**Loan Growth**     Total assets grew by $55 million in 2009. Total loans grew by $84 million or 19%. Theincrease in loans was partially offset by a reduction in investments. This trade-off ofinvestments for loans brings additional risk but also higher yield. In addition, as the Bank’sfundamental mission is to gather local deposits and make local loans, increases in both depositsand loans bring additional earnings and enhance franchise value.     The value of increased lending is weighed against credit quality. At year-end, non-performingloans increased to $6.0 million, a substantial increase from the $2.6 million at year-end 2008.Nevertheless, that $6.0 million total represents only 0.74% of total assets. Further, the loanportfolio is protected by an allowance for loan losses of $7.2 million, which equals 119% of totalnon-performers and 1.34% of total loans. Another factor supporting our belief regarding therelative soundness of our loan portfolio is the low level of loan charge-offs. Annualized net loancharge-offs for 2009 as a percentage of average loans totaled 7 basis points (0.07%).**Strong Capital**     As originally conceived, the Capital Purchase Plan (“CPP”) within TARP was a positive programmaking capital available to strong, healthy banks so that those banks could lever that capital upto 10 times with loans to local businesses. The capital was to be held for a minimum of fiveyears. As RiverBank experienced strong loan demand, desired to meet community needs and grew inboth size and earnings, we applied for and were awarded a $15 million preferred stock investment bythe U.S. Treasury. Shortly thereafter, Congress changed the terms and conditions and, moreimportantly, the media cast the entire program as a bailout for weak banks. As a strong, healthyBank, this inaccurate connotation was damaging to our reputation and a concern for both ourcustomers and shareholders. We opted to withdraw from the CPP as soon as practicable.     As an early participant in the TARP program, we had grown our balance sheet relying on theU.S. Treasury’s original terms. Before withdrawing from TARP and prepaying the preferred stockinvestment, we decided to add additional regulatory capital to prudently support our balance sheetgrowth. Accordingly, RiverBank issued $6 million of long-term subordinated debt before repayingits TARP investment. As a result, RiverBank comfortably exceeds all regulatory capitalrequirements for a “well capitalized” bank.**Retail Locations**     In January, 2009, we opened a new branch office in Derry, New Hampshire. That officecontinues to exceed its deposit goals and has proven a fertile source of new lending opportunities.At year-end, the Derry branch had deposits of approximately $10 million of which $7 million werein attractive core accounts.     In January, 2010, we relocated our single Lawrence location from an older, unattractive,inaccessible, rented office to a newly constructed, highly visible and accessible bank-owned
 

 
building. While it is too soon to declare victory, customer activity has increased dramatically atthe new location.     In December, 2009, we began construction of a new branch location on Jackson Street, Methuen.Our present Jackson Street branch has approximately $90 million in deposits and is completelyinadequate to service that level of account activity. On very busy days, it is not unusual to seecustomers lining up outside waiting to get into the branch. The new building will offer a higherlevel of service and convenience and, we anticipate, draw additional business.**Dividends**     In contemplation of prepaying our TARP investment, and in light of recent balance sheet growthand a continuing sluggish national economy, the prudent course required the retention of earningsto build a strong capital base. Accordingly, in the first quarter of 2009, dividends were reducedfrom $0.15 per share per quarter to $0.05 per share per quarter.     In the fourth quarter, after reviewing capital adequacy, credit quality and earningsprospects, the Board began restoring the dividend. We increased our dividend to $0.07 per share inthe first quarter of 2010.     The Board is cognizant that retail banking, especially in the Northeast, is not a growthbusiness where substantial capital appreciation can be realized rapidly from internal operations.In addition, we expect that the sluggish economy and increased regulatory capital requirements willlikely dampen capital appreciation for the foreseeable future. Given these constraints on capitalappreciation, the Board understands the important role that dividends play for our shareholders.Accordingly, the Board carefully weighs the demands of a strong capital base for both safety andgrowth versus the need to reward our shareholders for their patience and confidence.**Prospects for 2010**     Both our strong capital base and the high quality of our loan portfolio represent sources ofstrength for the future. We believe the actions we have taken in 2009 afford us the financialstrength and market position to continue our balance sheet growth and earnings improvementthroughout 2010. While the national and local economies remain uncertain, we believe that stayingwith our core competencies in gathering local deposits and extending prudent credit, we willenhance earnings potential and increase franchise value.     I wish to thank the Directors and employees for the dedication of their talents andconscientious effort to improve the Company by serving well our customers and local communities. Ialso wish to thank our shareholders for their continued support.      Very truly yours,