate of the Corporation is able to sell in the public market, without registration, a limited number of shares in any three-month period.

The following references to material statutes and regulations affecting the Corporation and the Bank’s ~~success~~are ~~depends~~brief summaries and do not purport to be complete, and are qualified in ~~part,~~their onentirety ~~its~~by ~~ability~~reference to ~~attract,~~such ~~retain~~statues and ~~motivate~~regulations. ~~highly qualified~~Any ~~management~~change ~~and~~in ~~other~~applicable ~~personnel,~~laws ~~for~~or ~~whom~~regulations ~~competition~~may ishave ~~intense.~~a ~~The~~material ~~Bank~~effect ofon ~~Birmingham operates~~the ~~with~~business ~~twenty~~of ~~seven~~the ~~full-time~~Corporation ~~equivalent~~and ~~employees~~the Bank.

9 The Corporation

~~Table~~General. The Corporation, as the sole shareholder of ~~Contents~~the Bank, is a bank holding company. As a bank holding company, the Corporation is required to register with, and is subject to regulation by, the Federal Reserve under the Bank Holding Company Act, as amended (the “BHCA”). In accordance with the Federal Deposit Insurance Act, as amended, (the “FDI Act”) and Federal Reserve policy, the Corporation is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances where the Corporation might not do so absent such policy. Under the BHCA, the Corporation is subject to periodic examination by the Federal Reserve Bank of Chicago and is required to file periodic reports of its operations and such additional information as the Federal Reserve may require.

~~SUPERVISION~~Investments ~~AND~~and ~~REGULATION~~Activities. Under the BHCA, a bank holding company must obtain Federal Reserve approval before: (i) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5% of such shares (unless it already owns or controls the majority of such shares); (ii) acquiring all or substantially all of the assets of another bank or bank holding company; or (iii) merging or consolidating with another bank holding company. The Federal Reserve may allow a bank holding company to acquire banks located in any state of the United States without regard to geographic restrictions or reciprocity requirements imposed by state law, but subject to certain conditions, including limitations on the aggregate amount of deposits that may be held by the acquiring holding company and all of its insured depository institution affiliates.

~~General~~ 10

The ~~growth~~BHCA ~~and~~limits ~~earnings~~the ~~performance~~activities of ~~the~~a ~~Corporation~~bank ~~and~~holding ~~the~~company ~~Bank~~that ~~can~~has benot ~~affected~~qualified ~~not~~as ~~only~~a byfinancial ~~management~~holding ~~decisions~~company to banking and ~~general~~the ~~economic~~management ~~conditions~~of banking organizations, ~~but~~and ~~also~~to bycertain ~~the~~non-banking ~~policies~~activities ofthat ~~various governmental~~are ~~regulatory~~deemed ~~authorities~~to ~~including,~~be ~~but~~so ~~not~~closely ~~limited~~related to, ~~the~~banking ~~Board~~or ofmanaging ~~Governors~~or ofcontrolling ~~the Federal~~banks ~~Reserve~~as ~~System~~to ~~(the~~be ~~“Federal~~a ~~Reserve”),~~proper ~~the~~incident ~~Federal~~to ~~Deposit~~those activities. ~~Insurance~~Such ~~Corporation~~non-banking ~~(the “FDIC”)~~activities include, ~~the~~among ~~Michigan~~other ~~Office~~things: ofoperating ~~Financial~~a ~~and~~mortgage ~~Insurance~~company, ~~Regulation~~finance ~~(the “OFIR”)~~company, ~~the~~credit ~~Internal Revenue~~card ~~Service~~company ~~and~~or ~~state~~factoring ~~taxing~~company; ~~authorities.~~performing ~~Financial~~certain ~~institutions~~data ~~and~~processing ~~their~~operations; ~~holding~~providing ~~companies are~~certain ~~extensively~~investment ~~regulated~~and ~~under~~financial advice; ~~federal~~acting ~~and~~as ~~state~~an ~~law.~~insurance ~~The~~agent ~~effect~~for certain types of ~~such~~credit-related ~~statutes,~~insurance; ~~regulations and~~leasing ~~policies~~property ~~can~~on bea ~~significant~~full-payout, ~~and~~non-operating ~~cannot~~basis; beand ~~predicted~~providing ~~with~~securities abrokerage ~~high~~services ~~degree~~for ~~of certainty~~customers.

~~Federal~~In ~~and~~November ~~state laws and regulations generally applicable to financial institutions~~1999, ~~such as~~ the ~~Corporation~~Gramm-Leach-Bliley ~~and~~Act (the ~~Bank,~~“GLB ~~regulate,~~Act”) ~~among~~was ~~other~~signed ~~things,~~into ~~the~~law. ~~scope~~Under ofthe ~~business,~~GLB ~~investments~~Act, ~~and reserves~~a ~~against~~bank ~~deposits,~~holding ~~capital~~company whose ~~levels~~subsidiary ~~relative~~depository toinstitutions ~~operations,~~all ~~the~~are ~~nature~~well-capitalized and ~~amount~~well-managed ~~of collateral~~and ~~for~~who ~~loans,~~have ~~the~~Community ~~establishment~~Reinvestment ofAct ~~branches,~~ratings ~~mergers, consolidations and dividends. The system~~ of ~~supervision~~at ~~and~~least ~~regulation~~“satisfactory” ~~applicable~~may elect to ~~the~~become ~~Corporation and the Bank establishes~~ a ~~comprehensive~~ ~~framework~~financial ~~for~~holding ~~their~~company. ~~respective~~A ~~operations~~financial ~~and~~holding iscompany ~~intended primarily for the~~is ~~protection~~permitted ofto ~~the~~engage ~~FDIC’s~~in ~~deposit~~a ~~insurance~~broader ~~funds~~range ~~and~~of ~~the~~activities ~~depositors,~~than ~~rather~~are ~~than~~permitted ~~the~~to ~~shareholders, of~~bank ~~financial~~holding ~~institutions~~companies.

~~The~~Those ~~Corporation’s~~expanded ~~common~~activities include ~~stock~~any isactivity ~~registered~~which the Federal Reserve (in certain instances in consultation with the ~~Securities~~Department ~~and~~of ~~Exchange~~the ~~Commission~~Treasury) ~~under~~determines, by order or regulation, to be financial in nature or incidental to such financial activity, or to be complementary to a financial activity and not to pose a substantial risk to the ~~Securities~~safety ~~Exchange~~or ~~Act~~soundness of ~~1934,~~depository asinstitutions ~~amended~~or (the ~~“Exchange~~financial ~~Act”)~~system generally. ~~Therefore~~Such expanded activities include, ~~the~~among ~~Corporation~~others: insuring, guaranteeing, or indemnifying against loss, isharm, ~~subject~~damage, toillness, ~~the~~disability ~~information~~or death, ~~proxy~~or ~~solicitation~~issuing annuities, ~~insider~~and ~~trading~~acting ~~restrictions~~as principal, agent, or broker for such purposes; providing financial, investment, or economic advisory services, including advising a mutual fund; and ~~other~~underwriting, ~~requirements~~dealing ofin, ~~the~~or ~~Securities~~making ~~and~~a ~~Exchange~~market ~~Commission~~in ~~under~~securities. ~~the~~The ~~Exchange~~Corporation ~~Act~~has not elected to be treated as a financial holding company.

~~The~~Federal ~~Corporation’s~~legislation ~~common~~also ~~stock~~prohibits ~~held~~the byacquisition ~~persons~~of ~~who~~control ~~are~~of ~~affiliates~~a ~~(generally~~bank ~~officers~~holding company, ~~directors~~ ~~and~~such ~~principal~~as ~~stockholders) of~~ the Corporation, ~~may~~by ~~not~~a beperson ~~resold~~or ~~without~~a ~~registration~~group ~~unless~~of ~~sold~~persons acting in ~~accordance~~concert, ~~with~~without ~~certain~~prior ~~resale~~notice ~~restrictions.~~to If the ~~Corporation~~Federal ~~meets~~Reserve. ~~specified current~~Control ~~public~~is ~~information~~defined ~~requirements,~~in ~~each~~certain ~~affiliate~~cases ofas the ~~Corporation~~acquisition isof ~~able~~10% toof ~~sell in~~ the ~~public~~ ~~market,~~outstanding ~~without~~shares ~~registration,~~of a ~~limited~~bank ~~number~~holding ~~of shares in any three-month period~~company.

~~The~~Capital ~~following~~Requirements. ~~references~~The toFederal ~~material~~Reserve ~~statutes~~uses ~~and~~capital ~~regulations~~adequacy ~~affecting~~guidelines ~~the~~in ~~Corporation~~its examination and ~~the~~ ~~Bank~~regulation ~~are~~of ~~brief~~bank holding ~~summaries~~companies. ~~and~~If docapital ~~not~~falls ~~purport~~below tominimum beguideline ~~complete~~levels, ~~and~~a ~~are~~bank ~~qualified~~holding incompany ~~their~~may, ~~entirety by~~among ~~reference~~other tothings, ~~such~~be ~~statues~~denied ~~and~~approval ~~regulations.~~to ~~Any~~acquire ~~change~~or inestablish ~~applicable~~additional ~~law~~banks or ~~regulations~~non-bank ~~may have a material effect on the business of the Corporation and the Bank~~businesses.

The ~~Corporation~~Federal Reserve capital guidelines establish the following minimum regulatory capital requirements for bank holding companies: a risk-based requirement expressed as a percentage of total risk-weighted assets, and a leverage requirement expressed as a percentage of total assets. The risk-based requirement consists of a minimum ratio of total capital to total risk-weighted assets of 8%, of which at least 4% must be Tier I capital (which consists principally of shareholders’ equity). The leverage requirement consists of a minimum ratio of Tier I capital to total assets of 3% for the most highly rated bank holding companies, with minimum requirements of 4% to 5% for all others.

~~General.~~ The ~~Corporation,~~risk-based asand ~~the~~leverage ~~sole~~standards ~~shareholder of the Bank, is a bank holding~~presently ~~company.~~used ~~As a bank holding company, the Corporation is required to register with, and is subject to regulation~~ by, the Federal Reserve ~~under~~are ~~the~~minimum ~~Bank Holding Company Act~~requirements, asand ~~amended~~higher ~~(the~~capital ~~“BHCA”). In~~levels ~~accordance~~will ~~with~~be ~~Federal~~required ~~Reserve~~if ~~policy,~~warranted ~~the~~by ~~Corporation is expected to act as a source of financial strength to~~ the ~~Bank~~particular ~~and to commit resources to support the Bank in~~ circumstances ~~where the~~or ~~Corporation~~risk ~~might~~profiles ~~not~~of doindividual sobanking ~~absent such policy~~organizations. ~~Under the BHCA~~Further, ~~the~~any ~~Corporation~~banking isorganization ~~subject~~experiencing toor ~~periodic~~anticipating ~~examination~~significant bygrowth ~~the~~would ~~Federal~~be ~~Reserve~~expected ~~Bank~~to ofmaintain ~~Chicago~~capital ~~and~~ratios, isincluding ~~required~~tangible tocapital ~~file~~positions ~~periodic reports~~(i.e., ofTier ~~its~~I ~~operations~~capital ~~and~~less ~~such~~all ~~additional~~intangible ~~information~~assets), aswell above the ~~Federal~~minimum ~~Reserve may require~~levels.

~~Investments~~Pursuant ~~and~~to ~~Activities.~~its ~~Under~~Small ~~the~~Bank ~~BHCA,~~Holding aCompany ~~bank~~Policy, ~~holding~~the ~~company must obtain~~ Federal Reserve ~~approval~~exempts ~~before:~~certain ~~(i) acquiring,~~bank ~~directly~~holding orcompanies ~~indirectly,~~from ~~ownership~~the ~~or control of~~capital ~~any~~requirements ~~voting~~discussed ~~shares~~above. ofThe ~~another~~exemption ~~bank~~applies oronly to bank holding ~~company~~companies ~~if,~~with ~~after~~less ~~such~~than ~~acquisition,~~$500 itmillion ~~would~~in ~~own or~~consolidated ~~control~~assets ~~more~~that: ~~than~~(i) are 5%not ofengaged ~~such~~in ~~shares~~significant ~~(unless~~nonbanking itactivities ~~already~~either ~~owns~~directly or ~~controls~~through ~~the~~a ~~majority of such~~nonbank ~~shares)~~subsidiary; (ii) ~~acquiring~~do ~~all~~not orconduct ~~substantially~~significant ~~all~~off-balance ofsheet ~~the~~activities ~~assets~~(including ofsecuritization ~~another~~and ~~bank~~asset management or ~~bank~~administration) ~~holding company;~~either directly or through a nonbank subsidiary; and (iii) ~~merging~~do not have a material amount of debt or equity ~~consolidating~~securities ~~with~~outstanding ~~another~~(other ~~bank~~than ~~holding~~trust ~~company~~preferred securities) that are registered with the SEC. The ~~Federal~~Corporation ~~Reserve may~~qualifies ~~allow~~for athis ~~bank~~exemption ~~holding~~and, ~~company~~thus, is required to ~~acquire~~meet ~~banks~~applicable ~~located~~capital instandards ~~any~~on ~~state~~a bank-only basis. However, bank holding companies with assets of ~~the~~less ~~United~~than ~~States~~$500 ~~without regard~~million are subject to ~~geographic~~various restrictions oron ~~reciprocity~~debt including requirements ~~imposed~~that bydebt ~~state~~is ~~law~~retired within 25 years of being incurred, ~~but~~that ~~subject~~the debt to ~~certain~~ ~~conditions,~~equity ~~including~~ratio ~~limitations~~is on.30 ~~the~~to ~~aggregate~~1 ~~amount~~within 12 years of ~~deposits~~the incurrence of debt and that ~~may~~dividends begenerally ~~held~~cannot ~~by the~~be ~~acquiring~~paid ~~holding~~if ~~company~~the ~~and~~debt ~~all~~to ofequity ~~its~~ratio ~~insured~~exceeds ~~depository~~1 ~~institution~~to ~~affiliates~~1.

10 11

~~Table~~Dividends. The Corporation is organized under the Michigan Business Corporation Act which provides that distributions may be made only if, after giving the distribution effect, a corporation is able to pay its debts as they become due in the usual course of ~~Contents~~business and the corporation’s total assets equal or exceed the sum of its total liabilities plus the amount that would be needed to satisfy the preferential rights of any shareholder whose preferential rights are superior to those receiving the distribution if the corporation were to be dissolved at the time of the distribution.

~~The~~Additionally, ~~BHCA~~the ~~limits~~Federal Reserve has issued a policy statement with regard to the ~~activities~~payment of cash adividends by bank holding ~~company~~companies. ~~that~~The ~~has~~policy ~~not~~statement ~~qualified~~provides asthat a ~~financial~~ bank holding company toshould ~~banking~~not ~~and~~pay ~~the~~cash ~~management~~dividends ofwhich ~~banking~~exceed ~~organizations,~~its ~~and~~net toincome ~~certain~~or ~~non-banking activities~~which ~~that~~can ~~are~~only ~~deemed to~~ be sofunded ~~closely~~in ~~related~~ways tothat ~~banking~~weaken orthe ~~managing~~bank orholding ~~controlling~~company’s ~~banks as~~financial tohealth, besuch aas ~~proper~~by ~~incident~~borrowing. toThe ~~those~~Federal ~~activities.~~Reserve ~~Such~~also ~~non-banking~~possesses ~~activities~~enforcement ~~include,~~powers ~~among~~over ~~other things:~~bank ~~operating~~holding acompanies ~~mortgage~~and ~~company,~~their ~~finance~~non-bank ~~company,~~subsidiaries ~~credit~~to ~~card~~prevent ~~company~~ or ~~factoring~~remedy ~~company; performing~~actions ~~certain~~that ~~data~~represent ~~processing~~unsafe ~~operations;~~or ~~providing~~unsound ~~certain~~practices ~~investment~~or ~~and~~violations ~~financial~~of ~~advice;~~applicable ~~acting~~statutes asand anregulations. ~~insurance~~Among ~~agent~~these ~~for~~powers ~~certain~~is ~~types~~the ofability ~~credit-related~~to ~~insurance;~~proscribe ~~leasing~~the ~~property~~payment onof ~~a full-payout,~~dividends ~~non-operating~~by ~~basis;~~banks and ~~providing~~bank ~~securities~~holding ~~brokerage services for customers~~companies.

InAs ~~November 1999,~~a result of the ~~Gramm~~Corporation’s issuance of senior non-~~Leach-Bliley~~cumulative ~~Act~~perpetual preferred shares to the Secretary of the Treasury (the “~~GLB Act~~Treasury”) ~~was~~pursuant ~~signed~~to ~~into~~the ~~law.~~Small ~~Under~~Business ~~the~~Lending Fund ~~GLB~~(“SBLF”) ~~Act~~(as described below), athe ~~bank~~Corporation ~~holding~~is ~~company~~restricted ~~whose~~in ~~subsidiary~~the ~~depository~~payment ~~institutions~~of ~~all~~dividends ~~are~~on ~~well-capitalized and~~Common ~~well-managed~~Stock ~~and~~if ~~who~~it ~~have~~fails ~~Community~~to ~~Reinvestment~~maintain ~~Act~~certain ~~ratings~~capital oflevels. atIn ~~least~~addition, ~~“satisfactory”~~as ~~may elect~~long toas ~~become~~the apreferred ~~financial~~shares ~~holding~~are ~~company.~~outstanding, Adividend ~~financial~~payments ~~holding~~are prohibited ~~company~~until isall ~~permitted~~accrued toand ~~engage~~unpaid ~~in a~~dividends ~~broader~~are ~~range~~paid ofon ~~activities~~such ~~than~~preferred ~~are~~shares, ~~permitted~~subject to ~~bank~~certain ~~holding~~limited ~~companies~~exceptions.

~~Those~~Recent ~~expanded~~Developments. ~~activities~~The ~~include~~Emergency ~~any~~Economic ~~activity~~Stabilization ~~which~~Act ~~the~~of ~~Federal~~2008 ~~Reserve~~ (in“EESA”) ~~certain~~was ~~instances~~enacted on October 3, in2008. ~~consultation~~Pursuant ~~with~~to ~~the~~its ~~Department~~authority ofunder EESA, the Treasury created the Troubled Asset Relief Program Capital Purchase Program (the “TARP CPP”) ~~determines,~~under bywhich ~~order~~the orTreasury ~~regulation,~~was authorized to ~~be financial~~invest in ~~nature~~non-voting, orsenior ~~incidental~~preferred tostock ~~such~~of ~~financial~~U.S. banks ~~activity,~~and savings associations or totheir beholding ~~complementary~~companies. The Corporation elected to aparticipate ~~financial activity~~in the TARP CPP and ~~not~~on toApril 24, ~~pose~~2009 acompleted ~~substantial~~the ~~risk~~sale to the ~~safety~~Treasury orof ~~soundness~~$1,635,000 of ~~depository~~Fixed ~~institutions~~Rate Cumulative Perpetual Preferred Stock, Series orA (the ~~financial~~“Series ~~system~~A ~~generally~~Preferred Shares”) and a warrant to purchase Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Shares”). ~~Such~~The ~~expanded~~Corporation ~~activities~~issued ~~include~~and sold 1,635 ~~among~~Series ~~others:~~A ~~insuring~~Preferred Shares, with a ~~guaranteeing~~$1,000 orper ~~indemnifying~~share ~~against~~liquidation ~~loss~~preference, ~~harm,~~and ~~damage,~~a ~~illness,~~warrant ~~disability~~to orpurchase ~~death~~82 shares of the Series B Preferred Shares, orwith ~~issuing annuities~~a $1,000 ~~and~~per ~~acting~~share asliquidation ~~principal~~preference, ~~agent,~~at oran ~~broker~~exercise ~~for~~price ~~such~~of ~~purposes;~~$0.01 ~~providing~~per ~~financial,~~share (the “Warrant”). The Warrant was ~~investment,~~immediately orexercised ~~economic~~by ~~advisory~~the ~~services~~Treasury. On December 18, ~~including~~2009, ~~advising~~the aCorporation ~~mutual~~completed ~~fund;~~the ~~and~~sale ~~underwriting, dealing~~of in1,744 orshares ~~making~~of aFixed ~~market~~Rate inCumulative ~~securities.~~Perpetual ~~The~~Preferred ~~Corporation~~Stock ~~has~~Series ~~not~~C ~~elected~~(the to“Series beC ~~treated~~Preferred asShares”) ain exchange for $1,744,000 ~~financial~~from ~~holding~~the ~~company~~Treasury under the TARP CPP.

~~Federal~~On ~~legislation~~September 27, ~~also~~2010, ~~prohibits~~ the ~~acquisition~~Small ofBusiness ~~control~~Jobs Act of a2010 ~~bank~~was ~~holding~~enacted ~~company,~~into ~~such~~law. asThe law authorized the ~~Corporation,~~creation byof the SBLF, a ~~person~~$30 orbillion acapital ~~group~~investment ofprogram ~~persons~~designed ~~acting~~for community banks with less than $10 billion in ~~concert~~assets to increase credit availability for small businesses. The Corporation elected to participate in the SBLF program and on July 28, ~~without~~2011 ~~prior~~issued ~~notice~~$4,621,000 of Senior Non-cumulative Perpetual Preferred Stock, Series D (the Series D Preferred Stock”) to the Treasury pursuant to the Securities Purchase Agreement dated July 28, 2011 (the ~~Federal~~“Securities ~~Reserve~~Purchase Agreement”). ~~Control~~A isportion ~~defined~~of inthe ~~certain~~proceeds ~~cases~~from as the ~~acquisition~~sale of ~~10%~~the Series D stock were used to redeem all of the outstanding ~~shares~~Series A, B and C Preferred Shares and Warrants associated with the TARP CPP. The remaining proceeds were used to improve the capital position of athe ~~bank~~Bank ~~holding~~and ~~company~~to increase credit availability for small business.

~~Capital~~The Series ~~Requirements~~D Preferred Stock pays non-cumulative dividends each January 1, April 1, July 1 and October 1, beginning October 1, 2011. The ~~Federal~~dividend ~~Reserve~~rate, ~~uses~~which ~~capital~~is ~~adequacy~~calculated ~~guidelines~~on inthe ~~its~~aggregate Liquidation Amount, is based ~~examination~~upon ~~and~~the ~~regulation~~current level of ~~bank~~“Qualified ~~holding~~Small ~~companies~~Business Lending”, or “QSBL” (as defined in the Securities Purchase Agreement) by the Bank. IfThe ~~capital~~dividend ~~falls~~rate ~~below~~for ~~minimum~~future ~~guideline~~dividend periods will be set based upon the “Percentage ~~levels,~~Change ain ~~bank~~Qualified ~~holding~~Lending” ~~company~~(as defined in the Securities Purchase Agreement) between each dividend period and the “Baseline” QSBL level. Such dividend rate may vary from 1% per annum to 5% per annum for the second through tenth dividend periods, ~~among~~from ~~other~~1% per ~~things~~annum to 7% per annum for the eleventh dividend period through year four and one-half. If the Series D Preferred Stock remains outstanding for more than four and one-half years, the dividend rate will be fixed ~~denied~~at ~~approval~~9%. Prior to ~~acquire~~that time, in general, the dividend rate decreases as the level of the Bank’s QSBL increases. Such dividends are not cumulative, but the Company may only declare and pay dividends on its common stock (or ~~establish~~any other equity ~~additional~~securities ~~banks~~junior to the Series D Preferred Stock) if it has declared and paid dividends for the current dividend period on the Series D Preferred Stock, and will be subject to other restrictions on its ability to repurchase or ~~non-bank~~redeem ~~businesses~~other securities.

~~The~~12 Federal Reserve capital guidelines establish the following minimum regulatory capital requirements for bank holding companies: a risk-based requirement expressed as a percentage of total risk-weighted assets, and a leverage requirement expressed as a percentage of total assets. The risk-based requirement consists of a minimum ratio of total capital to total risk-weighted assets of 8%, of which at least 4% must be Tier I capital (which consists principally of shareholders’ equity). The leverage requirement consists of a minimum ratio of Tier I capital to total assets of 3% for the most highly rated bank holding companies, with minimum requirements of 4% to 5% for all others.

~~The~~In ~~risk-based~~June ~~and~~2010, ~~leverage~~the ~~standards~~banking ~~presently~~regulators ~~used~~issued byfinal ~~the~~guidance ~~Federal~~to ~~Reserve~~ensure ~~are~~that ~~minimum~~incentive ~~requirements,~~compensation ~~and~~arrangements ~~higher~~at ~~capital~~financial ~~levels~~institutions ~~will~~take beinto ~~required~~account ifrisk ~~warranted~~and byare ~~the~~consistent ~~particular circumstances~~with orsafe ~~risk~~and ~~profiles~~sound ofpractices. ~~individual~~The ~~banking~~guidance ~~organizations.~~does ~~Further,~~not ~~any~~set ~~banking organization~~forth ~~experiencing~~any formulas or ~~anticipating~~pay ~~significant~~caps, ~~growth~~but ~~would~~sets beforth ~~expected~~certain toprinciples ~~maintain~~which ~~capital~~companies would be ~~ratios,~~required ~~including~~to ~~tangible~~follow ~~capital~~with ~~positions~~respect ~~(i.e.,~~to ~~Tier~~certain Iemployees ~~capital~~and ~~less~~groups ~~all~~of ~~intangible~~employees ~~assets), well~~that ~~above~~may expose the ~~minimum~~institution ~~levels~~to material amounts of risk.

~~Pursuant~~The toDodd-Frank ~~its~~Wall ~~Small~~Street ~~Bank~~Reform ~~Holding~~and ~~Company~~Consumer ~~Policy,~~Protection ~~the~~Act ~~Federal~~of ~~Reserve~~2010 ~~exempts~~(“Dodd-Frank ~~certain~~Act”) ~~bank holding~~was ~~companies~~signed ~~from~~into ~~the~~law ~~capital~~by ~~requirements~~President ~~discussed~~Obama ~~above~~on July 21, 2010. The ~~exemption~~Dodd-Frank ~~applies~~Act ~~only~~represents toa ~~bank~~comprehensive ~~holding~~overhaul ~~companies~~of the financial services industry within the United States and deals with ~~less~~a ~~than~~wide ~~$500 million~~range inof ~~consolidated~~regulatory ~~assets~~issues ~~that:~~including, ~~(i) are~~but not ~~engaged in~~limited ~~significant~~to: ~~nonbanking~~mandating ~~activities~~new ~~either~~capital ~~directly~~requirements orthat ~~through~~would arequire ~~nonbank~~certain ~~subsidiary;~~bank ~~(ii) do~~holding ~~not~~companies ~~conduct~~to ~~significant~~be ~~off-balance~~subject ~~sheet~~to ~~activities~~the ~~(including~~same ~~securitization~~capital ~~and~~requirements ~~asset~~as ~~management~~their ~~or administration~~depository institutions; eliminating (with certain exceptions) ~~either~~trust ~~directly~~preferred orsecurities; ~~through~~codifying athe ~~nonbank~~Federal ~~subsidiary~~Reserve’s Source of Strength doctrine; ~~and~~creating a Bureau of Consumer Financial Protection (~~iii~~the “CFPB”) do ~~not~~which will have athe ~~material amount~~power ofto ~~debt~~exercise orbroad ~~equity~~regulatory, ~~securities~~supervisory ~~outstanding~~and ~~(other~~enforcement ~~than~~authority ~~trust~~concerning ~~preferred~~both ~~securities)~~existing ~~that~~and ~~are~~new consumer financial protection laws; permanently increasing federal deposit ~~registered~~insurance ~~with~~protection ~~the~~to ~~SEC.~~$250,000 ~~The~~per ~~Corporation~~depositor; ~~qualifies~~extending the unlimited coverage for ~~this~~qualifying ~~exemption~~non-interest ~~and,~~bearing ~~thus~~transactional accounts until December 31, is2012; ~~required~~increasing the ratio of reserves to deposits minimum to 1.35 percent; assessing ~~meet~~premiums ~~applicable~~for ~~capital~~deposit ~~standards~~insurance coverage on aaverage ~~bank-only~~consolidated ~~basis.~~total ~~However~~assets less average tangible equity, ~~bank~~rather ~~holding~~than ~~companies~~on ~~with assets~~a deposit base; authorizing the assessment of ~~less~~examination ~~than~~fees; ~~$500 million~~establishing ~~are~~new ~~subject~~standards and restrictions on the origination of mortgages; permitting financial institutions to ~~various~~pay ~~restrictions~~interest on ~~debt~~business ~~including~~checking accounts; limiting interchange fees payable on debit card transactions; and implementing requirements on boards, corporate governance and executive compensation for ~~that~~public ~~debt~~companies. The act is ~~retired~~categorized ~~within~~into ~~25 years~~16 oftitles ~~being~~and ~~incurred~~requires regulators to create new and significant rules and regulations, ~~that~~conduct ~~the~~studies, ~~debt~~and toissue ~~equity~~periodic ~~ratio~~reports. The rulemaking phase began shortly after enactment. Implementation is occurring in stages, and widespread and complex changes are expected.30 The Dodd-Frank Act contains more than 300 provisions that expressly indicate that rulemaking is either required or permitted. At this time, it is difficult to 1predict the extent ~~within~~to ~~12 years~~which ofthe Dodd-Frank Act or the ~~incurrence~~resulting ofrules ~~debt~~and regulations will impact the Corporation’s and ~~that~~the ~~dividends~~Bank’s ~~generally~~business. ~~cannot~~Compliance with these new laws and regulations will likely result in additional costs, which could be ~~paid~~significant ifand could adversely impact the ~~debt to~~Corporation’s ~~equity~~and ~~ratio~~the ~~exceeds~~Bank’s 1results toof 1operations, financial condition or liquidity.

11In July 2011, the CFPB took over many of the consumer financial functions that had been assigned to the federal banking agencies and other designated agencies. The CFPB has broad rulemaking authority and there is considerable uncertainty as to how the CFPB actually will exercise its regulatory, supervisory, examination and enforcement authority.

~~Table~~The complete impact of ~~Contents~~the Dodd-Frank Act is unknown since many of the substantive requirements will be contained in the many rules and regulations to be implemented. However, the Dodd-Frank Act will have significant and immediate effects on banks and bank holding companies in many areas.

~~Dividends.~~ The ~~Corporation~~Bank is organized under the Michigan Business Corporation Act which provides that distributions may be made only if, after giving the distribution effect, a corporation is able to pay its debts as they become due in the usual course of business and the corporation’s total assets equal or exceed the sum of its total liabilities plus the amount that would be needed to satisfy the preferential rights of any shareholder whose preferential rights are superior to those receiving the distribution if the corporation were to be dissolved at the time of the distribution.

~~Additionally~~General. The Bank is a Michigan state-chartered bank, the ~~Federal~~deposit ~~Reserve~~accounts ~~has~~of ~~issued~~which are insured by the FDIC. As a ~~policy~~state-chartered ~~statement~~non-member ~~with~~bank, ~~regard~~the Bank is subject to the ~~payment of~~examination, ~~cash~~supervision, ~~dividends~~reporting byand ~~bank~~enforcement ~~holding~~requirements ~~companies.~~of ~~The~~the ~~policy~~OFIR, ~~statement~~as ~~provides~~the ~~that~~chartering aauthority ~~bank~~for ~~holding company~~state ~~should~~banks, ~~not~~and ~~pay~~the ~~cash~~FDIC, ~~dividends~~as ~~which~~administrator ~~exceed~~of ~~its~~the ~~net~~deposit ~~income~~insurance orfund, ~~which~~and ~~can~~to ~~only~~the bestatutes ~~funded~~and ~~in ways~~regulations ~~that~~administered ~~weaken~~by the ~~bank~~OFIR ~~holding~~and ~~company’s~~the ~~financial~~FDIC governing ~~health,~~ such matters as bycapital ~~borrowing.~~standards, ~~The~~mergers, ~~Federal Reserve~~establishment ~~also~~of ~~possesses~~branch ~~enforcement~~offices, ~~powers~~subsidiary ~~over~~investments ~~bank~~and ~~holding~~activities ~~companies~~ and ~~their~~general ~~non-bank subsidiaries~~investment toauthority. ~~prevent~~The orBank ~~remedy~~is ~~actions~~required ~~that~~to ~~represent~~file ~~unsafe~~reports orwith ~~unsound~~the ~~practices~~OFIR orand ~~violations~~the FDIC concerning its activities ofand ~~applicable~~financial ~~statutes~~condition and ~~regulations.~~is ~~Among~~required ~~these~~to ~~powers~~obtain isregulatory ~~the~~approvals ~~ability~~prior to ~~proscribe~~entering ~~the~~into ~~payment of~~certain ~~dividends~~transactions, byincluding ~~banks~~mergers ~~and~~with, ~~bank~~or ~~holding~~acquisitions ~~companies~~of, other financial institutions.

AsBusiness aActivities. ~~result~~The ~~of the Corporation~~Bank’s ~~issuance~~activities ofare ~~preferred~~governed ~~shares~~primarily toby ~~the~~Michigan’s U.Banking S.Code ~~Department~~ of ~~Treasury~~ 1999 (the “~~Treasury~~Banking Code”) ~~pursuant~~and to the ~~Troubled~~FDI ~~Asset~~Act. ~~Relief~~The ~~Program’s~~FDI ~~(“TARP”)~~Act, ~~Capital~~among ~~Purchase Plan~~other ~~(“CPP”)~~things, ~~the~~requires ~~Corporation~~that isfederal ~~restricted~~banking inregulators ~~the~~intervene ~~payment~~promptly ofwhen ~~dividends~~a ~~and,~~depository ~~without~~institution ~~the~~experiences ~~Treasury’s consent,~~financial ~~may~~difficulties; ~~not~~mandates ~~declare~~the orestablishment ~~pay~~of ~~any~~a ~~dividend~~risk-based deposit oninsurance ~~the~~assessment ~~Corporation’s~~system; ~~common~~and ~~stock~~requires ~~other~~imposition ~~than~~of ~~its current~~numerous ~~quarterly~~additional ~~cash~~safety ~~dividend~~and ofsoundness ~~$0.00~~operational ~~per~~standards ~~share~~and restrictions. ~~This~~The ~~restriction~~GLB noAct, ~~longer~~which ~~applies~~amended on the ~~earlier~~ toFDI ~~occur~~Act, ofamong ~~April 24~~other things, ~~2012~~loosens (the ~~third~~restrictions ~~anniversary~~on ofaffiliations between ~~the~~entities ~~issuance~~engaged ofin ~~the~~certain ~~preferred~~financial, ~~shares to~~securities, ~~the~~and ~~Treasury)~~insurance oractivities; ~~the~~imposes ~~date~~restrictions on ~~which~~ the ~~Corporation~~disclosure ~~has redeemed all~~ of ~~the~~consumers’ ~~preferred~~nonpublic ~~shares issued~~personal orinformation; ~~the~~and ~~date~~institutes oncertain ~~which~~reforms ~~the Treasury has transferred all~~ of the ~~preferred~~Federal ~~shares~~Home toLoan ~~third parties~~Bank ~~not~~System. ~~affiliated~~The federal ~~with~~laws ~~the~~contain ~~Treasury.~~provisions Inaffecting ~~addition,~~numerous asaspects ~~long~~of as the ~~preferred~~operation ~~shares~~and ~~are outstanding,~~regulation ~~dividend~~of ~~payments~~federally ~~are~~insured ~~prohibited~~banks ~~until all accrued~~ and ~~unpaid~~empower ~~dividends~~the ~~are~~FDIC, ~~paid~~among ~~on such~~other ~~preferred shares~~agencies, ~~subject~~ to ~~certain~~promulgate ~~limited~~regulations ~~exceptions~~implementing their provisions.

~~Recent~~13 Developments. The Emergency Economic Stabilization Act of 2008 (“EESA”) was enacted on October 3, 2008. Pursuant to EESA, the Treasury has the authority to among other things, purchase up to $700 billion of mortgages, mortgage-backed securities and certain other financial instruments from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets. Pursuant to its authority under EESA, the Treasury created the TARP CPP under which the Treasury was authorized to invest in non-voting, senior preferred stock of U.S. banks and savings associations or their holding companies. The Corporation elected to participate in the TARP CPP and on April 24, 2009 completed the sale to the Treasury of $1,635,000 of Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Shares”) and a warrant to purchase Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Shares”). The Corporation issued and sold 1,635 Series A Preferred Shares, with a $1,000 per share liquidation preference, and a warrant to purchase 82 shares of the Series B Preferred Shares, with a $1,000 per share liquidation preference, at an exercise price of $0.01 per share (the “Warrant”). The Warrant was immediately exercised by the Treasury. On December 18, 2009, the Corporation completed the sale of 1,744 shares of Fixed Rate Cumulative Perpetual Preferred Stock series C in exchange for $1,744,000 from the U.S. Treasury under the Capital Purchase Program.

~~The Series A and C Preferred Shares issued by the Corporation pay cumulative dividends of 5% a year for the first five years and 9% a year thereafter~~Branching. ~~The~~Michigan ~~Series B~~chartered ~~Preferred~~banks, ~~Shares~~such ~~issued~~as by the ~~Corporation pay cumulative dividends of 9% per annum. Among other restrictions~~Bank, ~~the~~have ~~securities purchase agreement between~~ the ~~Corporation and the Treasury limits the Corporation’s ability to~~authority ~~repurchase~~under ~~its~~Michigan ~~own~~law ~~stock and subjects the Corporation~~ to ~~certain~~establish ~~executive~~branches ~~compensation limitations.~~throughout ~~The~~Michigan ~~terms of the Series A Preferred Shares~~ and ~~Series B~~in ~~Preferred~~any ~~Shares~~state, ~~as amended by~~ the ~~American~~District ~~Recovery and Reinvestment Act~~ of ~~2009 (“ARRA”)~~Columbia, ~~provide~~any ~~that~~U.S. ~~the~~territory ~~Series A~~or ~~Preferred Shares~~protectorate, and ~~the~~foreign ~~Series B Preferred Shares~~countries, ~~may~~subject beto ~~redeemed by~~ the ~~Corporation,~~receipt ~~in whole or in part, upon approval~~ of ~~the Treasury and the Corporation’s primary banking regulators. The Series B Preferred Shares may not be redeemed until~~ all ~~the~~required ~~Series A~~regulatory ~~Preferred Shares have been redeemed~~approvals.

~~ARRA~~The ~~was~~Riegle-Neal ~~enacted~~Interstate onBanking ~~February 17,~~and ~~2009.~~Branching ~~Among~~Efficiency ~~other~~Act ~~things,~~of ~~ARRA~~1994 ~~sets~~allows ~~forth~~the ~~additional~~FDIC ~~limits on~~and ~~executive~~other ~~compensation~~federal atbank ~~all~~regulators ~~financial~~to ~~institutions~~approve applications ~~receiving~~for ~~federal~~mergers ~~funds~~of ~~under~~banks ~~any~~across ~~program, including~~state ~~the~~lines ~~TARP~~without ~~CPP,~~regard ~~both~~to ~~retroactively~~whether ~~and~~such ~~prospectively.~~activity ~~The~~is ~~executive~~contrary ~~compensation restrictions~~to instate ~~ARRA~~law. ~~include~~However, ~~among~~each ~~others:~~state ~~limits~~could ondetermine ~~compensation~~if ~~incentives,~~it ~~prohibitions~~would ~~on “Golden~~permit ~~Parachute~~out ~~Payments”~~of state banks to ~~certain~~acquire ~~employees,~~only ~~the~~branches ~~establishment~~of bya ~~publicly~~bank ~~registered~~in ~~TARP~~that ~~CPP~~state or to ~~recipients~~establish ofde novo branches. As a ~~board~~result ~~compensation~~of ~~committee~~the ~~comprised~~Dodd-Frank ~~entirely~~Act, ofinterstate ~~independent~~branching ~~directors~~authority ~~for~~has ~~the purpose~~been ofexpanded. ~~reviewing~~A ~~employee~~state ~~compensation~~or ~~plans,~~national ~~and~~bank may open a de novo branch in another state if the ~~requirement~~law of athe ~~non-binding~~state ~~vote~~where onthe branch is to be ~~executive~~located ~~pay~~would ~~packages~~permit ata ~~each~~state ~~annual~~bank ~~shareholder~~chartered ~~meeting~~by ~~until~~that ~~the~~state ~~government~~to ~~funds~~open ~~are~~a ~~repaid~~branch.

12Loans to One Borrower. Under Michigan law, a bank’s total loans and extensions of credit and leases to one person is limited to 15% of the bank’s capital and surplus, subject to several exceptions. This limit may be increased to 25% of the bank’s capital and surplus upon approval by a 2/3 vote of its board of directors. Certain loans, including loans secured by bonds or other instruments of the United States and fully guaranteed by the United States as to principal and interest, are not subject to the limit just referenced. In addition, certain loans, including loans arising from the discount of nonnegotiable consumer paper which carries a full recourse endorsement or unconditional guaranty of the person transferring the paper, are subject to a higher limit of 30% of capital and surplus.

~~Table~~Enforcement. The OFIR and FDIC each have enforcement authority with respect to the Bank. The Commissioner of ~~Contents~~the OFIR has the authority to issue cease and desist orders to address unsafe and unsound practices and actual or imminent violations of law and to remove from office bank directors and officers who engage in unsafe and unsound banking practices and who violate applicable laws, orders, or rules. The Commissioner of the OFIR also has authority in certain cases to take steps for the appointment of a receiver or conservator of a bank.

InThe ~~June 2010,~~FDIC ~~the~~has ~~banking~~similar ~~regulators~~broad ~~issued~~authority, ~~final~~including ~~guidance~~authority to ~~ensure~~bring ~~that~~enforcement ~~incentive~~actions against all “institution-affiliated ~~compensation~~parties” ~~arrangements~~(including atshareholders, ~~financial~~directors, ~~institutions~~officers, ~~take~~employees, ~~into~~attorneys, ~~account~~consultants, ~~risk~~appraisers and ~~are~~accountants) ~~consistent~~who ~~with safe~~knowingly ~~and~~or ~~sound~~recklessly ~~practices.~~participate ~~The~~in ~~guidance~~any ~~does~~violation ~~not~~of ~~set~~law ~~forth~~or regulation or any ~~formulas~~breach of fiduciary duty, or ~~pay~~other ~~caps~~unsafe or unsound practice likely to cause financial loss to, ~~but~~or ~~sets~~otherwise ~~forth~~have an adverse effect on, an insured institution. Civil penalties under federal law cover a wide range of violations and actions. Criminal penalties for most financial institution ~~certain~~crimes ~~principles~~include ~~which~~monetary ~~companies~~fines ~~would~~and beimprisonment. ~~required~~In addition, the FDIC has substantial discretion to ~~follow~~impose enforcement action on banks that fail to comply with its regulatory requirements, particularly with respect to ~~certain~~capital ~~employees~~levels. Possible ~~and~~enforcement ~~groups~~actions range from requiring the preparation of ~~employees~~a ~~that~~capital ~~may~~plan ~~expose~~or ~~the~~imposition ~~institution~~of a capital directive, to ~~material~~receivership, ~~amounts~~conservatorship, or the termination of ~~risk~~deposit insurance.

~~The~~Assessments ~~Dodd-Frank~~and ~~Wall~~Fees. ~~Street~~The ~~Reform~~Bank ~~and~~pays ~~Consumer~~a ~~Protection~~supervisory ~~Act~~fee (to the ~~“Dodd-Frank~~OFIR ~~Act”)~~of ~~became law~~not onless ~~July 31~~than $5,000 ~~2010.~~and ~~The~~not ~~Dodd-Frank~~more ~~Act~~than ~~constitutes~~25 ~~one~~cents for each $1,000 of ~~the~~total ~~most~~assets. ~~significant~~This ~~efforts~~fee inis ~~recent history~~invoiced prior to ~~comprehensively~~July 1 ~~overhaul~~each ~~the~~year ~~financial~~and ~~services~~is ~~industry~~due ~~and~~no ~~will~~later ~~affect~~than ~~large~~August 15. ~~and~~The ~~small financial~~OFIR ~~institutions~~imposes ~~alike.~~additional ~~While~~fees, ~~some~~in ofaddition ~~the~~to ~~provisions~~those ofcharged ~~the~~for ~~Dodd-Frank~~normal ~~Act~~supervision, ~~take~~for ~~effect immediately~~applications, ~~many~~special ofevaluations and ~~the~~analyses, ~~provisions~~and ~~have~~examinations. ~~delayed~~As ~~effective~~described ~~dates~~below ~~and~~under ~~their~~“Deposit ~~implementation~~Insurance, ~~will require~~“ the ~~issuance~~Bank ofalso ~~numerous~~pays ~~new~~assessments ~~regulations~~to the FDIC for deposit insurance.

~~The~~Regulatory ~~Dodd-Frank~~Capital ~~Act~~Requirements. ~~deals~~The ~~with~~Bank ais ~~wide~~required ~~range of regulatory issues including, but not limited~~ to~~: mandating~~ ~~new~~comply with capital ~~requirements~~adequacy ~~that~~standards ~~would~~set ~~require~~by ~~certain~~the ~~bank~~FDIC. ~~holding~~The ~~companies~~FDIC tomay beestablish ~~subject to~~higher ~~the~~minimum ~~same capital~~ requirements asif, ~~their~~for ~~depository~~example, ~~institutions;~~a ~~eliminating (with certain~~bank ~~exceptions)~~has ~~trust~~previously ~~preferred~~received ~~securities;~~special ~~codifying~~attention ~~the~~or ~~Federal~~has ~~Reserve’s Source of Strength doctrine; creating~~ a ~~Bureau~~high ofsusceptibility ~~Consumer Financial Protection which will have the power~~ to ~~exercise broad~~interest ~~regulatory,~~rate ~~supervisory~~risk. ~~and~~Banks ~~enforcement~~with ~~authority~~capital ~~concerning~~ratios ~~both~~below ~~existing~~the ~~and~~required ~~new~~minimum ~~consumer financial~~are ~~protection~~subject ~~laws; permanently increasing federal deposit insurance protection~~ to ~~$250,000 per~~certain ~~depositor;~~administrative ~~extending~~actions. ~~the~~More ~~unlimited~~than ~~coverage~~one ~~for~~capital ~~qualifying~~adequacy ~~non-interest~~standard ~~bearing~~applies, ~~transactional~~and ~~accounts~~all ~~until~~applicable ~~December 31,~~standards ~~2012.;~~must ~~increasing~~be ~~the~~satisfied ~~ratio~~for ofan ~~reserves~~institution to ~~deposits~~be ~~minimum~~considered to 1be in compliance.~~35 percent;~~ ~~assessing~~There ~~premiums~~are ~~for~~three ~~deposit~~basic ~~insurance~~measures ~~coverage~~of oncapital ~~average~~adequacy: ~~consolidated~~a total ~~assets less~~risk-based ~~average~~capital ~~tangible equity~~ratio, ~~rather than on~~ a ~~deposit~~Tier ~~base;~~1 authorizing the assessment of examination fees; establishing new standards and restrictions on the origination of mortgages; permitting financial institutions to pay interest on business checking accounts; limiting interrisk-~~change~~based ~~fees~~capital ~~payable on debit card transactions~~ratio; and ~~implementing~~a ~~requirements~~leverage ~~on boards, corporate governance and executive compensation for public companies~~ratio.

The ~~complete~~risk-based ~~impact~~framework ofwas ~~the~~adopted ~~Dodd-Frank~~to ~~Act~~assist isin ~~unknown~~the ~~since~~assessment ~~many~~of capital adequacy of ~~the~~financial ~~substantive~~institutions by, (i) making regulatory capital requirements ~~will~~more besensitive ~~contained~~to differences in ~~many~~risk ~~rules~~profiles ~~and~~among ~~regulations~~organizations; to(ii) introducing beoff-balance-sheet ~~implemented.~~items ~~However,~~into the assessment of capital adequacy; (iii) reducing the disincentive to ~~Dodd~~holding liquid, low-~~Frank~~risk ~~Act~~assets; ~~will~~and ~~have~~(iv) achieving greater consistency in evaluation of capital adequacy of major banking organizations throughout the world. The risk-based guidelines include both a ~~significant~~definition of capital and ~~immediate~~a ~~effect~~framework onfor calculating ~~banks~~risk-weighted assets by assigning assets and ~~bank~~off-balance ~~holding~~sheet ~~companies~~items ~~in many~~to ~~areas~~different risk categories. An institution’s risk-based capital ratios are calculated by dividing its qualifying capital by its risk-weighted assets.

~~The~~14 ~~Bank~~

~~General.~~Qualifying ~~The~~capital ~~Bank~~consists isof atwo ~~Michigan~~types ~~state-chartered~~of ~~bank,~~capital ~~the~~components: ~~deposit~~“core ~~accounts of which~~capital ~~are~~elements” ~~insured~~(or byTier ~~the~~1 ~~FDIC.~~capital) Asand a“supplementary ~~state-chartered~~capital ~~non-member~~elements” ~~bank,~~(or ~~the~~Tier ~~Bank~~2 iscapital). ~~subject~~Tier to1 ~~the examination,~~capital ~~supervision,~~is ~~reporting~~generally ~~and~~defined ~~enforcement~~as ~~requirements~~the sum of ~~the~~core ~~OFIR,~~capital aselements ~~the~~less ~~chartering authority~~goodwill ~~for~~and ~~state~~certain ~~banks,~~other ~~and~~intangible ~~the~~assets. ~~FDIC,~~Core ascapital ~~administrator~~elements consist of ~~the~~(i) common ~~deposit~~shareholders’ ~~insurance fund~~equity, ~~and~~(ii) non-cumulative perpetual preferred stock (subject to ~~the statutes~~certain limitations), and ~~regulations~~(iii) minority ~~administered~~interests byin the ~~OFIR~~equity ~~and~~capital ~~the~~accounts ~~FDIC~~of ~~governing~~consolidated ~~such~~subsidiaries. ~~matters~~Tier as2 capital ~~standards,~~consists ~~mergers,~~of ~~establishment~~(i) allowance offor ~~branch~~loan ~~offices,~~and ~~subsidiary~~lease ~~investments~~losses ~~and~~(subject ~~activities~~to ~~and general~~certain ~~investment~~limitations); ~~authority.~~(ii) perpetual ~~The~~preferred ~~Bank~~stock iswhich ~~required~~does tonot ~~file~~qualify ~~reports~~as ~~with~~Tier ~~the~~1 ~~OFIR~~capital ~~and~~(subject ~~the~~to ~~FDIC concerning~~certain ~~its~~conditions); ~~activities~~(iii) hybrid capital instruments and mandatory ~~financial~~convertible ~~condition~~debt ~~and~~securities; is(iv) term ~~required~~subordinated todebt ~~obtain~~and ~~regulatory~~intermediate ~~approvals prior~~term topreferred ~~entering~~stock ~~into~~(subject ~~certain~~to ~~transactions,~~limitations); ~~including~~and ~~mergers~~(v) net ~~with,~~unrealized orholding ~~acquisitions~~gains ~~of,~~on ~~other financial~~equity ~~institutions~~securities.

~~Business~~Under ~~Activities.~~current ~~The~~capital ~~Bank’s~~adequacy ~~activities~~standards, ~~are~~the ~~governed~~Bank ~~primarily~~must bymeet ~~Michigan’s Banking~~a ~~Code~~minimum ratio of ~~1999~~qualifying ~~(the~~total ~~“Banking~~capital ~~Code”)~~to ~~and~~risk-weighted ~~the~~assets ~~Federal~~of ~~Deposit Insurance Act (“FDI Act”)~~8%. ~~The~~ ~~FDI~~Of ~~Act~~that ratio, ~~among~~at ~~other~~least ~~things~~half, ~~requires~~or ~~that~~4%, ~~federal~~must ~~banking~~be ~~regulators~~in ~~intervene promptly when a depository institution experiences financial difficulties; mandates~~ the ~~establishment~~form of ~~a risk-based~~Tier ~~deposit~~1 ~~insurance~~capital. ~~assessment~~The ~~system;~~Bank ~~and~~must ~~requires~~also ~~imposition~~meet ofa ~~numerous~~leverage ~~additional safety~~capital ~~and soundness operational standards and restrictions~~requirement. ~~The~~In ~~GLB Act~~general, ~~which amended~~ the ~~FDI Act,~~minimum ~~among~~leverage ~~other~~capital ~~things,~~requirement ~~loosens~~is ~~the~~not ~~restrictions~~less onthan ~~affiliations~~3% ~~between~~Tier ~~entities~~1 ~~engaged~~capital ~~in certain~~to ~~financial,~~total ~~securities,~~assets ~~and~~if ~~insurance activities; imposes restrictions on~~ the ~~disclosure of~~bank ~~consumers’~~has ~~nonpublic~~the ~~personal~~highest ~~information;~~regulatory rating and ~~institutes~~is ~~certain~~not ~~reforms~~anticipating ofor ~~the~~experiencing ~~Federal~~any ~~Home~~significant ~~Loan Bank System~~growth. ~~The~~All ~~federal~~other ~~laws~~banks ~~contain~~should ~~provisions~~have ~~affecting~~a ~~numerous~~minimum ~~aspects~~leverage ofcapital ~~the~~ratio ~~operation and regulation~~ of ~~federally~~not ~~insured~~less ~~banks~~than ~~and empower the FDIC, among other agencies, to promulgate regulations implementing their provisions~~4%.

13The Dodd-Frank Act requires the FDIC to establish minimum leverage and risk-based capital requirements to apply to insured depository institutions. The Dodd-Frank Act additionally requires capital requirements to be countercyclical so that the required amount of capital increases in times of economic expansion and decreases in times of economic contraction, consistent with safety and soundness.

~~Table~~Prompt Corrective Regulatory Action. The FDIC is required to take certain supervisory actions against undercapitalized institutions, the severity of ~~Contents~~which depends upon the institution’s degree of undercapitalization. Generally, a bank is considered “well capitalized” if its risk-based capital ratio is at least 10%, its Tier 1 risk-based capital ratio is at least 6%, its leverage ratio is at least 5%, and the bank is not subject to any written agreement, order, or directive by the FDIC.

~~Branching.~~A ~~Michigan~~bank ~~chartered~~generally ~~banks,~~is ~~such~~considered as“adequately capitalized” if it does not meet each of the ~~Bank~~standards for well-capitalized institutions, ~~have~~and its risk-based capital ratio is at least 8%, its Tier 1 risk-based capital ratio is at least 4%, and its leverage ratio is at least 4% (or 3% if the ~~authority~~institution receives the highest rating under the Uniform Financial Institution Rating System). A bank that has a risk-based capital ratio less ~~Michigan~~than ~~law~~8%, toor ~~establish~~a ~~branches~~Tier ~~throughout~~1 ~~Michigan~~risk-based ~~and~~capital inratio ~~any~~less ~~state~~than 4%, or a leverage ratio less than 4% (3% or less for institutions with the ~~District~~highest ofrating ~~Columbia, any~~under Uthe Uniform Financial Institution Rating System) is considered to be “undercapitalized.S.” ~~territory~~A orbank ~~protectorate~~that has a risk-based capital ratio less than 6%, ~~and~~or ~~foreign~~a ~~countries~~Tier 1 capital ratio less than 3%, ~~subject~~or a leverage ratio less than 3% is considered to ~~the~~be ~~receipt~~“significantly ofundercapitalized,” ~~all~~and ~~required~~a bank is considered ~~regulatory~~“critically ~~approvals~~undercapitalized” if its ratio of tangible equity to total assets is equal to or less than 2%.

~~The~~Subject to ~~Riegle-Neal~~a ~~Interstate~~narrow ~~Banking~~exception, ~~and~~the ~~Branching~~FDIC ~~Efficiency~~is ~~Act~~required ofto ~~1994~~appoint ~~allows~~a ~~the~~receiver ~~FDIC~~or ~~and other~~conservator ~~federal~~for a bank ~~regulators~~that tois ~~approve~~“critically ~~applications~~undercapitalized.” ~~for~~In ~~mergers~~addition, a capital restoration plan must be filed with the FDIC within 45 days of ~~banks~~the ~~across~~date ~~state~~a ~~lines~~bank ~~without~~receives ~~regard~~notice tothat ~~whether~~it ~~such~~is ~~activity~~“undercapitalized,” is“significantly ~~contrary~~undercapitalized” toor ~~state~~“critically ~~law~~undercapitalized.” ~~However,~~Compliance with the plan must be guaranteed by each ~~state~~company ~~could determine~~that ifcontrols ita ~~would~~bank ~~permit~~that ~~out~~submits ofsuch ~~state~~a plan, ~~banks~~up to ~~acquire~~an ~~only~~amount ~~branches~~equal to 5% of athe bank’s inassets ~~that~~at ~~state~~the ~~or to~~time ~~establish~~it dewas ~~novo~~notified ~~branches~~regarding its deficient capital status. ~~However~~In addition, asnumerous amandatory ~~result~~supervisory ofactions ~~the~~become ~~Dodd-Frank~~immediately ~~Act,~~applicable ~~interstate~~to ~~branching~~an undercapitalized institution, ~~authority~~including, ~~has~~but ~~been~~not ~~expanded.~~limited Ato, ~~state~~increased ormonitoring ~~national~~by ~~bank~~regulators ~~may~~and ~~open~~restrictions aon degrowth, ~~novo~~capital ~~branch~~distributions, inand ~~another~~expansion. ~~state~~The ~~if the~~FDIC ~~law~~could ofalso ~~the~~take ~~state~~any ~~where~~one ~~the~~of ~~branch~~a isnumber toof bediscretionary ~~located~~supervisory ~~would~~actions, ~~permit~~including the issuance of a capital ~~state~~directive ~~bank~~and ~~charted~~the byreplacement ~~another state~~of tosenior ~~open~~executive aofficers ~~branch~~and directors.

~~Loans~~Deposit ~~to One Borrower~~Insurance. ~~Under Michigan law, a bank~~The Bank’s ~~total~~deposits ~~loans~~are ~~and~~insured ~~extensions~~up ~~of credit~~to ~~and~~applicable ~~leases~~limitations toby ~~one~~a ~~person~~deposit isinsurance ~~limited~~fund toadministered ~~15%~~by of the ~~bank’s~~FDIC. ~~capital~~The ~~and~~Dodd-Frank ~~surplus,~~Act ~~subject~~permanently ~~to several~~raised ~~exceptions.~~the ~~This~~basic limit ~~may~~on befederal ~~increased~~deposit toinsurance ~~25%~~coverage offrom ~~the~~$100,000 ~~bank’s~~to ~~capital~~$250,000 ~~and~~per ~~surplus upon~~depositor. ~~approval~~In byaddition, ain ~~2/3~~November ~~vote~~2010, ofpursuant ~~its~~to ~~board~~the ofDodd-Frank ~~directors. Certain loans~~Act, ~~including~~the ~~loans~~FDIC ~~secured~~issued bya ~~bonds or~~final ~~other~~rule ~~instruments~~to ofprovide ~~the~~temporary ~~United~~unlimited ~~States~~deposit ~~and~~insurance ~~fully~~coverage ~~guaranteed~~for bynon-interest ~~the~~bearing ~~United~~accounts ~~States~~from asDecember 31, to2010 ~~principal and~~through ~~interest~~December 31, ~~are~~2012, ~~not~~at ~~subject~~no additional tosurcharge. ~~the~~The ~~limit~~provision ~~just~~extended ~~referenced.~~the InFDIC’s ~~addition,~~Temporary ~~certain~~Liquidity ~~loans,~~Guarantee ~~including loans~~Program ~~arising~~that ~~from~~provided ~~the~~full ~~discount~~FDIC ofdeposit ~~nonnegotiable~~insurance ~~consumer~~coverage ~~paper~~for ~~which~~non-interest ~~carries~~bearing adeposit ~~full~~transaction ~~recourse endorsement~~accounts orregardless ~~unconditional guaranty~~ of ~~the~~dollar ~~person~~amount ~~transferring~~for ~~the~~an ~~paper,~~additional assessment ~~are~~fee. ~~subject~~This tolatter aprogram ~~higher limit~~expired ofon ~~30%~~December 31, ~~of capital and surplus~~2010.

~~Enforcement.~~15 The OFIR and FDIC each have enforcement authority with respect to the Bank. The Commissioner of the OFIR has the authority to issue cease and desist orders to address unsafe and unsound practices and actual or imminent violations of law and to remove from office bank directors and officers who engage in unsafe and unsound banking practices and who violate applicable laws, orders, or rules. The Commissioner of the OFIR also has authority in certain cases to take steps for the appointment of a receiver or conservator of a bank.

~~The~~Under the FDIC’s ~~has~~risk-based ~~similar~~assessment ~~broad authority~~regulations, ~~including~~there ~~authority~~are tofour ~~bring~~risk ~~enforcement~~categories ~~actions against~~and ~~all~~each “insured institution~~-affiliated~~ ~~parties”~~is ~~(including~~assigned ~~shareholders,~~to ~~directors,~~a ~~officers,~~risk ~~employees, attorneys,~~category ~~consultants,~~based ~~appraisers~~on capital levels and ~~accountants)~~supervisory ~~who~~ratings. ~~knowingly~~Well-capitalized orinstitutions ~~recklessly~~with ~~participate~~CAMELS incomposite ~~any violation~~ratings of ~~law~~1 or ~~regulation~~2 orare ~~any~~placed ~~breach~~in ofRisk ~~fiduciary~~Category ~~duty,~~I orwhile other ~~unsafe~~institutions orare ~~unsound~~placed ~~practice~~in Risk ~~likely~~Categories toII, ~~cause~~III ~~financial~~or ~~loss~~IV depending on their capital levels and CAMELS composite ratings. The assessment rates may be changed by the FDIC as necessary to, ormaintain ~~otherwise~~the ~~have~~insurance anfund ~~adverse~~at ~~effect~~the ~~on,~~reserve anratio ~~insured~~designated ~~institution~~by the FDIC. A bank’s initial ~~Civil~~assessment ~~penalties~~rate ~~under~~is ~~federal~~based ~~law~~upon ~~cover~~the risk category to which it is assigned. Adjustments may be made to a ~~wide~~bank’s ~~range~~initial assessment rate based certain factors including levels of ~~violations~~long-term ~~and~~unsecured ~~actions.~~debt, ~~Criminal~~levels ~~penalties~~of secured liabilities above a threshold amount, and, for ~~most~~certain ~~financial~~institutions, ~~institution~~brokered ~~crimes~~deposit ~~include~~levels. ~~monetary~~Effective ~~fines~~through ~~and~~March 31, ~~imprisonment~~2011, initial assessment rates ranged from 12 to 45 basis points of assessable deposits. InAs ~~addition,~~required by the Dodd-Frank Act, in February 2011, the FDIC ~~has~~adopted ~~substantial~~a ~~discretion~~final torule ~~impose~~that ~~enforcement~~redefines ~~action~~its ondeposit ~~banks~~insurance ~~that~~premium ~~fail~~assessment base to ~~comply~~be ~~with~~an ~~its regulatory~~insured ~~requirements,~~depository ~~particularly~~institution’s ~~with~~average ~~respect~~consolidated tototal assets minus average tangible equity capital, ~~levels~~rather than deposits. ~~Possible~~In ~~enforcement~~addition, ~~actions~~the ~~range~~FDIC ~~from~~has ~~requiring~~revised ~~the~~its ~~preparation~~deposit ofinsurance arate ~~capital~~schedules ~~plan~~as ora ~~imposition~~consequence of athe ~~capital~~changes ~~directive,~~ to ~~receivership,~~ ~~conservatorship~~the assessment base. The proposed rate schedule and other revisions became effective on April 1, or2011. ~~the~~Initial ~~termination~~base assessment rates now range between 5 and 35 basis points of ~~deposit~~the ~~insurance~~new assessment base.

~~Assessments~~Due ~~and~~to ~~Fees.~~a ~~The~~decrease ~~Bank~~in ~~pays~~the areserve ~~supervisory~~ratio ~~fee~~of to the ~~OFIR~~deposit ofinsurance ~~not~~fund, ~~less than~~in $4October 2008,~~700~~ ~~and~~the ~~not~~FDIC ~~more~~established ~~than~~a 25restoration ~~cents~~plan ~~for~~to ~~each~~restore $the reserve ratio to at least 1.15%. However,~~000~~ ofthe ~~total~~Dodd-Frank ~~assets.~~Act ~~This~~raised ~~fee~~the isminimum ~~invoiced~~reserve ~~prior~~ratio to ~~July~~ 1.35% ~~each year~~ and isremoved ~~due~~the no1.5% ~~later~~maximum ~~than~~fund ~~August 15.~~ratio, ~~The~~instead ~~OFIR~~leaving ~~imposes~~it ~~additional~~to ~~fees,~~the ~~in addition~~discretion toof ~~those~~the ~~charged~~FDIC. ~~for~~The ~~normal~~Dodd-Frank ~~supervision,~~Act ~~for~~also ~~applications,~~requires ~~special~~that ~~evaluations~~the ~~and~~reserve ~~analyses,~~ratio ~~and examinations~~reach 1.35% Asby ~~described~~September 30, ~~below~~2020. ~~under~~Effective ~~“Deposit~~January 1, ~~Insurance~~2011, “ the ~~Bank~~FDIC ~~also~~set ~~pays~~the ~~assessments~~long toterm ~~the FDIC~~reserve ~~for~~ratio ~~deposit~~at ~~insurance~~2%.

~~Regulatory~~On ~~Capital~~May 22, ~~Requirements.~~2009, ~~The Bank is required to comply with capital adequacy standards set by~~ the FDIC. ~~The~~imposed ~~FDIC may establish higher minimum requirements if, for example,~~ a ~~bank~~ ~~has previously received~~ special ~~attention~~assessment orof ~~has~~five abasis ~~high~~points ~~susceptibility~~on toeach ~~interest~~FDIC-insured ~~rate~~depository ~~risk.~~institution’s ~~Banks~~assets, ~~with~~minus ~~capital~~its ~~ratios~~Tier ~~below~~1 ~~the~~capital, ~~required~~as ~~minimum~~of ~~are~~June 30, ~~subject~~2009. toThe ~~certain~~special ~~administrative~~assessment ~~actions. More~~was ~~than~~collected ~~one~~on ~~capital~~September 30, ~~adequacy standard applies~~2009, and ~~all~~the ~~applicable~~Bank ~~standards~~paid ~~must be satisfied for~~ an ~~institution~~additional toassessment ~~be considered to be in compliance. There are three basic measures~~ of ~~capital adequacy: a total risk-based capital ratio~~$37, ~~a Tier 1 risk-based capital ratio; and a leverage ratio~~853.

~~The~~On ~~risk-based~~November 12, ~~framework~~2009, ~~was~~the FDIC adopted toa ~~assist~~final inrule ~~the~~that ~~assessment~~required ofinsured ~~capital~~institutions ~~adequacy~~to ~~of financial~~prepay ~~institutions~~on byDecember 31, ~~(i) making regulatory capital requirements more sensitive to differences~~2009, inestimated ~~risk~~quarterly ~~profiles among organizations; (ii) introducing off~~risk-~~balance-sheet~~based ~~items~~assessments ~~into~~for the ~~assessment of~~fourth ~~capital~~quarter ~~adequacy;~~of ~~(iii) reducing~~2009 ~~the~~and ~~disincentive~~for toall ~~holding~~of ~~liquid~~2010, ~~low-risk~~2011, ~~assets;~~ and ~~(iv) achieving~~2012. ~~greater~~For ~~consistency~~purposes inof ~~evaluation~~calculating ofthe ~~capital~~prepayment ~~adequacy~~amount, ofthe ~~major~~institution’s ~~banking~~third ~~organizations throughout~~quarter ~~the~~2009 ~~world.~~assessment ~~The~~base ~~risk-based~~was ~~guidelines~~increased ~~include~~quarterly ~~both~~at a five ~~definition~~percent ofannual ~~capital~~growth ~~and~~rate ~~a framework~~through ~~for~~the ~~calculating~~end ~~risk-weighted~~of ~~assets~~2012. byOn ~~assigning~~September 29, ~~assets~~2009, ~~and~~the ~~off-balance~~FDIC ~~sheet~~also ~~items~~increased ~~to different~~annual ~~risk~~assessment ~~categories.~~rates Anuniformly ~~institution’s~~by ~~risk-based~~three ~~capital~~basis ~~ratios~~points ~~are~~beginning ~~calculated~~in by2011. ~~dividing its~~On ~~qualifying~~December 31, ~~capital~~2009, bythe ~~its~~Bank ~~risk-weighted~~prepaid ~~assets~~estimated assessments of $632,342.

14Payment of Dividends by the Bank. There are state and federal requirements limiting the amount of dividends which the Bank may pay. Generally, a bank’s payment of cash dividends must be consistent with its capital needs, asset quality, and overall financial condition. Additionally, OFIR and the FDIC have the authority to prohibit the Bank from engaging in any business practice (including the payment of dividends) which they consider to be unsafe or unsound.

~~Table~~Under Michigan law, the payment of ~~Contents~~dividends is subject to several additional restrictions. The Bank cannot declare or pay a cash dividend or dividend in kind unless the Bank will have a surplus amounting to not less than 20% of its capital after payment of the dividend. The Bank will be required to transfer 10% of net income to surplus until its surplus is equal to its capital before the declaration of any cash dividend or dividend in kind. In addition, the Bank may pay dividends only out of net income then on hand, after deducting its losses and bad debts. These limitations can affect the Bank’s ability to pay dividends.

~~Qualifying~~Loans ~~capital~~to ~~consists~~Directors, ofExecutive ~~two~~Officers, ~~types~~and ofPrincipal ~~capital~~Shareholders. ~~components:~~Under ~~“core~~FDIC ~~capital~~regulations, ~~elements” (or~~the ~~Tier~~Bank’s 1authority ~~capital)~~to ~~and~~extend ~~“supplementary~~credit ~~capital~~to ~~elements”~~executive ~~(or~~officers, ~~Tier~~directors, 2and ~~capital).~~principal ~~Tier~~shareholders ~~1 capital~~ is ~~generally~~ ~~defined~~subject asto substantially the ~~sum~~same ofrestrictions ~~core~~set ~~capital~~forth ~~elements~~in ~~less~~Federal ~~goodwill~~Reserve ~~and~~Regulation O. ~~certain~~Among other ~~intangible assets.~~things, ~~Core~~Regulation ~~capital~~O ~~elements consist of~~ (i) ~~common shareholders’ equity, (ii) non-cumulative~~requires ~~perpetual~~that ~~preferred~~any ~~stock~~such ~~(subject~~loans tobe ~~certain~~made ~~limitations),~~on ~~and~~terms ~~(iii) minority~~substantially ~~interests~~similar into ~~the equity~~those ~~capital~~offered ~~accounts~~to ofnonaffiliated ~~consolidated~~individuals, ~~subsidiaries. Tier 2 capital consists of~~ (iii) ~~allowance~~places ~~for loan~~limits ~~and~~on ~~lease~~the ~~losses~~amount ~~(subject~~of toloans ~~certain~~the ~~limitations);~~Bank ~~(ii) perpetual~~may ~~preferred~~make ~~stock~~to ~~which~~such ~~does not~~persons ~~qualify~~based, asin ~~Tier~~part, 1on ~~capital~~the ~~(subject~~Bank’s ~~to certain conditions); (iii) hybrid~~ capital ~~instruments~~position, and ~~mandatory convertible debt securities;~~ (iviii) ~~term~~requires ~~subordinated~~that ~~debt~~certain ~~and~~approval ~~intermediate~~procedures ~~term~~be ~~preferred stock~~followed ~~(subject~~in toconnection ~~limitations);~~with ~~and~~such ~~(v) net unrealized holding gains on equity securities~~loans.

~~Under~~Certain ~~current~~Transactions with ~~capital~~Related ~~adequacy~~Parties. ~~standards~~Under Michigan law, the Bank ~~must~~may ~~meet~~purchase asecurities ~~minimum~~or ~~ratio~~other ofproperty ~~qualifying total~~from ~~capital~~a todirector, ~~risk-weighted~~or ~~assets~~from an entity of ~~8%.~~which Ofthe ~~that~~director ~~ratio~~is an officer, atmanager, ~~least~~director, ~~half~~owner, employee, or 4%agent, ~~must~~only beif such purchase (i) is made in the ~~form~~ ordinary course of ~~Tier~~business, 1(ii) is ~~capital.~~on ~~The~~terms ~~Bank~~not ~~must~~less ~~also~~favorable ~~meet~~to athe ~~leverage~~Bank ~~capital~~than ~~requirement.~~terms Inoffered ~~general~~by others, and (iii) the ~~minimum~~ ~~leverage~~purchase ~~capital requirement~~ is ~~not~~authorized ~~less~~by ~~than~~a 3%majority ~~Tier~~of 1the ~~capital~~board toof ~~total~~directors ~~assets~~not ifinterested in the ~~bank~~sale. The ~~has~~Bank ~~the~~may ~~highest~~also ~~regulatory~~sell ~~rating~~securities ~~and~~or isother ~~not~~property ~~anticipating~~to orits ~~experiencing~~directors, ~~any~~subject ~~significant~~to ~~growth. All~~the ~~other~~same ~~banks~~restrictions ~~should~~(except ~~have~~in the case of a ~~minimum~~sale ~~leverage~~by ~~capital~~the ~~ratio~~Bank, ofthe terms may not ~~less~~be more favorable to the director than 4%those offered to others).

~~Prompt~~16 Corrective Regulatory Action. The FDIC is required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institution’s degree of undercapitalization. Generally, a bank is considered “well capitalized” if its risk-based capital ratio is at least 10%, its Tier 1 risk-based capital ratio is at least 6%, its leverage ratio is at least 5%, and the bank is not subject to any written agreement, order, or directive by the FDIC.

AIn ~~bank~~addition, ~~generally~~the Bank is ~~considered~~subject ~~“adequately~~to ~~capitalized”~~certain ifrestrictions itimposed ~~does~~by ~~not~~federal ~~meet~~law ~~each~~on extensions of ~~the standards~~credit ~~for~~to ~~well-capitalized~~the ~~institutions,~~Corporation and its ~~risk~~non-~~based~~bank ~~capital ratio is at least 8%~~subsidiaries, ~~its Tier~~on 1investments ~~risk-based~~in ~~capital~~the ~~ratio~~stock ~~is at least 4%, and its leverage ratio is at least 4% (~~or 3%other ifsecurities ~~the institution~~of ~~receives~~ the ~~highest~~Corporation ~~rating~~and ~~under~~its ~~the Uniform Financial Institution Rating System). A~~ non-bank ~~that has a risk-based capital ratio less than 8%~~subsidiaries, orand aon ~~Tier~~the 1acceptance ~~risk-based~~of ~~capital~~stock ~~ratio less than 4%,~~ or aother ~~leverage~~securities ~~ratio~~of ~~less~~the ~~than~~Corporation ~~4% (3%~~ or ~~less for institutions with the highest rating~~its ~~under~~non-bank ~~the~~subsidiaries ~~Uniform~~as ~~Financial~~collateral ~~Institution~~for ~~Rating System) is considered to be “undercapitalized~~loans.” ~~A bank~~Various ~~that~~transactions, ~~has~~including ~~a risk-based capital ratio less than 6%~~contracts, orbetween athe ~~Tier~~Bank 1and ~~capital~~the ~~ratio~~Corporation ~~less than 3%,~~ or ~~a leverage~~its ~~ratio~~non-bank ~~less~~subsidiaries ~~than~~must ~~3% is considered to~~ be ~~“significantly~~on ~~undercapitalized,”~~substantially ~~and~~the asame ~~bank~~terms ~~is considered~~as ~~“critically~~would ~~undercapitalized”~~be ifavailable ~~its ratio of tangible equity~~ to ~~total~~unrelated ~~assets is equal to or less than 2%~~parties.

~~Subject~~Standards tofor aSafety ~~narrow~~and ~~exception,~~Soundness. ~~the~~The FDIC ishas ~~required~~established tosafety ~~appoint~~and asoundness ~~receiver~~standards orapplicable ~~conservator~~to ~~for a~~the ~~bank~~Bank ~~that~~regarding issuch ~~“critically~~matters ~~undercapitalized.”~~as Ininternal ~~addition~~controls, aloan ~~capital~~documentation, ~~restoration~~credit ~~plan~~underwriting, ~~must~~interest-rate berisk ~~filed with~~exposure, ~~the~~asset ~~FDIC~~growth, ~~within~~compensation ~~45 days~~and ofother ~~the date a bank receives notice that it is “undercapitalized~~benefits,~~” “significantly~~ ~~undercapitalized”~~and orasset ~~“critically~~quality ~~undercapitalized~~and earnings.” ~~Compliance~~If ~~with~~ the ~~plan~~Bank ~~must be~~were ~~guaranteed by each company that controls a bank that submits such a plan, up~~ to anfail ~~amount equal~~ to 5%meet ofthese standards, the ~~bank’s~~FDIC ~~assets~~could atrequire ~~the time~~ it ~~was~~to ~~notified~~submit ~~regarding~~a ~~its~~written ~~deficient~~compliance ~~capital~~plan ~~status.~~describing ~~In addition,~~the ~~numerous~~steps ~~mandatory~~the ~~supervisory~~Bank ~~actions~~will ~~become~~take ~~immediately applicable~~ to ~~an undercapitalized~~correct ~~institution,~~the ~~including,~~situation ~~but~~and ~~not~~the ~~limited~~time ~~to,~~within ~~increased~~which ~~monitoring~~such bysteps ~~regulators~~will ~~and restrictions~~be ~~on growth, capital distributions, and expansion~~taken. The FDIC ~~could~~has ~~also~~authority ~~take~~to ~~any~~issue ~~one~~orders ~~of a~~to ~~number~~secure ofadherence ~~discretionary~~to ~~supervisory actions, including~~ the ~~issuance of a capital directive and~~ ~~the~~safety ~~replacement of senior executive officers~~ and ~~directors~~soundness standards.

~~Deposit~~Reserve ~~Insurance~~Requirement. ~~The~~Under ~~Bank’s deposits are insured up to applicable limitations by~~ a ~~deposit~~ ~~insurance~~regulation ~~fund~~promulgated ~~administered~~ by the ~~FDIC.~~Federal ~~On July 21~~Reserve, depository ~~2010~~institutions, ~~the~~including ~~President signed~~ the ~~Dodd-Frank~~ ~~Wall~~Bank, ~~Street~~are ~~Reform~~required ~~and~~to ~~Consumer~~maintain ~~Protection~~cash ~~Act~~reserves ~~and~~against ~~permanently~~a ~~raised~~stated ~~the~~percentage ~~basic~~of ~~limit~~their ~~on federal~~transaction ~~deposit insurance coverage from $100,000 to $250,000 per depositor~~accounts. InEffective ~~addition, in November~~October ~~2010~~9, ~~pursuant to the Dodd-Frank Act~~2008, the ~~FDIC~~Federal ~~issued~~Reserve aBanks ~~final~~are ~~rule~~now authorized to ~~provide~~pay ~~temporary unlimited deposit insurance coverage for non-~~interest ~~bearing~~on ~~accounts~~such reserves. ~~from~~The ~~December 31,~~current ~~2010 through~~reserve ~~December 31,~~requirements ~~2012,~~are atas nofollows: ~~additional surcharge.~~

~~Under~~• ~~the~~for ~~FDIC’s~~transaction ~~risk-based~~accounts ~~assessment~~totaling ~~regulations, there are four risk categories and each insured institution is assigned to a risk category based on capital levels and supervisory ratings~~$11. ~~Well-capitalized~~5 ~~institutions~~million ~~with CAMELS composite ratings of 1~~ or ~~2 are placed in Risk Category I while other institutions are placed in Risk Categories II~~less, ~~III~~a ~~or IV depending on their capital levels and CAMELS composite ratings. The assessment rates may be changed by the FDIC as necessary to maintain the insurance fund at the~~ reserve ~~ratio~~of ~~designated by the FDIC. The FDIC may set the reserve ratio annually at between 1.15~~0%; and 1.50% of insured deposits. Assessments will be based on deposit balances at the end of the quarter, except for institutions with $1 billion or more in assets and any institution that becomes insured on or after January 1, 2007 which will have their assessment base determined using average daily balances of insured deposits.

15 • for transaction accounts in excess of $11.5 million up to and including $71.0 million, a reserve of 3%; and for transaction accounts totaling in excess of $71.0 million, a reserve requirement of $1.785 million plus 10% of that portion of the total transaction accounts greater than $71.0 million.

~~Table~~The ofdollar ~~Contents~~amounts and percentages reported here are all subject to adjustment by the Federal Reserve.

~~Due to a decrease in the reserve ratio of the deposit insurance fund, in October~~ITEM ~~2008, the FDIC established a restoration plan to restore the reserve ratio to at least 1~~1A.~~15%~~ ~~within~~Risk ~~five years (the FDIC has extended this time to eight years)~~Factors. The reserve ratio has now been increased to 1.35% by the Dodd-Frank Act. The FDIC has been directed to offset the effects of increased assessments on depository institutions with less than $10 billion in assets. To achieve these levels, the FDIC is authorized by the Dodd-Frank Act to make special assessments and charge examination fees.

OnThis ~~December 16,~~item 2008, the FDIC adopted and issued a final rule increasing the rates banks pay for deposit insurance uniformly by 7 basis points (annualized) effective January 1, 2009. Under the final rule, risk-based rates for the first quarter 2009 assessment ranged between 12 and 50 basis points (annualized). The 2009 first quarter assessment rates varied depending on an institution’s risk category. On February 27, 2009, the FDIC adopted a final rule amending the way that the assessment system differentiates for risk and setting new assessment rates beginning with the second quarter of 2009. As of April 1, 2009, for the highest rated institutions, those in Risk Category I, the initial base assessment rate was between 12 and 16 basis points and for the lowest rated institutions, those in Risk Category IV, the initial base assessment rate was 45 basis points. The final rule modified the means to determine a Risk Category I institution’s initial base assessment rate. It also provided for the following adjustments to an institution’s assessment rate: (1) a decrease for long-term unsecured debt, including most senior and subordinated debt and, for small institutions, a portion of Tier 1 capital; (2) an increase for secured liabilities above a threshold amount; and (3) for institutions in risk categories other than Risk Category I, an increase for brokered deposits above a threshold amount. After applying these adjustments, for the highest rated institutions, those in Risk Category I, the total base assessment rate is ~~between~~not 7required ~~and 24 basis points and~~ for ~~the lowest rated institutions, those in~~smaller ~~Risk~~reporting ~~Category IV, the total base assessment rate is between 40 and 77~~companies.5 ~~basis points.~~

~~On May~~ITEM ~~22, 2009, the FDIC also imposed a special assessment of five basis points on each FDIC-insured depository institution’s assets, minus its Tier 1 capital, as of June 30, 2009~~1B. ~~The special~~Unresolved ~~assessment~~Staff ~~was collected on September 30, 2009, and the Bank paid an additional assessment of $37,853~~Comments.

OnNot November 12, 2009, the FDIC adopted a final rule that required insured institutions to prepay on December 31, 2009, estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011, and 2012applicable. For purposes of calculating the prepayment amount, the institution’s third quarter 2009 assessment base was increased quarterly at a five percent annual growth rate through the end of 2012. On September 29, 2009, the FDIC also increased annual assessment rates uniformly by three basis points beginning in 2011. On December 31, 2009, the Bank prepaid estimated assessments of $632,342.

~~As required by the Dodd-Frank Act, on February~~ITEM ~~7, 2011, the FDIC adopted a final rule that redefines its deposit insurance premium assessment base to be an insured institution’s average consolidated total assets minus average tangible equity~~2. ~~In addition, FDIC has revised its deposit insurance rate schedules as a consequence of the changes to the assessment base~~Properties. ~~The proposed rate schedule and other revisions became effective on April 1, 2011.~~

OnThe ~~November 21,~~Bank ~~2008,~~operates ~~the~~its ~~FDIC~~main ~~adopted~~office ~~final~~located ~~regulations~~at ~~implementing~~33583 ~~the~~Woodward ~~Temporary~~Avenue, ~~Liquidity Guarantee~~Birmingham, ~~Program~~Michigan ~~(“TLGP”)~~48009, ~~pursuant to~~ which ~~depository~~is ~~institutions~~in ~~could elect to participate. Pursuant to~~ the ~~TLGP,~~southeast ~~the~~corner ~~FDIC will (i) guarantee, through the earlier~~ of ~~maturity or June 30,~~our ~~2012,~~primary ~~certain~~service ~~newly~~area. ~~issued~~It ~~senior~~has ~~unsecured~~leased ~~debt~~an ~~issued by participating institutions on or after October 14~~8,300 ~~2008~~square ~~and~~foot ~~before~~facility ~~October 31,~~for ~~2009 (~~the ~~“Debt~~main ~~Guarantee”),~~office. ~~and~~The ~~(ii) provide~~building ~~full~~is ~~FDIC deposit~~located ~~insurance~~on ~~coverage~~the ~~for~~southwest ~~non-interest~~corner ~~bearing~~of ~~deposit~~Woodward ~~transaction~~Avenue ~~accounts~~and ~~regardless~~Chapin ~~of dollar~~Street. ~~amount~~Woodward ~~for~~Avenue anwas ~~additional~~the ~~fee~~first ~~assessment~~official bystate ~~the~~highway ~~FDIC~~in ~~(the~~Michigan ~~“Transaction~~and ~~Account~~is ~~Guarantee”).~~a ~~These~~heavily ~~accounts are mainly payment-processing accounts~~traveled, ~~such~~eight aslane ~~business~~boulevard ~~payroll~~style ~~accounts~~roadway. The ~~Transaction~~ ~~Account~~main ~~Guarantee~~office ~~was~~is ~~set~~located ~~to expire~~ on ~~December 31,~~the ~~2009;~~west ~~however,~~side itof ~~was~~the ~~extended to December 31~~street, ~~2010~~facing east. The ~~Dodd-Frank~~main ~~Act~~lobby ~~provides~~may ~~unlimited~~be ~~federal~~accessed ~~deposit~~from ~~insurance~~the ~~until~~street ~~January 1, 2013~~or ~~for~~the ~~non-interest~~rear ~~bearing~~of ~~demand~~the ~~transactions~~building ~~account~~through atthe ~~all~~parking ~~insured depository institutions~~lot. ~~There~~ isThis nofacility ~~additional~~opened ~~surcharge~~in August ~~related to this coverage~~2006.

The ~~Corporation~~aggregate ~~and~~commitments under the ~~Bank~~lease ~~did~~is ~~not~~set ~~opt~~forth ~~out~~in ofthe notes to the ~~Debt~~audited ~~Guarantee~~financial ~~program~~statements included in this Form 10-K. At this time, ~~but~~the ~~did~~Bank does not ~~issue~~intend to own any ~~debt~~ ~~under~~of the ~~Debt~~properties ~~Guarantee~~from ~~program~~which it will conduct banking operations. Management believes that its facilities are adequate to meet the needs of the Corporation and Bank and that the properties are adequately covered by insurance.

~~Payment of Dividends by the Bank~~ITEM 3. ~~There~~Legal ~~are state and federal requirements limiting the amount of dividends which the Bank may pay~~Proceedings. Generally, a bank’s payment of cash dividends must be consistent with its capital needs, asset quality, and overall financial condition. Additionally, OFIR and the FDIC have the authority to prohibit the Bank from engaging in any business practice (including the payment of dividends) which they consider to be unsafe or unsound.

16There are no material pending legal proceedings to which the Corporation or the Bank is a party or to which any of its properties are subject; nor are there material proceedings known to the Corporation, in which any director, officer or affiliate or any principal stockholder is a party or has an interest adverse to the Corporation or the Bank.

~~Table~~17 ~~of Contents~~

~~Under Michigan law, the payment of dividends is subject to several additional restrictions~~ITEM 4. ~~The~~ ~~Bank cannot declare or pay a cash dividend or dividend in kind unless the Bank will have a surplus amounting to not less than 20% of its capital after payment of the dividend~~Reserved. The Bank will be required to transfer 10% of net income to surplus until its surplus is equal to its capital before the declaration of any cash dividend or dividend in kind. In addition, the Bank may pay dividends only out of net income then on hand, after deducting its losses and bad debts. These limitations can affect the Bank’s ability to pay dividends.

~~Loans~~18 to Directors, Executive Officers, and Principal Shareholders. Under FDIC regulations, the Bank’s authority to extend credit to executive officers, directors, and principal shareholders is subject to substantially the same restrictions set forth in Federal Reserve Regulation O. Among other things, Regulation O (i) requires that any such loans be made on terms substantially similar to those offered to nonaffiliated individuals, (ii) places limits on the amount of loans the Bank may make to such persons based, in part, on the Bank’s capital position, and (iii) requires that certain approval procedures be followed in connection with such loans.

~~Certain~~PART ~~Transactions~~II with Related Parties. Under Michigan law, the Bank may purchase securities or other property from a director, or from an entity of which the director is an officer, manager, director, owner, employee, or agent, only if such purchase (i) is made in the ordinary course of business, (ii) is on terms not less favorable to the Bank than terms offered by others, and (iii) the purchase is authorized by a majority of the board of directors not interested in the sale. The Bank may also sell securities or other property to its directors, subject to the same restrictions (except in the case of a sale by the Bank, the terms may not be more favorable to the director than those offered to others).

InITEM 5. ~~addition,~~Market ~~the~~for ~~Bank~~Registrant’s isCommon ~~subject to certain restrictions imposed by federal law on extensions of credit to the Corporation and its non-bank subsidiaries~~Equity, onRelated ~~investments~~Stockholder inMatters ~~the stock or other securities of the Corporation~~ and ~~its~~Issuer ~~non-bank~~Purchases ~~subsidiaries, and on the acceptance~~ of ~~stock~~Equity ~~or other securities of the Corporation or its non-bank subsidiaries as collateral for loans~~Securities. ~~Various transactions, including contracts, between the Bank and the Corporation or its non-bank subsidiaries must be on substantially the same terms as would be available to unrelated parties.~~

~~Standards for Safety and Soundness.~~ The ~~FDIC~~information ~~has~~shown ~~established~~under ~~safety and soundness standards applicable to~~ the ~~Bank~~caption ~~regarding~~“Stock ~~such~~Information” ~~matters~~on aspage ~~internal controls, loan documentation, credit underwriting, interest~~A-~~rate~~46 ~~risk~~of ~~exposure, asset growth, compensation and other benefits, and asset quality and earnings. If~~ the ~~Bank~~Shareholder ~~were~~Report tofiled ~~fail~~as toExhibit ~~meet~~13 ~~these standards, the FDIC could require it~~ to ~~submit a written compliance plan describing the steps the Bank will take to correct~~this ~~the~~Form ~~situation~~10-K ~~and~~is ~~the~~incorporated ~~time~~herein ~~within~~by ~~which such steps will be taken~~reference. ~~The FDIC has authority to issue orders to secure adherence to the safety and soundness standards.~~

~~Reserve~~Dividends Requirement. Under a regulation promulgated by the Federal Reserve, depository institutions, including the Bank, are required to maintain cash reserves against a stated percentage of their transaction accounts. Effective October 9, 2008, the Federal Reserve Banks are now authorized to pay interest on such reserves. The current reserve requirements are as follows:

•Because, ~~for~~as ~~transaction~~a ~~accounts~~holding ~~totaling~~company, ~~$10~~the Corporation conducts no material activities other than holding the common stock of the Bank, its ability to pay dividends depends on the receipt of dividends from the Bank.7 ~~million~~Additionally, orthe ~~less~~Corporation and the Bank are subject to significant regulatory restrictions on the payment of cash dividends. In light of these restrictions and the need to retain and build capital, aneither ~~reserve~~the Corporation nor the Bank plans to pay dividends until the Bank becomes profitable and recovers any losses incurred during its initial operations. The payment of ~~0%;~~future dividends and the dividend policies of the Corporation and the Bank will depend on the earnings, capital requirements and financial condition of the Corporation and the Bank, as well as other factors that its respective boards of directors consider relevant.

•The ~~for~~performance ~~transaction~~graph ~~accounts~~required inby ~~excess~~Item 201(e) of ~~$10.7~~Regulation ~~million~~S-K upis tonot ~~and~~applicable ~~including~~to ~~$58.8~~smaller ~~million,~~reporting ~~a reserve of 3%; and for transaction accounts totaling in excess of $58~~companies.8 ~~million, a reserve requirement of $1.443 million plus 10% of that portion of the total transaction accounts greater than $58.8 million.~~

~~The~~Recent ~~dollar~~Sales ~~amounts~~of ~~and~~Unregistered ~~percentages~~Securities ~~reported here are all subject to adjustment by the Federal Reserve.~~

~~ITEM 1A~~None. ~~Risk Factors.~~

~~This~~ITEM 6. ~~item~~Selected isFinancial ~~not~~Data ~~required for smaller reporting companies.~~

~~ITEM~~The ~~1B.~~information ~~Unresolved~~under ~~Staff~~the ~~Comments~~caption “SELECTED FINANCIAL INFORMATION” of the Corporation’s 2011 Shareholder Report is incorporated herein by reference from Exhibit 13.

~~Not~~ITEM 7. ~~applicable~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.

17The information presented under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages A-29 to A-46 of the Shareholder Report filed as Exhibit 13 to this Form 10-K is incorporated herein by reference.

~~Table~~ITEM 7A. ofQuantitative ~~Contents~~and Qualitative Disclosures about Market Risk

~~ITEM~~The 2.information ~~Properties~~required by the item number is not applicable to smaller reporting companies.

The Bank operated from two locations in 2009. The main office is located at 33583 Woodward Avenue, Birmingham, Michigan 48009, which is in the southeast corner of our primary service area. It has leased an ITEM 8~~,300 square foot facility for the main office~~. ~~The~~Financial ~~building~~Statements ~~is located on the southwest corner of Woodward Avenue~~ and ~~Chapin~~Supplemental ~~Street~~Data. Woodward Avenue was the first official state highway in Michigan and is a heavily traveled, eight lane boulevard style roadway. The main office is located on the west side of the street, facing east. The main lobby may be accessed from the street or the rear of the building through the parking lot. This facility opened in August 2006.

The ~~Bank~~information ~~had~~presented ~~also~~under ~~leased~~the ~~and~~captions ~~operated~~“Consolidated ~~from~~Balance aSheets,” ~~branch~~“Consolidated ~~office~~Statements atof ~~4145~~Operations,” ~~West~~“Consolidated ~~Maple,~~Statements of Changes in ~~Bloomfield~~Shareholders’ ~~Township~~Equity (Deficit),” ~~Michigan~~“Consolidated Statements of Cash Flows,” ~~which~~and ~~was~~“Notes ~~approximately~~to 5Consolidated ~~miles~~Financial ~~west~~Statements,” on pages A-1 through A-28 of the ~~main~~Shareholder ~~office.~~Report ~~The~~filed ~~branch~~as ~~which~~Exhibit ~~had been~~13 ~~unprofitable~~to ~~for~~this ~~three~~Form ~~years~~10-K, ~~was~~as ~~subsequently~~well ~~closed~~as onthe ~~January~~Report of Independent Registered Public Accounting Firm of Plante 18& Moran, ~~2010~~PLLC, ~~and~~dated ~~the~~March 30, ~~lease~~2012, ~~was terminated~~included atin ~~that~~the ~~time~~Shareholder byReport, anare ~~agreement~~incorporated ~~with~~herein ~~the~~by ~~leaseholder~~reference.

~~The~~ITEM 9. Changes ~~aggregate commitments under the leases are set forth~~ in ~~the~~and ~~notes~~Disagreements towith ~~the~~Accountants ~~audited~~on ~~financial statements~~Accounting included in this Form 10-K. At this time, the Bank does not intend to own any of the properties from which it will conduct banking operations. Management believes that these facilities will be adequate to meet the initial needs of the Corporation and ~~Bank~~Financial ~~and that the properties will be adequately covered by insurance~~Disclosure.

~~ITEM 3~~None. ~~Legal Proceedings.~~

~~There~~19 are no material pending legal proceedings to which the Corporation or the Bank is a party or to which any of its properties are subject; nor are there material proceedings known to the Corporation, in which any director, officer or affiliate or any principal stockholder is a party or has an interest adverse to the Corporation or the Bank.

ITEM 4 9A. ~~Reserved~~Controls and Procedures.

18Disclosure Controls and Procedures - As of the end of the period covered by this Annual Report on Form 10-K for the year ended December 31, 2011, the Corporation carried out an evaluation, under the supervision and with the participation of its management, including its chief executive officer and chief financial officer, of the effectiveness of the design and operation of its “disclosure controls and procedures,” as such term is defined under Exchange Act Rule 13a-15(e).

~~Table~~Based on this evaluation, the Corporation’s chief executive officer and chief financial officer concluded that, as of ~~Contents~~the end of the fiscal quarter covered by this report, such disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports the Corporation files or submit under the Exchange Act is: (a) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and (b) accumulated and communicated to management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

~~PART~~In IIdesigning and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and in reaching a reasonable level of assurance management of the Corporation necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

~~ITEM~~Management’s 5Annual Report on Internal Control over Financial Reporting - The management of Birmingham Bloomfield Bancshares, Inc. ~~Market~~is responsible for ~~Registrant~~establishing and maintaining adequate internal control over financial reporting. Birmingham Bloomfield Bancshares, Inc.’s ~~Common~~internal ~~Equity,~~control ~~Related~~over ~~Stockholder~~financial ~~Matters~~reporting ~~and~~is ~~Issuer~~a ~~Purchases~~process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer ~~Equity~~to ~~Securities.~~provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with United States generally accepted accounting principles.

~~The~~Birmingham ~~information~~Bloomfield ~~shown~~Bancshares, ~~under~~Inc.’s management assessed the ~~caption~~effectiveness ~~“Stock~~of ~~Information”~~the Company’s internal control over financial reporting as of December 31, 2011 based on ~~page~~criteria ~~A-43~~set forth by the Committee of Sponsoring Organizations of the ~~Shareholder~~Treadway Commission (COSO) in “Internal Control-Integrated Framework.” Based on that ~~Report~~assessment, ~~filed~~management determined that, as ~~Exhibit~~of December 1331, to2011, ~~this~~the ~~Form~~Company’s ~~10-K~~internal control over financial reporting is ~~incorporated~~effective, ~~herein~~based byon ~~reference~~those criteria.

~~Dividends~~Changes in Internal Controls - There were no changes in the Corporation’s internal controls over financial reporting during the quarter ended December 31, 2011 that materially affected, or were reasonably likely to materially affect, its internal controls over financial reporting.

~~Because,~~The ~~as a holding company, the~~ Corporation ~~conducts~~intends ~~no material activities other than holding the common stock of the Bank, its ability~~ to ~~pay dividends depends on the receipt of~~ ~~dividends~~continually ~~from~~review ~~the~~and ~~Bank.~~evaluate ~~Initially,~~ the ~~Corporation~~design ~~expects~~and ~~that~~effectiveness ~~the Bank will retain all~~ of its ~~earnings~~ todisclosure ~~support~~controls ~~its~~and ~~operations~~procedures and to ~~expand~~improve its ~~business.~~controls ~~Additionally,~~and ~~the~~procedures ~~Corporation~~over time and ~~the~~ ~~Bank~~to ~~are~~correct ~~subject~~any todeficiencies ~~significant~~that ~~regulatory~~it ~~restrictions~~may ondiscover in the ~~payment~~future. ofThe ~~cash~~goal ~~dividends.~~is Into ensure ~~light~~that ofsenior ~~these~~management ~~restrictions~~has ~~and~~timely ~~the~~access ~~need~~ to ~~retain~~all ~~and~~material ~~build~~non-financial ~~capital,~~information ~~neither~~concerning the Corporation’s ~~nor the~~business. ~~Bank~~While ~~plans~~the toCorporation ~~pay~~believes ~~dividends until~~ the ~~Bank~~present ~~becomes~~design ~~profitable~~of ~~and recovers any losses incurred during~~ its ~~initial~~disclosure ~~operations.~~controls ~~The payment of future dividends~~ and ~~the~~procedures ~~dividend~~is ~~policies~~effective ofto ~~the~~achieve its ~~Corporation~~goal, ~~and~~future ~~the~~events ~~Bank~~affecting ~~will~~its ~~depend~~business onmay ~~the~~cause ~~earnings, capital requirements and financial condition of~~ the Corporation ~~and~~to ~~the~~modify ~~Bank, as well as other factors that~~ its ~~respective~~disclosure ~~boards~~controls ofand ~~directors consider relevant~~procedures.

~~The performance graph required by Item 201(e) of Regulation~~ITEM ~~S-K~~9B. ~~is not applicable to smaller~~Other ~~reporting~~Information ~~companies.~~

~~Recent~~Not ~~Sales~~applicable. ~~of Unregistered Securities~~

~~None.~~20

~~ITEM~~PART 6.III ~~Selected Financial Data~~

~~The~~In accordance with applicable rules and regulations of the Securities and Exchange Commission, certain information ~~under~~required by this Part III is omitted from this report in that the ~~caption~~Company ~~“SELECTED~~will ~~FINANCIAL~~file ~~INFORMATION~~a definitive proxy statement pursuant to Regulation 14A (the “Proxy Statement”) not later than 120 days after the end of the ~~Corporation’s~~fiscal ~~2010 Shareholder~~year ~~Report~~covered by this report and certain information included therein is incorporated herein by reference. Only ~~from~~those ~~Exhibit 13~~sections of the proxy statement that specifically address the items set forth herein are incorporated by reference.

ITEM 7 10. ~~Management’s~~Directors, ~~Discussion~~Executive ~~and~~Officers ~~Analysis of Financial Condition~~ and ~~Results~~Corporate ~~of Operations~~Governance.

The information ~~presented~~with ~~under~~respect ~~the~~to ~~caption~~directors ~~“Management’s Discussion~~ and ~~Analysis~~executive officers of ~~Financial Condition~~the ~~and~~Corporation, ~~Results~~set offorth ~~Operations”~~under onthe ~~pages~~captions ~~A-27~~“Election toof ~~A-43~~Directors” ofand ~~the~~“Backgrounds ~~Shareholder~~of ~~Report~~our ~~filed~~Other asExecutive ~~Exhibit 13~~Officers” toin ~~this~~the ~~Form~~Proxy ~~10-K~~Statement is incorporated herein by reference.

~~ITEM~~The ~~7A.~~Board ~~Quantitative~~of Directors of the Corporation has determined that Harry Cendrowski, a director and ~~Qualitative~~member ~~Disclosures~~of ~~about~~the ~~Market~~Audit ~~Risk~~Committee, qualifies as an “Audit Committee Financial Expert” as defined in rules adopted by the Commission pursuant to the Sarbanes-Oxley Act of 2002 and is “independent,” as defined by NASDAQ listing standards.

The ~~information~~Board ~~required~~of byDirectors of the ~~item~~Corporation ~~number~~has adopted a Code of Ethics which details principles and responsibilities governing ethical conduct for all Corporation directors and executive officers. The Code of Ethics is ~~not~~available ~~applicable~~on our website (www.bankofbirmingham.net) or can be obtained free of charge by sending a request to ~~smaller~~the ~~reporting~~Corporation’s ~~companies~~Corporate Secretary at 33583 Woodward Ave, Birmingham, MI 48009.

~~ITEM~~The 8.information required ~~Financial~~for ~~Statements~~Section 16 ~~and~~reporting ~~Supplemental~~persons ~~Data~~is incorporated from the proxy statement under the caption “Compliance with Section 16. ”

The information ~~presented~~required ~~under~~with ~~the~~respect ~~captions~~to ~~“Consolidated~~our ~~Balance~~audit ~~Sheets,”~~committee ~~“Consolidated Statements~~is ofincorporated ~~Operations,”~~from ~~“Consolidated~~the ~~Statements~~proxy ofstatement ~~Changes~~under inthe ~~Shareholders’~~caption ~~Equity (Deficit),”~~ “~~Consolidated~~Role ~~Statements of Cash Flows,”~~ and ~~“Notes~~Composition ~~to Consolidated Financial Statements,” on pages A-1 through A-26~~ of the ~~Shareholder~~Board ~~Report filed as Exhibit 13 to this Form 10-K, as well as the Report~~ of ~~Independent Registered Public Accounting Firm of Plante & Moran, PLLC, dated March 21, 2011, included in the Shareholder Report, are incorporated herein by reference~~Directors”.

ITEM 9 11. ~~Changes~~Executive ~~in and Disagreements with Accountants on Accounting and Financial Disclosure~~Compensation.

~~None~~The information presented under the captions “Directors Compensation” and “Executive Compensation” in the Proxy Statement is incorporated herein by reference.

19Information required by Items 407(e) (4) and 407(e) (5) of Regulation S-K is not applicable to smaller reporting companies.

~~Table~~ITEM 12. Security Ownership of ~~Contents~~Certain Beneficial Owners and Management and Related Stockholder Matters.

~~ITEM~~The ~~9A.~~information ~~Controls~~relating to security ownership of certain beneficial owners and ~~Procedures.~~management presented under the captions “Security Ownership of Directors, Nominees for Directors, Most Highly Compensated Executive Officers and All Directors and Executive Officers as A Group” and “Security Ownership of Stockholder Holding 5% or More” in the Proxy Statement is incorporated herein by reference.

~~Disclosure~~21 Controls and Procedures — As of the end of the period covered by this Annual Report on Form 10-K for the year ended December 31, 2010, the Corporation carried out an evaluation, under the supervision and with the participation of its management, including its chief executive officer and chief financial officer, of the effectiveness of the design and operation of its “disclosure controls and procedures,” as such term is defined under Exchange Act Rule 13a-15(e).

~~Based~~The onfollowing ~~this~~table ~~evaluation,~~shows the ~~Corporation~~Company’s ~~chief~~shareholder ~~executive~~approved ~~officer~~ and ~~chief financial~~non-shareholder ~~officer~~approved ~~concluded~~equity ~~that,~~compensation plans as of ~~the end of the fiscal quarter covered by this report~~December 31, ~~such disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports the Corporation files or submit under the Exchange Act is~~2011: (a) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and (b) accumulated and communicated to management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and in reaching a reasonable level of assurance management of the Corporation necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.


Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities in column (a)) (c)
Equity compensation plans approved by security holders		180,000	$	10.00		45,000
Equity compensation plans not approved by security holders (1)		184,000	$	10.00		0

Total		364,000	$	10.00		45,000

~~Management’s~~(1) ~~Annual~~Organizers ~~Report on Internal Control over Financial Reporting — The management~~ of Birmingham Bloomfield Bancshares, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Birmingham Bloomfield Bancshares, Inc.’s internal control over financial reporting is a process designed under the ~~supervision of the~~ Company’s ~~Chief~~were ~~Executive~~granted ~~Officer~~warrants ~~and~~pursuant ~~Chief Financial Officer~~ to ~~provide reasonable assurance regarding~~ the ~~reliability of financial reporting and the preparation of the~~ Company’s ~~financial statements~~registration ~~for~~statement ~~external~~dated ~~reporting~~November ~~purposes~~14, ~~in accordance with United States generally accepted accounting principles~~2005.

~~Birmingham Bloomfield Bancshares, Inc.’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December~~ITEM ~~31, 2010 based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework~~13.” ~~Based~~Certain onRelationships ~~that~~and ~~assessment,~~Related ~~management determined that~~Transactions, asand ~~of December 31,~~Director ~~2010, the Company’s internal control over financial reporting is effective, based on those criteria~~Independence.

~~Changes~~The inInformation ~~Internal~~relating ~~Controls~~to —certain ~~There~~relationships ~~were~~and norelated ~~changes~~transactions inunder the ~~Corporation’s~~caption ~~internal controls~~“Transactions ~~over~~With ~~financial~~Certain ~~reporting~~Related Persons” ~~during~~in the ~~quarter~~Proxy ~~ended~~Statement ~~December 31,~~is ~~2010~~incorporated ~~that~~by ~~materially affected,~~reference. orThe ~~were~~information ~~reasonably~~relating ~~likely~~ to ~~materially~~director ~~affect,~~independence ~~its~~under ~~internal~~the ~~controls~~caption ~~over~~“Role ~~financial~~and Composition of the Board of Directors” in the Proxy Statement is incorporated herein by ~~reporting~~reference.

The Corporation intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the futureITEM 14. ~~The~~Principal ~~goal~~Accounting isFees to ensure that senior management has timely access to all material non-financial information concerning the Corporation’s business. While the Corporation believes the present design of its disclosure controls and ~~procedures~~ ~~is effective to achieve its goal, future events affecting its business may cause the Corporation to modify its disclosure controls and procedures~~Services.

~~ITEM~~The ~~9B.~~information ~~Other~~relating ~~Information~~to principal accountant fees and services presented under the caption “Audit Committee” (with the exception of the Audit Committee Report) in the Proxy Statement is incorporated herein by reference.

~~Not~~22 ~~applicable.~~

20 ITEM 15. Exhibits and Financial Statement Schedules


Number		Description

3.1(i)		Articles of Incorporation are incorporated by reference from Exhibit 3.1 of the Corporation’s quarterly report on Form 10-Q for the quarter ended September 30, 2011.

3.1(ii)		Certificate of Designations for the Series C Preferred Stock (incorporated by reference from Form 8-K filed on December 21, 2009).

3.1(iii)		Certificate of Designations for the Series D Preferred Stock (incorporated by reference from Form 8-K filed on August 1, 2011).

3.1(IV)		Certificate elimination the Certificates of Designations with respect to the Series A, Series B, Series C Fixed Rate, Cumulative Perpetual Preferred Stock (incorporated by reference from Form 8-K filed on August 3, 2011).

3.2		Bylaws (incorporated by reference from Exhibit 3.2 of the Corporation’s Registration Statement on Form SB-2 dated September 6, 2005).

4.1		Specimen common stock certificate (incorporated by reference from Exhibit 4.1 of the Corporation’s Registration Statement on Form SB-2 dated September 6, 2005).

4.2		Form of Birmingham Bloomfield Bancshares, Inc. Organizers’ Warrant Agreement (incorporated by reference from Exhibit 4.2 of the Corporation’s Registration Statement on Form SB-2 dated September 6, 2005).

10.1		Birmingham Bloomfield Bancshares, Inc. 2006 Stock Incentive Plan (incorporated by reference from Exhibit 10.1 of the Corporation’s Quarterly Report on Form 10-QSB for the Quarter Ended March 31, 2007).

10.2		Lease Agreement dated January 28, 2005, by and between Irving I. Rosen Family Limited Partnership and Birmingham Bloomfield Bancshares, Inc. (incorporated by reference from Exhibit 10.10 of the Corporation’s Registration Statement on Form SB-2 dated September 6, 2005).

10.3		Form of Incentive Stock Option Agreement (incorporated by reference from Quarterly Report on Form 10-QSB for the quarter ended March 31, 2007).

10.4		Letter Agreement dated April 24, 2009 including the Securities Purchase Agreement – Standard Terms incorporated by reference therein between the Company and the U.S. Treasury (incorporated by reference from Form 8-K filed on April 30, 2009).

10.5		Form of Waiver of Senior Executive Officers (incorporated by reference from Form 8-K filed on April 30, 2009).

10.6		Form of Omnibus Amendment Agreement (incorporated by reference from Form 8-K filed on April 30, 2009).

10.7		Side Letter Agreement dated April 24, 2009 between the Company and the U.S. Treasury (incorporated by reference from Form 8-K filed on April 30, 2009).

10.8		Executive Employment Agreement with Robert E. Farr (incorporated by reference from Form 8-K filed on May 21, 2009).

10.9		Executive Employment Agreement with Lance N. Krajacic, Jr. (incorporated by reference from Form 8-K filed on May 21, 2009).

10.10		Letter Agreement dated December 18, 2009 including the Securities Purchase Agreement – Standard Terms incorporated by reference therein between the Company and the U.S. Treasury (incorporated by reference from Form 8-K filed on December 24, 2009).

10.11		Form of Waiver of Senior Executive Officers (incorporated by reference from Form 8-K filed on December 24, 2009).

10.12		Side Letter Agreement No. 1 dated December 18, 2009 between the Company and the U.S. Treasury (incorporated by reference from Form 8-K filed on December 24, 2009).

10.13		Side Letter Agreement No. 2 dated December 18, 2009 between the Company and the U.S. Treasury (incorporated by reference from Form 8-K filed on December 24, 2009).

10.14		Executive Employment Agreement with Thomas H. Dorr (incorporated by reference from Form 8-K filed on November 17, 2010).

10.15		Letter Agreement dated July 28, 2011 including the Securities Purchase Agreement – Standard Terms incorporated by reference therein between the Company and the U.S. Treasury (incorporated by reference from Form 8-K filed on August 3, 2011).

11		Computation of Per Share Earnings is incorporated by reference from the Corporation’s 2011 Shareholder Report on Form 10-K

~~PART~~23 ~~III~~

In accordance with applicable rules and regulations of the Securities and Exchange Commission, certain information required by this Part III is omitted from this report in that the Company will file a definitive proxy statement pursuant to Regulation 14A (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this report and certain information included therein is incorporated herein by reference. Only those sections of the proxy statement that specifically address the items set forth herein are incorporated by reference.



13		2011 Shareholder Report (except for portions of the 2011 Shareholder Report that are expressly incorporated by reference into this Annual Report of Form 10-K, the 2011 Shareholder Report shall not be deemed filed as apart hereof.)

14		Code of Ethics (incorporated by reference from Form 10-K filed on March 31, 2010)

21		List of Subsidiaries.

23		Consent of Plante & Moran, PLLC.

31.1		Certification of Chief Executive Officer Pursuant to Rule 15d-15(e) of the securities Exchange Act.

31.2		Certification of Chief Financial Officer Pursuant to Rule 15d-15(e) of the securities Exchange Act.

32		Certification Pursuant to Rule 14d-14(b) of the Securities Exchange Act and 18 U.S.C. section 1350

99.1		31 C.F.R. Section 30.15 Certification of Principal Executive Officer

99.2		31 C.F.R. Section 30.15 Certification of Principal Financial Officer

~~ITEM~~24 ~~10. Directors, Executive Officers and Corporate Governance.~~

~~The~~SIGNATURES information with respect to directors and executive officers of the Corporation, set forth under the captions “Election of Directors” and “Backgrounds of our Other Executive Officers” in the Proxy Statement is incorporated herein by reference.

~~The~~Pursuant ~~Board~~to ofthe ~~Directors~~requirements of ~~the~~Section 13 ~~Corporation~~or ~~has~~15(d) ~~determined that Harry Cendrowski, a director and member~~ of the ~~Audit~~Exchange ~~Committee~~Act, ~~qualifies~~the asRegistrant anhas ~~“Audit~~caused ~~Committee~~this ~~Financial~~report ~~Expert”~~to asbe ~~defined~~signed ~~in rules~~on ~~adopted~~its behalf by the ~~Commission pursuant to the Sarbanes-Oxley Act of 2002 and is “independent~~undersigned,” ~~as defined~~thereunto byduly ~~NASDAQ listing standards~~authorized.

The Board of Directors of the Corporation has adopted a Code of Ethics which details principles and responsibilities governing ethical conduct for all Corporation directors and executive officers. The Code of Ethics is available on our website (www.bankofbirmingham.net) or can be obtained free of charge by sending a request to the Corporation’s Corporate Secretary at 33583 Woodward Ave, Birmingham, MI 48009.


	BIRMINGHAM BLOOMFIELD BANCSHARES, INC.

Date: March 30, 2012	By:	/s/ Robert E. Farr

		Robert E. Farr
		President and Chief Executive Officer

~~The~~Pursuant ~~information~~to ~~required~~the ~~for~~requirements ~~Section 16~~of ~~reporting~~the Securities Exchange Act of 1934, this report has been signed below by the following persons ison ~~incorporated~~behalf ~~from~~of the ~~proxy~~Registrant ~~statement under~~and in the ~~caption~~capacities ~~“Compliance~~and ~~with~~on ~~Section 16~~the dates indicated.”

The information required with respect to our audit committee is incorporated from the proxy statement under the caption “Role and Composition of the Board of Directors”.


SIGNATURE	TITLE	DATE

/s/ Harry Cendrowski	Director	March 30, 2012
Harry Cendrowski

/s/ Donald E. Copus	Director	March 30, 2012
Donald E. Copus

/s/ Joe A. Ahern	Director	March 30, 2012
Joe A. Ahern

/s/ Robert E. Farr	Director, President & Chief Executive Officer (Principal Executive Officer)	March 30, 2012
Robert E. Farr

/s/ Charles Kaye	Director	March 30, 2012
Charles Kaye

/s/ Lance N. Krajacic, Jr.	Director	March 30, 2012
Lance N. Krajacic, Jr.

/s/ Scott McCallum	Director	March 30, 2012
Scott McCallum

/s/ Daniel P. O’Donnell	Director	March 30, 2012
Daniel P. O’Donnell

/s/ Charles T. Pryde	Director	March 30, 2012
Charles T. Pryde

/s/ Walter G. Schwartz	Director	March 30, 2012
Walter F. Schwartz

/s/ Henry Spellman	Director	March 30, 2012
Henry Spellman

/s/ Bruce E. Nyberg	Director	March 30, 2012
Bruce E. Nyberg

~~ITEM~~25 ~~11. Executive Compensation.~~

The information presented under the captions “Directors Compensation” and “Executive Compensation” in the Proxy Statement is incorporated herein by reference.



/s/ John C. Hamaty	Director	March 30, 2012
John C. Hamaty

/s/ Barbara Rom	Director	March 30, 2012
Barbara Rom

/s/ Thomas J. Wagner	Director	March 30, 2012
Thomas J. Wagner

/s/ Thomas H. Dorr	Chief Financial Officer (Principal Financial and Accounting Officer)	March 30, 2012
Thomas H. Dorr

~~Information~~26 ~~required by Items 407(e) (4) and 407(e) (5) of Regulation S-K is not applicable to smaller reporting companies.~~

~~ITEM~~Exhibit ~~12.~~Index ~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.~~

The information relating to security ownership of certain beneficial owners and management presented under the captions “Security Ownership of Directors, Nominees for Directors, Most Highly Compensated Executive Officers and All Directors and Executive Officers as A Group” and “Security Ownership of Stockholder Holding 5% or More” in the Proxy Statement is incorporated herein by reference.


Number		Description

13		2011 Shareholder Report (except for portions of the 2011 Shareholder Report that are expressly incorporated by reference into this Annual Report of Form 10-K, the 2011 Shareholder Report shall not be deemed filed as a part hereof.)

21		List of Subsidiaries

23		Consent of Plante & Moran, PLLC

31.1		Certification of Chief Executive Officer Pursuant to Rule 15d-15(e) of the securities Exchange Act.

31.2		Certification of Chief Financial Officer Pursuant to Rule 15d-15(e) of the securities Exchange Act.

32		Certification Pursuant to Rule 14d-14(b) of the Securities Exchange Act and 18 U.S.C. section 1350

99.1		31 C.F.R. Section 30.15 Certification of Principal Executive Officer

99.2		31 C.F.R. Section 30.15 Certification of Principal Financial Officer

21 27

The following table shows the Company’s shareholder approved and non-shareholder approved equity compensation plans as of December 31, 2010:

Number of securities

remaining available for

Number of securities to

Weighted-average

future issuance under

be issued upon exercise

exercise price of

equity compensation

of outstanding options,

outstanding options,

plans (excluding

warrants and rights

securities in column (a))

Plan category

(a)

(b)

(c)

Equity compensation plans approved by security holders

180,000

10.00

45,000

Equity compensation plans not approved by security holders (1)

184,000

10.00

Total

364,000

10.00

45,000

(1) Organizers of the Company were granted warrants pursuant to the Company’s registration statement dated November 14, 2005.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence.

The Information relating to certain relationships and related transactions under the caption “Transactions With Certain Related Persons” in the Proxy Statement is incorporated by reference. The information relating to director independence under the caption “Role and Composition of the Board of Directors” in the Proxy Statement is incorporated herein by reference.

ITEM 14. Principal Accounting Fees and Services.

The information relating to principal accountant fees and services presented under the caption “Audit Committee” (with the exception of the Audit Committee Report) in the Proxy Statement is incorporated herein by reference.

ITEM 15. Exhibits and Financial Statement Schedules

Number		Description
3.1(i)		Articles of Incorporation are incorporated by reference from Exhibit 3.1 of the Corporation’s quarterly report on Form 10-Q for the quarter ended June 30, 2009.
3.1(ii)		Certificate of Designations for the Series C Preferred Stock (incorporated by reference from Form 8-K filed on December 21, 2009).
3.2		Bylaws (incorporated by reference from Exhibit 3.2 of the Corporation’s Registration Statement on Form SB-2 dated September 6, 2005).
4.1		Specimen common stock certificate (incorporated by reference from Exhibit 4.1 of the Corporation’s Registration Statement on Form SB-2 dated September 6, 2005).
4.2		Form of Birmingham Bloomfield Bancshares, Inc. Organizers’ Warrant Agreement (incorporated by reference from Exhibit 4.2 of the Corporation’s Registration Statement on Form SB-2 dated September 6, 2005).
10.1		Birmingham Bloomfield Bancshares, Inc. 2006 Stock Incentive Plan (incorporated by reference from Exhibit 10.1 of the Corporation’s Quarterly Report on Form 10-QSB for the Quarter Ended March 31, 2007).
10.2		Lease Agreement dated January 28, 2005, by and between Irving I. Rosen Family Limited Partnership and Birmingham Bloomfield Bancshares, Inc. (incorporated by reference from Exhibit 10.10 of the Corporation’s Registration Statement on Form SB-2 dated September 6, 2005).
10.3		Form of Incentive Stock Option Agreement (incorporated by reference from Quarterly Report on Form 10-QSB for the quarter ended March 31, 2007).
10.4		Letter Agreement dated April 24, 2009 including the Securities Purchase Agreement — Standard Terms incorporated by reference therein between the Company and the U.S. Treasury (incorporated by reference from Form 8-K filed on April 30, 2009).
10.5		Form of Waiver of Senior Executive Officers (incorporated by reference from Form 8-K filed on April 30, 2009).
10.6		Form of Omnibus Amendment Agreement (incorporated by reference from Form 8-K filed on April 30, 2009).
10.7		Side Letter Agreement dated April 24, 2009 between the Company and the U.S. Treasury (incorporated by reference from Form 8-K filed on April 30, 2009).
10.8		Executive Employment Agreement with Robert E. Farr (incorporated by reference from Form 8-K filed on May 21, 2009).
10.9		Executive Employment Agreement with Lance N. Krajacic, Jr. (incorporated by reference from Form 8-K filed on May 21, 2009).
10.10		Letter Agreement dated December 18, 2009 including the Securities Purchase Agreement — Standard Terms incorporated by reference therein between the Company and the U.S. Treasury (incorporated by reference from Form 8-K filed on December 24, 2009).
10.11		Form of Waiver of Senior Executive Officers (incorporated by reference from Form 8-K filed on December 24, 2009).
10.12		Side Letter Agreement No. 1 dated December 18, 2009 between the Company and the U.S. Treasury (incorporated by reference from Form 8-K filed on December 24, 2009).
10.13		Side Letter Agreement No. 2 dated December 18, 2009 between the Company and the U.S. Treasury (incorporated by reference from Form 8-K filed on December 24, 2009).
10.14		Executive Employment Agreement with Thomas H. Dorr (incorporated by reference from Form 8-K filed on November 17, 2010).
11		Computation of Per Share Earnings is incorporated by reference from the Corporation’s 2010 Shareholder Report on Form 10-K
13		2010 Shareholder Report (except for portions of the 2010 Shareholder Report that are expressly incorporated by reference into this Annual Report of Form 10-K, the 2010 Shareholder Report shall not be deemed filed as apart hereof.)
14		Code of Ethics (incorporated by reference from Form 10-K filed on March 31, 2010)
21		List of Subsidiaries.
23		Consent of Plante & Moran, PLLC.
31.1		Certification of Chief Executive Officer Pursuant to Rule 15d-15(e) of the securities Exchange Act.

Number		Description
31.2		Certification of Chief Financial Officer Pursuant to Rule 15d-15(e) of the securities Exchange Act.
32		Certification Pursuant to Rule 14d-14(b) of the Securities Exchange Act and 18 U.S.C. section 1350
99.1		31 C.F.R. Section 30.15 Certification of Principal Executive Officer
99.2		31 C.F.R. Section 30.15 Certification of Principal Financial Officer

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BIRMINGHAM BLOOMFIELD BANCSHARES, INC.
Date: March 21, 2011	By:	/s/ Robert E. Farr
		Robert E. Farr
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ Harry Cendrowski	Director	March 21, 2011
Harry Cendrowski
/s/ Donald E. Copus	Director	March 21, 2011
Donald E. Copus
/s/ John M. Erb	Director	March 21, 2011
John M. Erb
/s/ Robert E. Farr	Director, President & Chief	March 21, 2011
Robert E. Farr	Executive Officer
	(Principal Executive Officer)
/s/ Charles Kaye	Director	March 21, 2011
Charles Kaye
/s/ Lance N. Krajacic, Jr.	Director	March 21, 2011
Lance N. Krajacic, Jr.
/s/ Scott McCallum	Director	March 21, 2011
Scott McCallum
/s/ Daniel P. O’Donnell	Director	March 21, 2011
Daniel P. O’Donnell
/s/ Charles T. Pryde	Director	March 21, 2011
Charles T. Pryde
/s/ Walter G. Schwartz	Director	March 21, 2011
Walter F. Schwartz
/s/ Henry Spellman	Director	March 21, 2011
Henry Spellman
/s/ Bruce Nyberg	Director	March 21, 2011
Bruce Nyberg

SIGNATURE	TITLE	DATE
/s/ Thomas J. Wagner	Director	March 21, 2011
Thomas J. Wagner
/s/ Thomas H. Dorr	Chief Financial Officer (Principal Financial and	March 21, 2011
Thomas H. Dorr	Accounting Officer)

Exhibit Index

Number		Description
13		2010 Shareholder Report (except for portions of the 2010 Shareholder Report that are expressly incorporated by reference into this Annual Report of Form 10-K, the 2010 Shareholder Report shall not be deemed filed as a part hereof.)
21		List of Subsidiaries
23		Consent of Plante & Moran, PLLC
31.1		Certification of Chief Executive Officer Pursuant to Rule 15d-15(e) of the securities Exchange Act.
31.2		Certification of Chief Financial Officer Pursuant to Rule 15d-15(e) of the securities Exchange Act.
32		Certification Pursuant to Rule 14d-14(b) of the Securities Exchange Act and 18 U.S.C. section 1350
99.1		31 C.F.R. Section 30.15 Certification of Principal Executive Officer
99.2		31 C.F.R. Section 30.15 Certification of Principal Financial Officer

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Filing Compare · Birmingham Bloomfield Bancshares