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Much like 2012 and 2013, the State of Michigan and its community banks continue to experience relative stability, although the State’s economy continues to lag most other states and unemployment remains high (7.9% for the State in June 2014). However, both the State and our banks have displayed a fundamental improvement in health over the past couple of years, which has reopened the door for M&A activity in the state. In fact, in 2014 the State has seen 3 of its community banks announce the sale of their institution, all for more than 175% of stated tangible book value and 2 of which were greater than 200% of stated tangible book value. These valuations are much higher than the national average for bank M&A transactions and are a positive signal. With interest rates expected to be low for the foreseeable future, and the costs of banking (salaries, benefits, regulatory, etc.) expected to continue to increase, achieving profitability and returns sufficient to satisfy shareholders will be challenging. This likely will lead to an increasing focus on strategic alternatives and discussions on whether independence is the best option for each bank.

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