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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C.
 FORM 10-K
 (Annual Report Under Section 13 of the Securities Exchange Act of 1934)
 For the fiscal year ended December 31, 2009
 Commission File No. 001-16101
 BANCORP RHODE ISLAND, INC.
  Rhode Island
    
    05-0509802(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (IRS Employer
Identification No.)
 ONE TURKS HEAD PLACE, PROVIDENCE, RI 02903
  (Issuers Telephone Number, Including Area Code)
 Securities registered pursuant to Section 12(b) of the Act: None
 Securities registered pursuant to Section 12(g) of the Act:
 Common Stock, par value $0.01 per share
  
 Yes o No þ
 Yes o No þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ
 SM
  Documents incorporated by reference:




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##### 



Bancorp Rhode Island, Inc.
Annual Report on Form 10-K
Table of Contents
 Description
    
    Page NumberPart IItem 1  Business
    
    
    1Item 1A  Risk Factors
    
    
    16Item 1B   Unresolved Staff Comments
    
    
    23Item 2  Properties
    
    
    24Item 3  Legal Proceedings
    
    
    24Part II.Item 5  Market for the Companys Common Stock, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    
    
    25Item 6  Selected Consolidated Financial Data
    
    
    26Item 7  Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    28Item 7A  Qualitative and Quantitative Disclosures About Market Risk
    
    
    52Item 8  Financial Statements and Supplementary Data
    
    
    53Item 9  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    53Item 9A  Controls and Procedures
    
    
    54Item 9B  Other Information
    
    
    54Part IIIItem 10  Directors, Executive Officers and Corporate Governance
    
    
    55Item 11  Executive Compensation
    
    
    56Item 12  Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    56Item 13   Certain Relationships, Related Transactions and Director
Independence
    
    
    56Item 14  Principal Accountant Fees and Services
    
    
    57Part IVItem 15  Exhibits and Financial Statement Schedules
    
    
    57Signatures
    
    
    60Exhibit 12.1Exhibit 12.2Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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PART I
 SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
  
    
    statements of our goals, intentions and expectations;
 
    
    statements regarding our business plans and prospects and growth and operating
strategies;
 
    
    statements regarding the quality of our products and our loan and investment portfolios;
and
 
    
    estimates of our risks and future costs and benefits.
  
 ITEM 1 . BUSINESS
 Introduction
     1




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http://www.bankri.com
 http://www.bankri.com http://www.sec.gov
 Overview
   de novo
       2




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Capital Strength and Exit from the U.S. Treasurys Capital Purchase Program
    Regulatory Capital Requirements
 Lending Activities
    3




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Commercial Real Estate and Multi-Family Loans 
   Commercial and Industrial Loans 
  4




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Leases
  Small Business Loans 
  Construction Loans 
    5




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Residential Mortgage Loans 
    Consumer and Other Loans 
  Asset Quality
   6




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Investment Activities
    Deposits and Service Charges on Deposit Accounts
       7




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Borrowings and Liquidity
    Nondeposit Investment Products and Services
  Employees
  Supervision and Regulation
 Overview 
    8




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Rhode Island Regulation
     Federal Supervision: FDIC
 Overview 
   Deposit Insurance 
  9




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Safety and Soundness Standards 
 Examination 
 Federal Supervision: FRB
   10




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Regulatory Capital Requirements
 FDIC Requirements 
  Prompt Corrective Action Provisions 
    FRB Requirements
  11




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Basel Accord 
    Restrictions on Transactions with Affiliates and Insiders
     12




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Interstate Banking
  Gramm-Leach-Bliley Act
     Other Aspects of Federal and State Laws
 Community Reinvestment Act 
  13




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USA PATRIOT Act 
 Sarbanes-Oxley Act of 2002  ,
 Insurance Sales 
 Miscellaneous 
 Recent Regulatory Developments
 Financial Stability Plan 
 Temporary Debt Guaranty Program 
 American Recovery and Reinvestment Act of 2009 -
  14




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Homeowner Affordability and Stability Plan 
 
    
    Provide access to low-cost refinancing for responsible homeowners suffering from falling home prices.
    
    A $75.0 billion homeowner stability initiative to prevent foreclosure and help responsible families
stay in their homes.
    
    Support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac.
 Overdraft Protection 
 Proposed Legislation and Regulatory Action
   Effect of Governmental Policy
   15




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ITEM 1A. RISK FACTORS
 Overview
  Risks Related to Our Business
 Recent negative developments in the financial services industry and U.S. and global credit markets
may adversely impact our operations and results.
  The continuation of adverse market conditions in the U.S. economy and the markets in which we
operate could adversely impact us.
  Current regional and local economic conditions could adversely affect our profitability.
     16




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Competition with other financial institutions could adversely affect our franchise growth and
profitability.
    Fluctuations in interest rates could adversely impact our net interest margin.
  Increases in FDIC insurance premiums may adversely affect our net income and profitability.
  Changes in customer behavior could adversely affect our profitability.
   17




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Our focus on commercial lending may result in greater risk of losses.
  Our allowance for loan and lease losses may be insufficient to cover actual loan and lease losses.
  We may be required to record an impairment charge for goodwill related to acquisitions.
    18




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Our operations and profitability could be adversely affected by continued deterioration of the
Federal Home Loan Bank System.
  We may experience a decline in the market value of our available for sale securities.
   The soundness of other financial institutions could adversely affect us.
    19




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There can be no assurance that the Emergency Economic Stabilization Act of 2008 and other
government programs will stabilize the U.S. financial system.
   Mortgage loan modification programs and future legislative action may adversely affect the value
of, and the returns, on the investment securities that we own.
  We are exposed to risk of environmental liabilities with respect to properties to which we take
title
  Expanding the franchise may limit increases in profitability.
  Our growth is substantially dependent on our management team.
   20




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Our operating history is not necessarily indicative of future operating results.
  Our controls and procedures may fail or be circumvented.
  We face various technological risks.
  We encounter technological change continually.
  Severe weather, natural disasters, acts of war or terrorism and other external events could
significantly impact our business.
  Extensive government regulation and supervision have a significant impact on our operations.
   21




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Risks Related to the Companys Common Stock
 Our common stock has limited liquidity.
 SM
  Fluctuations in the price of our stock could adversely impact your investment.
  There are limitations on our ability to pay dividends.
  Certain Anti-Takeover measures affect the ability of shareholders to effect takeover transactions.
    22




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Directors and executive officers own a significant portion of our common stock.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
   23




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ITEM 2. PROPERTIES
   Size
    
    
    Year Opened
    
    
    Owned or
    
    LeaseLocation
    
    (Square feet)
    
    
    or Acquired
    
    
    Leased
    
    Expiration DateBranch offices:1047 Park Avenue, Cranston, RI
    
    
    4,700
    
    
    
    1996
    
    
    Owned
    
    Not Applicable383 Atwood Avenue, Cranston, RI
    
    
    4,700
    
    
    
    1996
    
    
    Owned
    
    Not Applicable1269 South County Trail, East Greenwich, RI
    
    
    2,600
    
    
    
    2005
    
    
    Leased
    
    
    5/31/25999 South Broadway, East Providence, RI
    
    
    3,200
    
    
    
    1996
    
    
    Leased
    
    
    11/30/12195 Taunton Avenue, East Providence, RI
    
    
    3,100
    
    
    
    1996
    
    
    Leased
    
    
    12/31/101440 Hartford Avenue, Johnston, RI
    
    
    4,700
    
    
    
    1996
    
    
    Land Leased
    
    
    12/31/12625 G. Washington Highway, Lincoln, RI
    
    
    1,000
    
    
    
    2005
    
    
    Owned
    
    Not Applicable1140 Ten Rod Road, North Kingstown, RI
    
    
    4,000
    
    
    
    2004
    
    
    Land Leased
    
    
    6/30/18499 Smithfield Avenue, Pawtucket, RI
    
    
    3,500
    
    
    
    2007
    
    
    Land Leased
    
    
    5/31/21One Turks Head Place, Providence, RI
    
    
    5,000
    
    
    
    1996
    
    
    Leased
    
    
    4/30/14165 Pitman Street, Providence, RI
    
    
    3,300
    
    
    
    1998
    
    
    Leased
    
    
    10/31/13445 Putnam Pike, Smithfield, RI
    
    
    3,500
    
    
    
    1996
    
    
    Leased
    
    
    7/31/191062 Centerville Road, Warwick, RI
    
    
    2,600
    
    
    
    1996
    
    
    Owned
    
    Not Applicable1300 Warwick Avenue, Warwick, RI
    
    
    4,200
    
    
    
    1996
    
    
    Leased
    
    
    6/30/142975 West Shore Road, Warwick, RI
    
    
    3,500
    
    
    
    2000
    
    
    Leased
    
    
    3/31/141175 Cumberland Hill Road, Woonsocket, RI
    
    
    3,300
    
    
    
    1998
    
    
    Owned
    
    Not ApplicableAdministrative and operational offices:2104 Plainfield Pike, Cranston, RI
    
    
    700
    
    
    
    2002
    
    
    Owned
    
    Not Applicable625 G. Washington Highway, Lincoln, RI
    
    
    23,600
    
    
    
    2003
    
    
    Owned
    
    Not ApplicableOne Turks Head Place, Providence, RI
    
    
    20,600
    
    
    
    1999
    
    
    Leased
    
    
    6/30/14One Ames Court, Plainview, NY
    
    
    4,400
    
    
    
    2005
    
    
    Leased
    
    
    1/31/13Planned branch offices:40 Newport Avenue, East Providence, RI
    
    
    (A
    )
    
    Not Applicable
    
    
    Leased
    
    
    12/31/17
 (A)
    
    Facility currently under construction or in planning. 
 ITEM 3 . LEGAL PROCEEDINGS
   24




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PART II
 
 ITEM 5 . MARKET FOR THE COMPANYS COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Common Stock Prices and Dividends  SM
 Stock Price
    
    
    DividendHigh
    
    
    Low
    
    
    Paid2008:First Quarter
    
    $
    37.15
    
    
    $
    30.70
    
    
    $
    0.16Second Quarter
    
    
    38.13
    
    
    
    28.05
    
    
    
    0.16Third Quarter
    
    
    32.00
    
    
    
    26.00
    
    
    
    0.17Fourth Quarter
    
    
    30.00
    
    
    
    19.05
    
    
    
    0.172009:First Quarter
    
    $
    21.88
    
    
    $
    15.44
    
    
    $
    0.17Second Quarter
    
    
    21.97
    
    
    
    17.50
    
    
    
    0.17Third Quarter
    
    
    27.00
    
    
    
    19.40
    
    
    
    0.17Fourth Quarter
    
    
    27.00
    
    
    
    24.50
    
    
    
    0.17
  Stock Repurchase Program 
   25




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Period EndingIndex
    
    12/31/04
    
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08
    
    
    12/31/09Bancorp Rhode Island, Inc.
    
    
    100.00
    
    
    
    85.39
    
    
    
    112.71
    
    
    
    90.42
    
    
    
    57.39
    
    
    
    71.64Russell 3000
    
    
    100.00
    
    
    
    106.12
    
    
    
    122.80
    
    
    
    129.11
    
    
    
    80.94
    
    
    
    103.88SNL Bank $1B-$5B Index
    
    
    100.00
    
    
    
    98.29
    
    
    
    113.74
    
    
    
    82.85
    
    
    
    68.72
    
    
    
    49.26
 
 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
   26




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As of and for theyear ended December 31,2009
    
    
    2008 (b)
    
    
    2007 (b)
    
    
    2006 (b)
    
    
    2005 (b)(Dollars in thousands, except per share data)Statements of operations data:Interest income
    
    $
    75,277
    
    
    $
    80,298
    
    
    $
    86,070
    
    
    $
    81,202
    
    
    $
    69,520Interest expense
    
    
    26,955
    
    
    
    34,930
    
    
    
    44,826
    
    
    
    38,974
    
    
    
    26,619Net interest income
    
    
    48,322
    
    
    
    45,368
    
    
    
    41,244
    
    
    
    42,228
    
    
    
    42,901Provision for loan and lease losses
    
    
    9,917
    
    
    
    4,520
    
    
    
    700
    
    
    
    1,202
    
    
    
    1,423Noninterest income
    
    
    9,165
    
    
    
    10,609
    
    
    
    10,785
    
    
    
    8,988
    
    
    
    9,274Noninterest expense
    
    
    39,529
    
    
    
    37,886
    
    
    
    38,025
    
    
    
    38,727
    
    
    
    36,343Income before taxes
    
    
    8,041
    
    
    
    13,571
    
    
    
    13,304
    
    
    
    11,287
    
    
    
    14,409Income taxes
    
    
    2,502
    
    
    
    4,427
    
    
    
    4,259
    
    
    
    3,576
    
    
    
    4,840Net income
    
    
    5,539
    
    
    
    9,144
    
    
    
    9,045
    
    
    
    7,711
    
    
    
    9,569Preferred stock dividends
    
    
    (892
    )
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    Prepayment
charges and accretion of preferred stock discount
    
    
    (1,405
    )
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    Net income
applicable to
common shares
    
    $
    3,242
    
    
    $
    9,086
    
    
    $
    9,045
    
    
    $
    7,711
    
    
    $
    9,569Per share data:Basic earnings per common share
    
    $
    0.71
    
    
    $
    1.99
    
    
    $
    1.89
    
    
    $
    1.62
    
    
    $
    2.14Diluted earnings per common share
    
    $
    0.70
    
    
    $
    1.96
    
    
    $
    1.84
    
    
    $
    1.57
    
    
    $
    2.04Dividends per common share
    
    $
    0.68
    
    
    $
    0.66
    
    
    $
    0.62
    
    
    $
    0.60
    
    
    $
    0.60Dividend pay-out ratio
    
    
    97.1
    %
    
    
    33.7
    %
    
    
    33.7
    %
    
    
    38.2
    %
    
    
    29.4
    %Book value per share of common stock
    
    $
    26.16
    
    
    $
    26.34
    
    
    $
    24.68
    
    
    $
    23.28
    
    
    $
    22.11Tangible book value per share of common stock
    
    $
    23.50
    
    
    $
    23.71
    
    
    $
    22.10
    
    
    $
    20.92
    
    
    $
    19.72Average common shares outstanding  basic
    
    
    4,604,308
    
    
    
    4,561,396
    
    
    
    4,793,055
    
    
    
    4,766,854
    
    
    
    4,478,081Average common shares outstanding  diluted
    
    
    4,626,434
    
    
    
    4,631,208
    
    
    
    4,918,763
    
    
    
    4,920,569
    
    
    
    4,697,134Balance sheet data:Total assets
    
    $
    1,589,946
    
    
    $
    1,528,178
    
    
    $
    1,476,323
    
    
    $
    1,478,303
    
    
    $
    1,441,986Available for sale securities
    
    
    381,839
    
    
    
    326,406
    
    
    
    335,181
    
    
    
    343,887
    
    
    
    385,817Total loans and leases receivable
    
    
    1,111,847
    
    
    
    1,077,742
    
    
    
    1,038,132
    
    
    
    1,004,292
    
    
    
    950,806Allowance for loan and lease losses
    
    
    16,536
    
    
    
    14,664
    
    
    
    12,619
    
    
    
    12,377
    
    
    
    11,665Goodwill, net
    
    
    12,239
    
    
    
    12,019
    
    
    
    11,772
    
    
    
    11,317
    
    
    
    11,234Deposits
    
    
    1,098,284
    
    
    
    1,042,192
    
    
    
    1,014,780
    
    
    
    1,016,423
    
    
    
    980,969Borrowings
    
    
    350,757
    
    
    
    320,015
    
    
    
    331,703
    
    
    
    337,097
    
    
    
    344,769Total shareholders equity
    
    
    120,661
    
    
    
    149,090
    
    
    
    112,593
    
    
    
    111,570
    
    
    
    104,317Common shareholders equity
    
    
    120,661
    
    
    
    120,495
    
    
    
    112,593
    
    
    
    111,570
    
    
    
    104,317Average balance sheet data:Total assets
    
    $
    1,558,278
    
    
    $
    1,484,071
    
    
    $
    1,468,778
    
    
    $
    1,451,163
    
    
    $
    1,346,714Available for sale securities
    
    
    362,706
    
    
    
    335,132
    
    
    
    342,333
    
    
    
    372,433
    
    
    
    340,715Total loans and leases receivable
    
    
    1,107,640
    
    
    
    1,052,552
    
    
    
    1,014,951
    
    
    
    980,598
    
    
    
    916,273Allowance for loan and lease losses
    
    
    16,159
    
    
    
    13,350
    
    
    
    12,503
    
    
    
    12,002
    
    
    
    11,560Goodwill, net
    
    
    12,055
    
    
    
    11,982
    
    
    
    11,318
    
    
    
    11,290
    
    
    
    11,067Deposits
    
    
    1,073,366
    
    
    
    1,018,510
    
    
    
    1,010,162
    
    
    
    965,194
    
    
    
    928,374Borrowings
    
    
    333,866
    
    
    
    332,602
    
    
    
    326,398
    
    
    
    362,721
    
    
    
    306,344Total shareholders equity
    
    
    139,551
    
    
    
    115,977
    
    
    
    114,357
    
    
    
    106,359
    
    
    
    95,407Common shareholders equity
    
    
    121,911
    
    
    
    113,668
    
    
    
    114,357
    
    
    
    106,359
    
    
    
    95,407Operating ratios:Interest rate spread
    
    
    2.85
    %
    
    
    2.72
    %
    
    
    2.29
    %
    
    
    2.50
    %
    
    
    2.92
    %Net interest margin
    
    
    3.25
    %
    
    
    3.21
    %
    
    
    2.96
    %
    
    
    3.06
    %
    
    
    3.35
    %Efficiency ratio (a)
    
    
    68.76
    %
    
    
    67.68
    %
    
    
    73.08
    %
    
    
    75.62
    %
    
    
    69.66
    %Return on assets
    
    
    0.36
    %
    
    
    0.62
    %
    
    
    0.62
    %
    
    
    0.53
    %
    
    
    0.71
    %Return on common equity
    
    
    2.66
    %
    
    
    7.99
    %
    
    
    7.91
    %
    
    
    7.25
    %
    
    
    10.03
    %Tangible common equity ratio
    
    
    6.87
    %
    
    
    7.15
    %
    
    
    6.88
    %
    
    
    6.83
    %
    
    
    6.51
    %Asset quality ratios:Nonperforming loans and leases to
total loans and leases
    
    
    1.65
    %
    
    
    1.33
    %
    
    
    0.40
    %
    
    
    0.14
    %
    
    
    0.04
    %Nonperforming assets to total assets
    
    
    1.26
    %
    
    
    1.00
    %
    
    
    0.28
    %
    
    
    0.10
    %
    
    
    0.03
    %Allowance for loan and lease losses to
nonperforming loans and leases
    
    
    90.29
    %
    
    
    102.05
    %
    
    
    304.15
    %
    
    
    875.94
    %
    
    
    2,810.84
    %Allowance for loan and lease losses to
total loans and leases
    
    
    1.49
    %
    
    
    1.36
    %
    
    
    1.22
    %
    
    
    1.23
    %
    
    
    1.23
    %Net loans and leases charged-off to
average loans and leases
    
    
    0.73
    %
    
    
    0.24
    %
    
    
    0.05
    %
    
    
    0.05
    %
    
    
    0.13
    %
  27




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As of and for theyear ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in thousands, except per share data)Capital ratios:Average common shareholders equity to
average total assets
    
    
    7.82
    %
    
    
    7.66
    %
    
    
    7.79
    %
    
    
    7.33
    %
    
    
    7.08
    %Tier I leverage ratio
    
    
    7.65
    %
    
    
    10.04
    %
    
    
    7.87
    %
    
    
    8.37
    %
    
    
    8.21
    %Tier I risk-based capital ratio
    
    
    10.71
    %
    
    
    14.23
    %
    
    
    11.06
    %
    
    
    12.05
    %
    
    
    12.62
    %Total risk-based capital ratio
    
    
    11.97
    %
    
    
    15.48
    %
    
    
    12.28
    %
    
    
    13.27
    %
    
    
    13.87
    %
 (a)
    
    Calculated by dividing total noninterest expenses by net interest income plus noninterest
income.(b)
    
    December 31, 2008, 2007, 2006 and 2005 balances reflect an immaterial correction of an error
recorded as of January 1, 2005 related to income taxes. The correction reduced retained
earnings by $515,000, prepaid expenses and other assets by $796,000 and other liabilities by
$281,000. 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Introduction
  http://www.bankri.com
 Overview
   Average Balances, Yields and Costs
 Asset and Liability Management
  28




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##### Table of Contents



Financial Condition  Asset
Quality
       Critical Accounting Policies
   29




---



##### Table of Contents



Allowance for loan and lease losses
    Review of goodwill for impairment
    Valuation of available for sale securities
   30




---



##### Table of Contents



Income taxes
    31




---



##### Table of Contents



Results of Operations
 Net Interest Income
  Average Balances, Yields and Costs
  Year ended December 31,2009
    
    
    2008
    
    
    2007Interest
    
    
    
    
    
    
    
    
    
    
    Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    earned/
    
    
    Average
    
    
    Average
    
    
    earned/
    
    
    Average
    
    
    Average
    
    
    earned/
    
    
    Averagebalance
    
    
    paid
    
    
    yield
    
    
    balance
    
    
    paid
    
    
    yield
    
    
    balance
    
    
    paid
    
    
    yield(Dollars in thousands)AssetsEarning assets:Overnight investments
    
    $
    1,456
    
    
    $
    10
    
    
    
    0.78
    %
    
    $
    8,577
    
    
    $
    264
    
    
    
    3.07
    %
    
    $
    21,030
    
    
    $
    1,103
    
    
    
    5.24
    %Investment securities
    
    
    78,762
    
    
    
    2,157
    
    
    
    2.74
    %
    
    
    60,972
    
    
    
    2,767
    
    
    
    4.54
    %
    
    
    112,461
    
    
    
    5,707
    
    
    
    5.07
    %Mortgage-backed securities
    
    
    283,944
    
    
    
    13,357
    
    
    
    4.70
    %
    
    
    274,160
    
    
    
    13,655
    
    
    
    4.98
    %
    
    
    229,872
    
    
    
    11,166
    
    
    
    4.86
    %Stock in the FHLB
    
    
    15,912
    
    
    
    
    
    
    
    0.00
    %
    
    
    15,671
    
    
    
    610
    
    
    
    3.89
    %
    
    
    15,723
    
    
    
    1,056
    
    
    
    6.72
    %Loans receivable:Commercial loans and leases
    
    
    703,982
    
    
    
    40,823
    
    
    
    5.80
    %
    
    
    617,254
    
    
    
    39,709
    
    
    
    6.43
    %
    
    
    540,383
    
    
    
    39,657
    
    
    
    7.34
    %Residential mortgage loans
    
    
    192,853
    
    
    
    9,486
    
    
    
    4.92
    %
    
    
    226,483
    
    
    
    12,095
    
    
    
    5.34
    %
    
    
    255,442
    
    
    
    13,768
    
    
    
    5.39
    %Consumer and other loans
    
    
    210,805
    
    
    
    9,444
    
    
    
    4.48
    %
    
    
    208,815
    
    
    
    11,198
    
    
    
    5.36
    %
    
    
    219,126
    
    
    
    13,613
    
    
    
    6.21
    %Total earning assets
    
    
    1,487,714
    
    
    
    75,277
    
    
    
    5.06
    %
    
    
    1,411,932
    
    
    
    80,298
    
    
    
    5.69
    %
    
    
    1,394,037
    
    
    
    86,070
    
    
    
    6.17
    %Cash and due from banks
    
    
    18,186
    
    
    
    
    
    
    
    
    
    
    
    23,062
    
    
    
    
    
    
    
    
    
    
    
    24,178Allowance for loan and lease losses
    
    
    (16,159
    )
    
    
    
    
    
    
    
    
    
    
    (13,350
    )
    
    
    
    
    
    
    
    
    
    
    (12,503
    )Premises and equipment
    
    
    12,512
    
    
    
    
    
    
    
    
    
    
    
    13,195
    
    
    
    
    
    
    
    
    
    
    
    14,458Goodwill, net
    
    
    12,055
    
    
    
    
    
    
    
    
    
    
    
    11,982
    
    
    
    
    
    
    
    
    
    
    
    11,318Accrued interest receivable
    
    
    4,252
    
    
    
    
    
    
    
    
    
    
    
    4,888
    
    
    
    
    
    
    
    
    
    
    
    5,865Bank-owned life insurance
    
    
    29,323
    
    
    
    
    
    
    
    
    
    
    
    25,033
    
    
    
    
    
    
    
    
    
    
    
    23,627Prepaid expenses and other assets
    
    
    10,395
    
    
    
    
    
    
    
    
    
    
    
    7,329
    
    
    
    
    
    
    
    
    
    
    
    7,798Total assets
    
    $
    1,558,278
    
    
    
    
    
    
    
    
    
    
    $
    1,484,071
    
    
    
    
    
    
    
    
    
    
    $
    1,468,778Liabilities and Shareholders EquityInterest-bearing liabilities:Deposits:NOW accounts
    
    $
    65,471
    
    
    
    60
    
    
    
    0.09
    %
    
    $
    60,438
    
    
    
    162
    
    
    
    0.27
    %
    
    $
    62,327
    
    
    
    391
    
    
    
    0.63
    %Money market accounts
    
    
    31,157
    
    
    
    367
    
    
    
    1.18
    %
    
    
    5,249
    
    
    
    69
    
    
    
    1.31
    %
    
    
    6,285
    
    
    
    135
    
    
    
    2.15
    %Savings accounts
    
    
    377,755
    
    
    
    3,380
    
    
    
    0.89
    %
    
    
    388,060
    
    
    
    7,042
    
    
    
    1.81
    %
    
    
    376,746
    
    
    
    11,028
    
    
    
    2.93
    %Certificate of deposit accounts
    
    
    409,564
    
    
    
    11,061
    
    
    
    2.70
    %
    
    
    389,021
    
    
    
    14,306
    
    
    
    3.68
    %
    
    
    382,711
    
    
    
    17,676
    
    
    
    4.62
    %Overnight and short-term borrowings
    
    
    44,298
    
    
    
    86
    
    
    
    0.19
    %
    
    
    54,878
    
    
    
    902
    
    
    
    1.64
    %
    
    
    57,117
    
    
    
    2,717
    
    
    
    4.76
    %Wholesale repurchase agreements
    
    
    13,699
    
    
    
    551
    
    
    
    3.97
    %
    
    
    10,000
    
    
    
    540
    
    
    
    5.32
    %
    
    
    11,425
    
    
    
    602
    
    
    
    5.27
    %FHLB borrowings
    
    
    262,466
    
    
    
    10,720
    
    
    
    4.03
    %
    
    
    254,321
    
    
    
    10,960
    
    
    
    4.31
    %
    
    
    240,668
    
    
    
    10,768
    
    
    
    4.47
    %Subordinated deferrable interest
debentures
    
    
    13,403
    
    
    
    730
    
    
    
    5.45
    %
    
    
    13,403
    
    
    
    949
    
    
    
    7.08
    %
    
    
    17,188
    
    
    
    1,509
    
    
    
    8.78
    %Total interest-bearing
liabilities
    
    
    1,217,813
    
    
    
    26,955
    
    
    
    2.21
    %
    
    
    1,175,370
    
    
    
    34,930
    
    
    
    2.97
    %
    
    
    1,154,467
    
    
    
    44,826
    
    
    
    3.88
    %Noninterest-bearing deposits
    
    
    189,419
    
    
    
    
    
    
    
    
    
    
    
    175,742
    
    
    
    
    
    
    
    
    
    
    
    182,093Other liabilities
    
    
    11,495
    
    
    
    
    
    
    
    
    
    
    
    16,982
    
    
    
    
    
    
    
    
    
    
    
    17,861Total liabilities
    
    
    1,418,727
    
    
    
    
    
    
    
    
    
    
    
    1,368,094
    
    
    
    
    
    
    
    
    
    
    
    1,354,421Shareholders equity
    
    
    139,551
    
    
    
    
    
    
    
    
    
    
    
    115,977
    
    
    
    
    
    
    
    
    
    
    
    114,357Total liabilities and
shareholders equity
    
    $
    1,558,278
    
    
    
    
    
    
    
    
    
    
    $
    1,484,071
    
    
    
    
    
    
    
    
    
    
    $
    1,468,778Net interest income
    
    
    
    
    
    $
    48,322
    
    
    
    
    
    
    
    
    
    
    $
    45,368
    
    
    
    
    
    
    
    
    
    
    $
    41,244Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.85
    %
    
    
    
    
    
    
    
    
    
    
    2.72
    %
    
    
    
    
    
    
    
    
    
    
    2.29
    %Net interest rate margin
    
    
    
    
    
    
    
    
    
    
    3.25
    %
    
    
    
    
    
    
    
    
    
    
    3.21
    %
    
    
    
    
    
    
    
    
    
    
    2.96
    %
  32




---



##### Table of Contents



Rate/Volume Analysis
  Year ended December 31,2009 vs. 2008
    
    
    2008 vs. 2007Increase/(decrease) due to
    
    
    Increase/(decrease) due toRate
    
    
    Volume
    
    
    Total
    
    
    Rate
    
    
    Volume
    
    
    Total(In thousands)Interest income:Overnight investments
    
    $
    (120
    )
    
    $
    (134
    )
    
    $
    (254
    )
    
    $
    (346
    )
    
    $
    (493
    )
    
    $
    (839
    )Investment securities
    
    
    (1,042
    )
    
    
    432
    
    
    
    (610
    )
    
    
    (532
    )
    
    
    (2,408
    )
    
    
    (2,940
    )Mortgage-backed securities
    
    
    (749
    )
    
    
    451
    
    
    
    (298
    )
    
    
    280
    
    
    
    2,209
    
    
    
    2,489Stock in the FHLB
    
    
    (619
    )
    
    
    9
    
    
    
    (610
    )
    
    
    (443
    )
    
    
    (3
    )
    
    
    (446
    )Commercial loans and leases
    
    
    (5,064
    )
    
    
    6,178
    
    
    
    1,114
    
    
    
    (5,555
    )
    
    
    5,607
    
    
    
    52Residential mortgage loans
    
    
    (923
    )
    
    
    (1,686
    )
    
    
    (2,609
    )
    
    
    (127
    )
    
    
    (1,546
    )
    
    
    (1,673
    )Consumer and other loans
    
    
    (1,528
    )
    
    
    (226
    )
    
    
    (1,754
    )
    
    
    (1,860
    )
    
    
    (555
    )
    
    
    (2,415
    )Total interest income
    
    
    (10,045
    )
    
    
    5,024
    
    
    
    (5,021
    )
    
    
    (8,583
    )
    
    
    2,811
    
    
    
    (5,772
    )Interest expense:NOW accounts
    
    
    (114
    )
    
    
    12
    
    
    
    (102
    )
    
    
    (217
    )
    
    
    (12
    )
    
    
    (229
    )Money market accounts
    
    
    (8
    )
    
    
    306
    
    
    
    298
    
    
    
    (46
    )
    
    
    (20
    )
    
    
    (66
    )Savings accounts
    
    
    (3,479
    )
    
    
    (183
    )
    
    
    (3,662
    )
    
    
    (4,308
    )
    
    
    322
    
    
    
    (3,986
    )Certificate of deposit accounts
    
    
    (3,960
    )
    
    
    715
    
    
    
    (3,245
    )
    
    
    (3,645
    )
    
    
    275
    
    
    
    (3,370
    )Overnight & short-term borrowings
    
    
    (669
    )
    
    
    (147
    )
    
    
    (816
    )
    
    
    (1,711
    )
    
    
    (104
    )
    
    
    (1,815
    )Wholesale repurchase agreements
    
    
    (156
    )
    
    
    167
    
    
    
    11
    
    
    
    6
    
    
    
    (68
    )
    
    
    (62
    )FHLB borrowings
    
    
    (623
    )
    
    
    383
    
    
    
    (240
    )
    
    
    (422
    )
    
    
    614
    
    
    
    192Capital trust and other subordinated
securities
    
    
    (219
    )
    
    
    
    
    
    
    (219
    )
    
    
    (254
    )
    
    
    (306
    )
    
    
    (560
    )Total interest
expense
    
    
    (9,228
    )
    
    
    1,253
    
    
    
    (7,975
    )
    
    
    (10,597
    )
    
    
    701
    
    
    
    (9,896
    )Net interest income
    
    $
    (817
    )
    
    $
    3,771
    
    
    $
    2,954
    
    
    $
    2,014
    
    
    $
    2,110
    
    
    $
    4,124
 Comparison of Years Ended December 31, 2009 and December 31, 2008
 General
  Net Interest Income
  Interest Income  Investments
   33




---



##### Table of Contents



Interest Income  Loans and Leases
   Interest Expense  Deposits and Borrowings
    Provision for Loan and Lease Losses
  Allowance for
Loan and Lease Losses
 Noninterest Income
  Year ended December 31,2009
    
    
    2008(In thousands)Service charges on deposit accounts
    
    $
    5,377
    
    
    $
    5,711Income from bank-owned life insurance
    
    
    1,245
    
    
    
    1,080Loan related fees
    
    
    869
    
    
    
    803Commissions on nondeposit investment products
    
    
    776
    
    
    
    745Net gains on lease sales and commissions on loans originated for others
    
    
    408
    
    
    
    454Impairment
of available for sale securities
    
    
    (384
    )
    
    
    (219
    )Gain on sale of available for sale securities
    
    
    61
    
    
    
    725Other income
    
    
    813
    
    
    
    1,310Total noninterest income
    
    $
    9,165
    
    
    $
    10,609
  34




---



##### Table of Contents



Noninterest Expense
  Year ended December 31,2009
    
    
    2008(In thousands)Salaries and employee benefits
    
    $
    20,573
    
    
    $
    20,091Occupancy and equipment
    
    
    4,553
    
    
    
    4,578Data processing
    
    
    2,640
    
    
    
    2,816FDIC insurance
    
    
    2,527
    
    
    
    694Professional services
    
    
    2,612
    
    
    
    2,968Marketing
    
    
    1,318
    
    
    
    1,607Loan workout and other real estate owned
    
    
    688
    
    
    
    543Loan servicing
    
    
    665
    
    
    
    643Other expenses
    
    
    3,953
    
    
    
    3,946Total noninterest
expense
    
    $
    39,529
    
    
    $
    37,886
     35




---



##### Table of Contents



Income Tax Expense
  Comparison of Years Ended December 31, 2008 and December 31, 2007
 General
  Net Interest Income
  Interest Income  Investments
  Interest Income  Loans and Leases
   Interest Expense  Deposits and Borrowings
     36




---



##### Table of Contents



Provision for Loan and Lease Losses
  Allowance for
Loan and Lease Losses
 Noninterest Income
  Year ended December 31,2008
    
    
    2007(In thousands)Service charges on deposit accounts
    
    $
    5,711
    
    
    $
    5,578Income from bank-owned life insurance
    
    
    1,080
    
    
    
    1,038Loan related fees
    
    
    803
    
    
    
    649Commissions on nondeposit investment products
    
    
    745
    
    
    
    575Gain on sale of available for sale securities
    
    
    725
    
    
    
    254Impairment
of available for sale securities
    
    
    (219
    )
    
    
    Net gains on lease sales and commissions on loans originated for others
    
    
    454
    
    
    
    1,216Other income
    
    
    1,310
    
    
    
    1,475Total noninterest income
    
    $
    10,609
    
    
    $
    10,785
     37




---



##### Table of Contents



Noninterest Expense
  Year ended December 31,2008
    
    
    2007(In thousands)Salaries and employee benefits
    
    $
    20,091
    
    
    $
    20,859Occupancy and equipment
    
    
    4,578
    
    
    
    4,872Professional services
    
    
    2,968
    
    
    
    2,212Data processing
    
    
    2,816
    
    
    
    2,850Marketing
    
    
    1,607
    
    
    
    1,562Loan servicing
    
    
    643
    
    
    
    767Loan workout and other real estate owned
    
    
    543
    
    
    
    190Other expenses
    
    
    4,640
    
    
    
    4,713Total noninterest
expense
    
    $
    37,886
    
    
    $
    38,025
  Income Tax Expense
  Financial Condition
 Loans and Leases Receivable
   38




---



##### Table of Contents



December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands)Commercial loans and leases:Commercial real estate 
owner occupied
    
    $
    167,853
    
    
    $
    175,472
    
    
    $
    157,431
    
    
    $
    140,812
    
    
    $
    112,987Commercial & industrial
    
    
    178,808
    
    
    
    164,569
    
    
    
    131,927
    
    
    
    106,017
    
    
    
    73,620Commercial real estate 
nonowner occupied
    
    
    170,148
    
    
    
    133,782
    
    
    
    102,990
    
    
    
    102,390
    
    
    
    95,779Small business
    
    
    56,148
    
    
    
    50,464
    
    
    
    45,778
    
    
    
    41,785
    
    
    
    38,641Multi-family
    
    
    66,350
    
    
    
    53,159
    
    
    
    42,536
    
    
    
    34,294
    
    
    
    33,725Construction
    
    
    23,405
    
    
    
    22,300
    
    
    
    38,832
    
    
    
    37,237
    
    
    
    37,772Leases and other (1)
    
    
    75,057
    
    
    
    63,799
    
    
    
    58,702
    
    
    
    62,979
    
    
    
    48,745Subtotal
    
    
    737,769
    
    
    
    663,545
    
    
    
    578,196
    
    
    
    525,514
    
    
    
    441,269Unearned lease income (1)
    
    
    (7,693
    )
    
    
    (6,980
    )
    
    
    (5,742
    )
    
    
    (6,651
    )
    
    
    (3,366
    )Net deferred loan origination costs (fees)
    
    
    2,321
    
    
    
    1,857
    
    
    
    1,214
    
    
    
    927
    
    
    
    406Total commercial loans and leases
    
    
    732,397
    
    
    
    658,422
    
    
    
    573,668
    
    
    
    519,790
    
    
    
    438,309Residential mortgage loans:One-to four-family adjustable rate
    
    
    115,855
    
    
    
    126,689
    
    
    
    155,087
    
    
    
    165,140
    
    
    
    202,223One-to four-family fixed rate
    
    
    56,724
    
    
    
    85,057
    
    
    
    92,485
    
    
    
    96,880
    
    
    
    101,598Subtotal
    
    
    172,579
    
    
    
    211,746
    
    
    
    247,572
    
    
    
    262,020
    
    
    
    303,821Premium on loans acquired
    
    
    738
    
    
    
    953
    
    
    
    1,198
    
    
    
    1,979
    
    
    
    2,257Net deferred loan origination fees
    
    
    (23
    )
    
    
    (34
    )
    
    
    (42
    )
    
    
    (54
    )
    
    
    (62
    )Total residential mortgage loans
    
    
    173,294
    
    
    
    212,665
    
    
    
    248,728
    
    
    
    263,945
    
    
    
    306,016Consumer and other loans:Home equity  term loans
    
    
    119,909
    
    
    
    127,142
    
    
    
    149,192
    
    
    
    152,484
    
    
    
    134,932Home equity  lines of credit
    
    
    83,771
    
    
    
    76,038
    
    
    
    62,357
    
    
    
    64,208
    
    
    
    67,959Unsecured and other
    
    
    1,410
    
    
    
    2,216
    
    
    
    2,774
    
    
    
    2,359
    
    
    
    2,151Subtotal
    
    
    205,090
    
    
    
    205,396
    
    
    
    214,323
    
    
    
    219,051
    
    
    
    205,042Premium on loans acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Net deferred loan origination costs
    
    
    1,066
    
    
    
    1,259
    
    
    
    1,413
    
    
    
    1,506
    
    
    
    1,437Total consumer and other loans
    
    
    206,156
    
    
    
    206,655
    
    
    
    215,736
    
    
    
    220,557
    
    
    
    206,481Total loans and leases receivable
    
    $
    1,111,847
    
    
    $
    1,077,742
    
    
    $
    1,038,132
    
    
    $
    1,004,292
    
    
    $
    950,806
 (1)
    
    Included within commercial loans and leases were $156,000 of leases held for sale at
December 31, 2008. Commercial loans and leases 
    39




---



##### Table of Contents



Residential mortgage loans 
 Consumer loans 
  Principal repayments contractually dueAfter one,One year
    
    
    but within
    
    
    Afteror less
    
    
    five years
    
    
    five years(In thousands)Commercial & industrial loans
    
    $
    77,791
    
    
    $
    70,413
    
    
    $
    30,604Construction/permanent loans
    
    
    11,412
    
    
    
    254
    
    
    
    12,040Home equity lines of credit
    
    
    621
    
    
    
    22
    
    
    
    83,128Interest-only residential first
mortgages
    
    
    5,194
    
    
    
    16,700
    
    
    
    4,053Small business loans
    
    
    24,387
    
    
    
    24,126
    
    
    
    7,636Total
    
    $
    119,405
    
    
    $
    111,515
    
    
    $
    137,461
  40




---



##### Table of Contents



Loans due after one yearFloating oradjustableFixed rates
    
    
    rates(In thousands)Commercial & industrial loans
    
    $
    65,425
    
    
    $
    35,592Construction/permanent loans
    
    
    5,877
    
    
    
    6,417Home equity lines of credit
    
    
    
    
    
    
    83,149Interest-only residential first mortgages
    
    
    3,089
    
    
    
    17,664Small business loans
    
    
    8,771
    
    
    
    22,991Total
    
    $
    83,162
    
    
    $
    165,813
 Asset Quality
  Nonperforming Assets
  41




---



##### Table of Contents



December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in thousands)Loans and leases accounted for on a nonaccrual basis
    
    $
    16,830
    
    
    $
    14,045
    
    
    $
    4,012
    
    
    $
    1,407
    
    
    $
    415Loans and leases past due 90 days or more,
but still accruing
    
    
    826
    
    
    
    324
    
    
    
    100
    
    
    
    6
    
    
    
    Restructured loans and leases on a nonaccrual basis
    
    
    659
    
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    Total nonperforming loans
and leases
    
    
    18,315
    
    
    
    14,369
    
    
    
    4,149
    
    
    
    1,413
    
    
    
    415Other real estate owned
    
    
    1,700
    
    
    
    863
    
    
    
    
    
    
    
    
    
    
    
    Total nonperforming assets
    
    $
    20,015
    
    
    $
    15,232
    
    
    $
    4,149
    
    
    $
    1,413
    
    
    $
    415Restructured loans and leases not included in
nonperforming assets
    
    $
    445
    
    
    $
    32
    
    
    $
    
    
    
    $
    
    
    
    $
    Nonperforming loans and leases as a percent
of total loans and leases
    
    
    1.65
    %
    
    
    1.33
    %
    
    
    0.40
    %
    
    
    0.14
    %
    
    
    0.04
    %Nonperforming assets as a percent
of total assets
    
    
    1.26
    %
    
    
    1.00
    %
    
    
    0.28
    %
    
    
    0.10
    %
    
    
    0.03
    %
  December 31,2009
    
    
    2008
    
    
    2007Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof Total
    
    
    
    
    
    
    of Total
    
    
    
    
    
    
    of TotalPrincipal
    
    
    Loans and
    
    
    Principal
    
    
    Loans and
    
    
    Principal
    
    
    Loans andBalance
    
    
    Leases
    
    
    Balance
    
    
    Leases
    
    
    Balance
    
    
    Leases(Dollars in thousands)Nonperforming loans and leases:Commercial real estate
    
    $
    6,909
    
    
    
    0.63
    %
    
    $
    4,884
    
    
    
    0.46
    %
    
    $
    
    
    
    
    0.00
    %Commercial and industrial
    
    
    2,919
    
    
    
    0.26
    %
    
    
    2,802
    
    
    
    0.26
    %
    
    
    2,594
    
    
    
    0.25
    %Small business
    
    
    1,147
    
    
    
    0.10
    %
    
    
    892
    
    
    
    0.08
    %
    
    
    39
    
    
    
    0.00
    %Multifamily
    
    
    205
    
    
    
    0.02
    %
    
    
    
    
    
    
    0.00
    %
    
    
    594
    
    
    
    0.06
    %Construction
    
    
    469
    
    
    
    0.04
    %
    
    
    1,000
    
    
    
    0.09
    %
    
    
    
    
    
    
    0.00
    %Leases
    
    
    1,878
    
    
    
    0.17
    %
    
    
    428
    
    
    
    0.04
    %
    
    
    100
    
    
    
    0.01
    %Residential
    
    
    4,124
    
    
    
    0.37
    %
    
    
    4,314
    
    
    
    0.40
    %
    
    
    822
    
    
    
    0.08
    %Consumer
    
    
    664
    
    
    
    0.06
    %
    
    
    49
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %Total nonperforming
loans and leases
    
    $
    18,315
    
    
    
    1.65
    %
    
    $
    14,369
    
    
    
    1.33
    %
    
    $
    4,149
    
    
    
    0.40
    %
 Nonaccrual Loans and Leases
 Delinquencies 
  42




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##### Table of Contents



December 31,2009
    
    
    2008
    
    
    2007Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof Total
    
    
    
    
    
    
    of Total
    
    
    
    
    
    
    of TotalPrincipal
    
    
    Loans and
    
    
    Principal
    
    
    Loans and
    
    
    Principal
    
    
    Loans andBalance
    
    
    Leases
    
    
    Balance
    
    
    Leases
    
    
    Balance
    
    
    Leases(Dollars in thousands)Loans and leases delinquent for 30 to 59 days:Commercial real estate loans
    
    $
    1,506
    
    
    
    0.14
    %
    
    $
    1,325
    
    
    
    0.12
    %
    
    $
    
    
    
    
    Commercial and industrial loans
    
    
    1,167
    
    
    
    0.10
    %
    
    
    95
    
    
    
    0.01
    %
    
    
    3,205
    
    
    
    0.31
    %Small business loans
    
    
    1,942
    
    
    
    0.17
    %
    
    
    98
    
    
    
    0.01
    %
    
    
    15
    
    
    
    0.00
    %Multifamily loans
    
    
    731
    
    
    
    0.07
    %
    
    
    
    
    
    
    
    
    
    
    369
    
    
    
    0.04
    %Construction loans
    
    
    900
    
    
    
    0.08
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Leases
    
    
    2,108
    
    
    
    0.19
    %
    
    
    1,817
    
    
    
    0.17
    %
    
    
    3,005
    
    
    
    0.29
    %Residential loans
    
    
    1,248
    
    
    
    0.11
    %
    
    
    921
    
    
    
    0.08
    %
    
    
    1,309
    
    
    
    0.13
    %Consumer loans
    
    
    980
    
    
    
    0.09
    %
    
    
    1,488
    
    
    
    0.14
    %
    
    
    981
    
    
    
    0.09
    %Total loans and leases delinquent 30 to 59 days
    
    
    10,582
    
    
    
    0.95
    %
    
    
    5,744
    
    
    
    0.53
    %
    
    
    8,884
    
    
    
    0.86
    %Loans and leases delinquent for 60 to 89 days:Commercial real estate loans
    
    $
    
    
    
    
    
    
    
    $
    599
    
    
    
    0.06
    %
    
    $
    1,230
    
    
    
    0.12
    %Commercial and industrial loans
    
    
    
    
    
    
    
    
    
    
    1,722
    
    
    
    0.16
    %
    
    
    
    
    
    
    Small business loans
    
    
    285
    
    
    
    0.03
    %
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    0.00
    %Multifamily loans
    
    
    410
    
    
    
    0.04
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Leases
    
    
    951
    
    
    
    0.09
    %
    
    
    1,194
    
    
    
    0.11
    %
    
    
    2,173
    
    
    
    0.21
    %Residential loans
    
    
    234
    
    
    
    0.02
    %
    
    
    117
    
    
    
    0.01
    %
    
    
    275
    
    
    
    0.03
    %Consumer loans
    
    
    148
    
    
    
    0.01
    %
    
    
    150
    
    
    
    0.01
    %
    
    
    13
    
    
    
    0.00
    %Total loans and leases delinquent 60 to 89 days
    
    
    2,028
    
    
    
    0.19
    %
    
    
    3,782
    
    
    
    0.35
    %
    
    
    3,702
    
    
    
    0.36
    %Total loans and leases
delinquent 30 to 89
days
    
    $
    12,610
    
    
    
    1.14
    %
    
    $
    9,526
    
    
    
    0.88
    %
    
    $
    12,586
    
    
    
    1.22
    %
 Higher-Risk Loans 
 Adversely Classified Assets 
  43




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##### Table of Contents



Allowance for Loan and Lease Losses
     December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof Total
    
    
    
    
    
    
    of Total
    
    
    
    
    
    
    of Total
    
    
    
    
    
    
    of Total
    
    
    
    
    
    
    of TotalLoans
    
    
    
    
    
    
    Loans
    
    
    
    
    
    
    Loans
    
    
    
    
    
    
    Loans
    
    
    
    
    
    
    Loansand
    
    
    
    
    
    
    and
    
    
    
    
    
    
    and
    
    
    
    
    
    
    and
    
    
    
    
    
    
    andAmount
    
    
    Leases
    
    
    Amount
    
    
    Leases
    
    
    Amount
    
    
    Leases
    
    
    Amount
    
    
    Leases
    
    
    Amount
    
    
    Leases(Dollars in thousands)Commercial loans and leases
    
    $
    12,409
    
    
    
    65.9
    %
    
    $
    10,708
    
    
    
    61.1
    %
    
    $
    8,786
    
    
    
    55.2
    %
    
    $
    7,944
    
    
    
    51.8
    %
    
    $
    7,002
    
    
    
    46.1
    %Residential mortgage loans
    
    
    1,340
    
    
    
    15.6
    %
    
    
    1,239
    
    
    
    19.7
    %
    
    
    1,002
    
    
    
    24.0
    %
    
    
    1,440
    
    
    
    26.2
    %
    
    
    1,653
    
    
    
    32.2
    %Consumer and other loans
    
    
    1,504
    
    
    
    18.5
    %
    
    
    1,609
    
    
    
    19.2
    %
    
    
    1,637
    
    
    
    20.8
    %
    
    
    2,086
    
    
    
    22.0
    %
    
    
    1,894
    
    
    
    21.7
    %Unallocated
    
    
    1,283
    
    
    NA
    
    
    
    1,108
    
    
    NA
    
    
    
    1,194
    
    
    NA
    
    
    
    907
    
    
    NA
    
    
    
    1,116
    
    
    NATotal
    
    $
    16,536
    
    
    
    100.0
    %
    
    $
    14,664
    
    
    
    100.0
    %
    
    $
    12,619
    
    
    
    100.0
    %
    
    $
    12,377
    
    
    
    100.0
    %
    
    $
    11,665
    
    
    
    100.0
    %
    44




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##### Table of Contents



Year ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands)Allowance for Loan and Lease LossesBalance at beginning of year
    
    $
    14,664
    
    
    $
    12,619
    
    
    $
    12,377
    
    
    $
    11,665
    
    
    $
    11,454Loans and leases charged-off:Commercial loans and leases
    
    
    (5,187
    )
    
    
    (1,186
    )
    
    
    (184
    )
    
    
    (472
    )
    
    
    (1,266
    )Residential mortgage loans
    
    
    (2,344
    )
    
    
    (1,235
    )
    
    
    (248
    )
    
    
    
    
    
    
    Consumer and other loans
    
    
    (658
    )
    
    
    (168
    )
    
    
    (96
    )
    
    
    (47
    )
    
    
    (8
    )Total loans and leases charged-off
    
    
    (8,189
    )
    
    
    (2,589
    )
    
    
    (528
    )
    
    
    (519
    )
    
    
    (1,274
    )Recoveries of loans and leases previously charged-off:Commercial loans and leases
    
    
    97
    
    
    
    79
    
    
    
    32
    
    
    
    19
    
    
    
    61Residential mortgage loans
    
    
    8
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    Consumer and other loans
    
    
    39
    
    
    
    31
    
    
    
    38
    
    
    
    10
    
    
    
    1Total recoveries of loans and leases
previously charged-off
    
    
    144
    
    
    
    114
    
    
    
    70
    
    
    
    29
    
    
    
    62Net charge-offs
    
    
    (8,045
    )
    
    
    (2,475
    )
    
    
    (458
    )
    
    
    (490
    )
    
    
    (1,212
    )Provision for loan and lease losses charged against income
    
    
    9,917
    
    
    
    4,520
    
    
    
    700
    
    
    
    1,202
    
    
    
    1,423Balance at end of year
    
    $
    16,536
    
    
    $
    14,664
    
    
    $
    12,619
    
    
    $
    12,377
    
    
    $
    11,665Net charge-offs to average loans and leases outstanding
    
    
    0.73
    %
    
    
    0.24
    %
    
    
    0.05
    %
    
    
    0.05
    %
    
    
    0.13
    %
 Investments
   45




---



##### Table of Contents



Amortized
    
    
    Unrealized
    
    
    FairCost (1)
    
    
    Gains
    
    
    Losses
    
    
    Value(In thousands)At December 31, 2009:GSE obligations
    
    $
    80,866
    
    
    $
    347
    
    
    $
    (287
    )
    
    $
    80,926Trust preferred collateralized debt
securities
    
    
    2,550
    
    
    
    
    
    
    
    (2,085
    )
    
    
    465Collateralized mortgage obligations
    
    
    45,641
    
    
    
    697
    
    
    
    (2,311
    )
    
    
    44,027GSE mortgage-backed securities
    
    
    251,051
    
    
    
    6,353
    
    
    
    (983
    )
    
    
    256,421Total
    
    $
    380,108
    
    
    $
    7,397
    
    
    $
    (5,666
    )
    
    $
    381,839At December 31, 2008:U.S. Treasury obligations
    
    $
    9,990
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    9,988GSE obligations
    
    
    47,131
    
    
    
    256
    
    
    
    
    
    
    
    47,387Corporate debt securities
    
    
    2,001
    
    
    
    
    
    
    
    (14
    )
    
    
    1,987Trust preferred collateralized debt
securities
    
    
    2,735
    
    
    
    
    
    
    
    (1,255
    )
    
    
    1,480Collateralized mortgage obligations
    
    
    62,909
    
    
    
    256
    
    
    
    (2,415
    )
    
    
    60,750GSE mortgage-backed securities
    
    
    201,001
    
    
    
    4,289
    
    
    
    (476
    )
    
    
    204,814Total
    
    $
    325,767
    
    
    $
    4,801
    
    
    $
    (4,162
    )
    
    $
    326,406At December 31, 2007:GSE obligations
    
    
    68,185
    
    
    
    90
    
    
    
    (100
    )
    
    
    68,175Corporate debt securities
    
    
    6,028
    
    
    
    2
    
    
    
    (174
    )
    
    
    5,856Trust preferred collateralized debt
securities
    
    
    2,980
    
    
    
    
    
    
    
    (25
    )
    
    
    2,955Collateralized mortgage obligations
    
    
    74,371
    
    
    
    193
    
    
    
    (769
    )
    
    
    73,795GSE mortgage-backed securities
    
    
    183,723
    
    
    
    1,169
    
    
    
    (492
    )
    
    
    184,400Total
    
    $
    335,287
    
    
    $
    1,454
    
    
    $
    (1,560
    )
    
    $
    335,181
 (1)
    
    Amortized cost is net of write-downs as a result of other-than-temporary impairment.  46




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##### Table of Contents



After one, but
    
    
    After five, butWithin one year
    
    
    within five years
    
    
    within ten years
    
    
    After ten yearsWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedFair
    
    
    average
    
    
    Fair
    
    
    average
    
    
    Fair
    
    
    average
    
    
    Fair
    
    
    averagevalue
    
    
    yield
    
    
    value
    
    
    yield
    
    
    value
    
    
    yield
    
    
    value
    
    
    yield(Dollars in thousands)At December 31, 2009:GSE obligations
    
    $
    
    
    
    
    0.00
    %
    
    $
    76,013
    
    
    
    2.74
    %
    
    $
    4,913
    
    
    
    3.20
    %
    
    $
    
    
    
    
    0.00
    %Trust preferred collateralized debt
securities
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    465
    
    
    
    4.00
    %Collateralized mortgage obligations
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    22,958
    
    
    
    4.55
    %
    
    
    21,070
    
    
    
    5.35
    %GSE mortgage-backed securities
    
    
    
    
    
    
    0.00
    %
    
    
    1,604
    
    
    
    4.75
    %
    
    
    24,624
    
    
    
    4.70
    %
    
    
    230,193
    
    
    
    4.51
    %Total
    
    $
    
    
    
    
    0.00
    %
    
    $
    77,617
    
    
    
    2.78
    %
    
    $
    52,495
    
    
    
    4.48
    %
    
    $
    251,728
    
    
    
    4.58
    %
    Note 2  Summary of Significant Accounting Policies
   47




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##### Table of Contents



Bank-Owned Life Insurance
  Deposits and Borrowings
    December 31,2009
    
    
    2008
    
    
    2007Percent
    
    
    Weighted
    
    
    
    
    
    
    Percent
    
    
    Weighted
    
    
    
    
    
    
    Percent
    
    
    Weightedof
    
    
    Average
    
    
    
    
    
    
    of
    
    
    Average
    
    
    
    
    
    
    of
    
    
    AverageAmount
    
    
    Total
    
    
    Rate
    
    
    Amount
    
    
    Total
    
    
    Rate
    
    
    Amount
    
    
    Total
    
    
    Rate(Dollars in thousands)NOW accounts
    
    $
    74,558
    
    
    
    6.8
    %
    
    
    0.09
    %
    
    $
    56,703
    
    
    
    5.5
    %
    
    
    0.10
    %
    
    $
    65,191
    
    
    
    6.4
    %
    
    
    0.60
    %Money market accounts
    
    
    65,076
    
    
    
    5.9
    %
    
    
    1.10
    %
    
    
    4,445
    
    
    
    0.4
    %
    
    
    0.39
    %
    
    
    6,054
    
    
    
    0.6
    %
    
    
    2.32
    %Savings accounts
    
    
    367,225
    
    
    
    33.4
    %
    
    
    0.64
    %
    
    
    381,106
    
    
    
    36.6
    %
    
    
    1.46
    %
    
    
    396,838
    
    
    
    39.1
    %
    
    
    3.01
    %Certificate of deposit accounts
    
    
    387,144
    
    
    
    35.3
    %
    
    
    1.80
    %
    
    
    423,443
    
    
    
    40.6
    %
    
    
    3.29
    %
    
    
    374,063
    
    
    
    36.9
    %
    
    
    4.46
    %Total interest
bearing deposits
    
    
    894,003
    
    
    
    81.4
    %
    
    
    1.13
    %
    
    
    865,697
    
    
    
    83.1
    %
    
    
    2.26
    %
    
    
    842,146
    
    
    
    83.0
    %
    
    
    3.46
    %Noninterest bearing accounts
    
    
    204,281
    
    
    
    18.6
    %
    
    
    0.00
    %
    
    
    176,495
    
    
    
    16.9
    %
    
    
    0.00
    %
    
    
    172,634
    
    
    
    17.0
    %
    
    
    0.00
    %Total deposits
    
    $
    1,098,284
    
    
    
    100.0
    %
    
    
    0.92
    %
    
    $
    1,042,192
    
    
    
    100.0
    %
    
    
    1.89
    %
    
    $
    1,014,780
    
    
    
    100.0
    %
    
    
    2.86
    %
   48




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##### Table of Contents



Subordinated Deferrable Interest Debentures
  Liquidity and Capital Resources
 Liquidity
     49




---



##### Table of Contents



Commitments and Contingent Liabilities
  Payments due or commitments expiring - by periodLess than
    
    
    One to
    
    
    Four to
    
    
    AfterTotal
    
    
    one year
    
    
    three years
    
    
    five years
    
    
    five years(In thousands)Contractual cash obligations:FHLB term borrowings
    
    $
    277,183
    
    
    $
    53,584
    
    
    $
    69,000
    
    
    $
    23,400
    
    
    $
    131,199Subordinated deferrable interest debentures
    
    
    13,403
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,403Lease obligations
    
    
    12,281
    
    
    
    1,432
    
    
    
    1,400
    
    
    
    1,412
    
    
    
    8,037Other:Treasury, tax and loan payments
    
    
    1,803
    
    
    
    1,803
    
    
    
    
    
    
    
    
    
    
    
    Retail repurchase agreements
    
    
    36,991
    
    
    
    36,991
    
    
    
    
    
    
    
    
    
    
    
    FHLB short-term borrowings
    
    
    1,377
    
    
    
    1,377
    
    
    
    
    
    
    
    
    
    
    
    Wholesale repurchase agreements
    
    
    20,000
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    
    
    
    
    Total contractual cash
obligations
    
    $
    363,038
    
    
    $
    105,187
    
    
    $
    80,400
    
    
    $
    24,812
    
    
    $
    152,639Other commitments:Commitments to originate or purchase loans
    
    $
    19,425
    
    
    $
    19,425
    
    
    $
    
    
    
    $
    
    
    
    $
    Unused lines of credit and other commitments
    
    
    200,274
    
    
    
    88,705
    
    
    
    35,294
    
    
    
    642
    
    
    
    75,633Letters of credit and standby letters of credit
    
    
    4,605
    
    
    
    3,481
    
    
    
    1,124
    
    
    
    
    
    
    
    Forward commitments to originate leases for sale
    
    
    458
    
    
    
    458
    
    
    
    
    
    
    
    
    
    
    
    Supplemental retirement benefits
    
    
    3,958
    
    
    
    
    
    
    
    
    
    
    
    382
    
    
    
    3,576Total other commitments
    
    $
    228,720
    
    
    $
    112,069
    
    
    $
    36,418
    
    
    $
    1,024
    
    
    $
    79,209
  Capital Resources
     50




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##### Table of Contents



Note 14  Company-Obligated Mandatorily Redeemable Capital Securities and Subordinated
Deferrable Interest Debentures
 Impact of Inflation and Changing Prices
  Recent Accounting Developments
 Note 2  Summary of Significant Accounting Policies
  51




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##### Table of Contents



ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
 Asset and Liability Management
    Estimated impact onnet interest incomeDollar
    
    
    Percentchange
    
    
    change(Dollars in thousands)Initial Twelve Month Period:Up 300 basis point shock
    
    $
    (2,632
    )
    
    
    -4.99
    %
   52




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##### Table of Contents



Within
    
    
    Over
    
    
    Over Six
    
    
    Over OneThree
    
    
    Three to
    
    
    to Twelve
    
    
    Year to
    
    
    OverMonths
    
    
    Six months
    
    
    months
    
    
    Five Years
    
    
    Five Years
    
    
    Total(Dollars in thousands)Interest-earning assets:Overnight investments
    
    $
    1,964
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,964Available for sale securities
    
    
    44,466
    
    
    
    45,234
    
    
    
    40,057
    
    
    
    154,454
    
    
    
    90,664
    
    
    
    374,875FHLB Stock
    
    
    16,274
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,274Commercial loans and leases
    
    
    204,809
    
    
    
    44,439
    
    
    
    87,326
    
    
    
    363,743
    
    
    
    19,036
    
    
    
    719,353Residential mortgage loans
    
    
    21,627
    
    
    
    22,147
    
    
    
    54,780
    
    
    
    53,748
    
    
    
    15,887
    
    
    
    168,189Consumer and other loans
    
    
    91,438
    
    
    
    7,098
    
    
    
    13,043
    
    
    
    63,057
    
    
    
    29,853
    
    
    
    204,489Total interest-earning assets
    
    
    380,578
    
    
    
    118,918
    
    
    
    195,206
    
    
    
    635,002
    
    
    
    155,440
    
    
    
    1,485,144Interest-bearing liabilities:NOW accounts
    
    
    6,213
    
    
    
    6,213
    
    
    
    12,426
    
    
    
    49,706
    
    
    
    
    
    
    
    74,558Money market accounts
    
    
    5,423
    
    
    
    5,423
    
    
    
    10,846
    
    
    
    43,384
    
    
    
    
    
    
    
    65,076Savings accounts
    
    
    30,701
    
    
    
    30,701
    
    
    
    61,401
    
    
    
    244,422
    
    
    
    
    
    
    
    367,225Certificate of deposit accounts
    
    
    180,259
    
    
    
    58,126
    
    
    
    67,843
    
    
    
    80,969
    
    
    
    20
    
    
    
    387,217Overnight & short-term borrowings
    
    
    40,171
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,171Wholesale repurchase agreements
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    20,000FHLB and other borrowings
    
    
    30,120
    
    
    
    23,666
    
    
    
    207
    
    
    
    94,240
    
    
    
    128,949
    
    
    
    277,182Subordinated deferrable interest debentures
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,403
    
    
    
    13,403Total interest-bearing
liabilities
    
    
    312,887
    
    
    
    124,129
    
    
    
    152,723
    
    
    
    522,721
    
    
    
    132,372
    
    
    
    1,244,832Net interest sensitivity gap
during the period
    
    $
    67,691
    
    
    $
    (5,211
    )
    
    $
    42,483
    
    
    $
    112,281
    
    
    $
    23,068
    
    
    $
    240,312Cumulative gap  December 31, 2009
    
    $
    67,691
    
    
    $
    62,480
    
    
    $
    104,963
    
    
    $
    217,244
    
    
    $
    240,312Cumulative gap  December 31, 2008
    
    $
    198,220
    
    
    $
    174,801
    
    
    $
    155,460
    
    
    $
    230,525
    
    
    $
    235,220Interest-sensitive assets as a percent of
Interest-sensitive liabilities (cumulative)
    
    
    121.63
    %
    
    
    114.30
    %
    
    
    117.80
    %
    
    
    119.53
    %
    
    
    119.30
    %Cumulative gap as a percent of total assets
    
    
    4.26
    %
    
    
    3.93
    %
    
    
    6.60
    %
    
    
    13.66
    %
    
    
    15.11
    %
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL  DISCLOSURE
   53




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##### Table of Contents



ITEM 9A. CONTROLS AND PROCEDURES
 (a) Evaluation of Disclosure Controls and Procedures.
   (b) Managements Annual Report on Internal Control over Financial Reporting.
  Attestation Report of the Independent Registered Public Accounting Firm.
 (c) Changes in Internal Control over Financial Reporting.
  
 ITEM 9B. OTHER INFORMATION
   54




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   Name
    
    Age
    
    PositionMerrill W. Sherman
    
    
    61
    
    
    President and Chief Executive OfficerLinda H. Simmons
    
    
    50
    
    
    Chief Financial Officer and TreasurerMark J. Meiklejohn
    
    
    46
    
    
    Vice PresidentRobert H. Wischnowsky
    
    
    53
    
    
    Vice PresidentDaniel W. West
    
    
    68
    
    
    President of Macrolease Corporation
 Merrill W. Sherman
 Linda H. Simmons.
 Mark J. Meiklejohn.
 Robert H. Wischnowsky.
 Daniel W. West.
 Code of Ethics and Governance Principles
 http://www.bankri.com SM
  55




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
   
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  Equity Compensation Plan Information
  Number of SecuritiesNumber of Securities to
    
    
    Weighted-Average
    
    
    Remaining Available forbe Issued Upon Exercise
    
    
    Exercise Price of
    
    
    Future Issuance Underof Outstanding Options,
    
    
    Outstanding Options,
    
    
    Equity CompensationPlan category
    
    Warrants and Rights
    
    
    Warrants and Rights
    
    
    PlansEquity Compensation
Plans Approved by
Security Holders
    
    
    274,746
    (1)
    
    
    $28.39
    
    
    
    118,085
    (2)Equity Compensation
Plans Not Approved
by Security Holders
    
    
    
    
    
    Not applicable
    
    
    
    Total
    
    
    274,746
    
    
    
    $28.39
    
    
    
    118,085
 (1)
    
    Includes 231,746 shares issuable upon exercise of outstanding awards granted under the
Bancorp Rhode Island, Inc. 2002 Equity Incentive Plan and predecessor plan (Amended and
Restated Bancorp Rhode Island, Inc. 1996 Incentive and Nonqualified Stock Option Plan) and
43,000 shares issuable upon exercise of outstanding awards granted under the Amended and
Restated Bancorp Rhode Island, Inc. Non-Employee Directors Stock Plan.(2)
    
    Includes 93,085 shares reserved for awards under the Bancorp Rhode Island, Inc. 2002
Equity Incentive Plan and predecessor plan and 25,000 shares reserved for awards under the
Amended and Restated Bancorp Rhode Island, Inc. Non-Employee Directors Stock Plan. Note 16 
Employee and Director Benefits
 
 ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
   56




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) (1) Financial Statements
  Managements
Report on Internal Control Over Financial Reporting
    
    
    F-1Report of Independent Registered Public Accounting Firm on the Effectiveness of Internal
Control Over Financial Reporting
    
    
    F-2Report
of Independent Registered Public Accounting Firm
    
    
    F-3Consolidated
Balance Sheets as of December 31, 2009 and 2008
    
    
    F-4Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007
    
    
    F-5Consolidated Statements of Changes in Shareholders Equity for the Years Ended
December 31, 2009, 2008 and 2007
    
    
    F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007
    
    
    F-7Notes
to Consolidated Financial Statements
    
    
    F-8
 (2) Financial Statement Schedules
  (3) Exhibits
 Exhibit No.
    
    Description3.1
    
    
    Articles of Incorporation of the Company, as amended (Incorporated by
reference from Exhibit 3.1 to the Companys Annual Report on Form 10-K for the year
ended December 31, 2008).3.2
    
    
    By-laws of the Company, as amended (Incorporated by reference from
Exhibit 3.2 to the Companys Annual Report on Form 10-K for the year ended December
31, 2007).10.1
    
    
    Amended and Restated Employment Agreement of Merrill W. Sherman dated
February 20, 2007 (Incorporated by reference from Exhibit 10.1 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2006).10.1(a)
    
    
    First Amendment to Amended and Restated Executive Employment Agreement of Merrill
W. Sherman dated as of March 6, 2008 (Incorporated by reference from Exhibit 10.1(a)
to the Companys Quarterly Report for the period ended March 31, 2008).10.1(b)
    
    
    Letter Agreement of Merrill W. Sherman dated December 15, 2008
related to CPP restrictions (Incorporated by reference from Exhibit 10.1(b) to the
Companys Annual Report on Form 10-K for the year ended December 31,
2008).
  57




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##### Table of Contents



Exhibit No.
    
    Description10.2
    
    
    Amended and Restated Employment Agreement of Linda H. Simmons dated
February 20, 2007 (Incorporated by reference from Exhibit 10.2 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2006).10.2(a)
    
    
    Letter Agreement of Linda H. Simmons dated December 15, 2008 related
to CPP restrictions (Incorporated by reference from Exhibit 10.2(a) to the Companys
Annual Report on Form 10-K for the year ended December 31, 2008).10.3
    
    
    Amended and Restated Employment Agreement of James V. DeRentis dated
February 20, 2007 (Incorporated by reference from Exhibit 10.3 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2006).10.3 (a)
    
    
    Letter Agreement of James V. DeRentis dated December 15, 2008 related
to CPP restrictions (Incorporated by reference from Exhibit 10.3(a) to the Companys
Annual Report on Form 10-K for the year ended December 31, 2008).10.4
    
    
    Amended and Restated 1996 Incentive and Nonqualified Stock Option Plan
(Incorporated by reference from Exhibit 10.5 to the Companys Annual Report on Form
10-K for the year ended December 31, 2000).10.5
    
    
    Amended and Restated Non-Employee Director Stock Plan (Incorporated by
reference from Exhibit to the Companys Quarterly Report on Form 10-Q for the period
ended September 30, 2000).10.5(a)
    
    
    Amendment to Amended and Restated Non-Employee Director Stock Plan (Incorporated
by reference from Exhibit 10.6(a) to the Companys Quarterly Report on Form 10-Q for
the period ended June 30, 2002).10.5(b)
    
    
    Second Amendment to Amended and Restated Non-Employee Director Stock Plan
(Incorporated by reference from Exhibit 10.6(b) to the Companys Quarterly Report on
Form 10-Q for the period ended June 30, 2006).10.5(c)
    
    
    Third Amendment to Amended and Restated Non-Employee Director Stock Plan
(Incorporated by reference from Exhibit 10.5(b) to the Companys Quarterly Report on
Form 10-Q for the period ended June 30, 2009).10.6
    
    
    Bank Rhode Island Amended and Restated Supplemental Executive Retirement
Plan (Incorporated by reference from Exhibit 10.6 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2008).10.6(a)
    
    
    Amendment No. 1 to Amended and Restated Supplemental Executive Retirement Plan
(Incorporated by reference from Exhibit 10.6(a) to the Companys Quarterly Report on
Form 10-Q for the period ended March 31, 2009).10.6(b)
    
    
    Amendment No. 2 to Amended and Restated Supplemental Executive Retirement Plan
(Incorporated by reference from Exhibit 10.6(b) the Companys Quarterly Report on
Form 10-Q for the period ended September 30, 2009).10.7
    
    
    Bank Rhode Island Nonqualified Deferred Compensation Plan, as amended by
Amendment No. 1 (Incorporated by reference from Exhibit 10.8 to the Companys
Registration Statement on Form S-4, SEC File No. 333-33182).10.7(a)
    
    
    Amendment No. 2 to Bank Rhode Island Nonqualified Deferred Compensation Plan
(Incorporated by reference from Exhibit 10.8(a) to the Companys Annual Report on
Form 10-K for the year ended December 31, 2002).10.7(b)
    
    
    Amendment No. 3 to Bank Rhode Island Nonqualified Deferred Compensation Plan
(Incorporated by reference from Exhibit 10.7(b) to the Companys Annual Report on
Form 10-K for the year ended December 31, 2007).10.7(c)
    
    
    Amendment No. 4 to Bank Rhode Island Nonqualified Deferred Compensation Plan
(Incorporated by reference from Exhibit 10.7(c) to the Companys Annual Report on
Form 10-K for the year ended December 31, 2007).10.7(d)
    
    
    Amendment No. 5 to Bank Rhode Island Nonqualified Deferred Compensation Plan
(Incorporated by reference from Exhibit 10.7(c) to the Companys Annual Report on
Form 10-K for the year ended December 31, 2002).
  58




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##### Table of Contents



Exhibit No.
    
    Description10.8(a)
    
    
    Executive Incentive Bonus Plan (Incorporated by reference from Exhibit 10 to the
Companys Current Report on Form 8-K dated February 9, 2005).10.8(b)
    
    
    Executive Incentive Compensation Plan (2008 and thereafter) (Incorporated by
reference from Exhibit 10 to the Companys Current Report on Form 8-K dated January
28, 2008).10.9
    
    
    Executive Employment Agreement of Mark J. Meiklejohn dated as of April
28, 2008 (Incorporated by reference from Exhibit 10.9 to the Companys Quarterly
Report on Form 10-Q for the period ended June 30, 2008).10.9(a)
    
    
    Letter Agreement of Mark J. Meiklejohn dated December 15, 2008
related to CPP restrictions (Incorporated by reference from Exhibit 10.9(a) to the
Companys Annual Report on Form 10-K for the year ended December 31,
2008).10.10
    
    
    Executive Annual Incentive Plan (Incorporated by reference from Exhibit
99.1 to the Companys Current Report on Form 8-K dated February 22,
2010).10.11
    
    
    Form of Bank Rhode Island Split Dollar Agreement (Incorporated by
reference from Exhibit 10.12 to the Companys Quarterly Report on Form 10-Q for the
period ended March 31, 2002).10.12
    
    
    2002 Equity Incentive Plan (Incorporated by reference to Appendix B to
the Companys Definitive Proxy Statement on Schedule 14A filed on April 15,
2005).10.13
    
    
    Executive Employment Agreement of Robert H. Wischnowsky dated as of
December 1, 2008 (Incorporated by reference from Exhibit 10.13 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2008).10.13(a)
    
    
    Letter Agreement of Robert H. Wischnowsky dated December 15, 2008
related to CPP restrictions (Incorporated by reference from Exhibit 10.13(a) to the
Companys Annual Report on Form 10-K for the year ended December 31,
2008).11
    
    
    Computation of Earnings per Share.(1)12.1
    
    
    Computation of Ratios of Earnings to Fixed Charges for periods ended
December 31, 2009, 2008, 2007, 2006 and 2005.12.2
    
    
    Computation of Ratios of Earnings to Fixed Charges and Preferred Stock
Dividends for periods ended December 31, 2009, 2008, 2007, 2006 and 2005.21
    
    
    List of Subsidiaries (as of December 31, 2009).23
    
    
    Consent of KPMG LLP, as independent registered public accountants for the
Company.31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes  Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes  Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes  Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes  Oxley Act of 2002.
 
 (1)
    
    The calculation of earnings per share is set forth as Note 20  Earnings per Share
to the Companys audited consolidated financial statements.
    
    Management contract or compensatory plan or arrangement.  59




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
   BANCORP RHODE ISLAND, INC.Date:  March 16, 2010
    By:
    /s/ Merrill W. ShermanMerrill W. ShermanPresident and Chief Executive Officer    /s/ Merrill W. Sherman

Merrill W. Sherman,
President, Chief Executive Officer
and Director (Principal Executive Officer)
Date: March 16, 2010/s/ Anthony F. Andrade

Anthony F. Andrade, Director
Date: March 16, 2010/s/ John R. Berger

John R. Berger, Director
Date: March 16, 2010/s/ Richard L. Bready

Richard L. Bready, Director
Date: March 16, 2010/s/ Malcolm G. Chace

Malcolm G. Chace, Director and
Chairman of the Board
Date: March 16, 2010
 /s/ Linda H. Simmons

Linda H. Simmons,
Chief Financial Officer and
Treasurer (Principal Financial Officer)
Date: March 16, 2010/s/ Ernest J. Chornyei, Jr.

Ernest J. Chornyei, Jr., Director
Date: March 16, 2010/s/ Meredith A. Curren

Meredith A. Curren, Director
Date: March 16, 2010/s/ Mark R. Feinstein

Mark R. Feinstein, Director
Date: March 16, 2010/s/ Edward J. Mack

Edward J. Mack, Director
Date: March 16, 2010/s/ Michael E. McMahon

Michael E. McMahon, Director
Date: March 16, 2010
 /s/ Tiffany R. Sy

Tiffany R. Sy,
Controller (Principal Accounting Officer)
Date: March 16, 2010/s/ Bogdan Nowak

Bogdan Nowak, Director
Date: March 16, 2010/s/ Cheryl W. Snead

Cheryl W. Snead, Director
Date: March 16, 2010/s/ Pablo Rodriguez

Pablo Rodriguez, Director
Date: March 16, 2010/s/ John A. Yena

John A. Yena, Director
Date: March 16, 2010
    60




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Managements Report on Internal Control
Over Financial Reporting
     /s/ Merrill W. Sherman

President and Chief Executive Officer
    
    /s/ Linda H. Simmons

Chief Financial Officer and Treasurer
  F-1




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Report of Independent Registered Public Accounting Firm
 
       
   F-2




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Report of Independent Registered Public Accounting Firm
 
     Internal Control  Integrated Framework
 
   F-3




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##### Table of Contents



BANCORP
RHODE ISLAND, INC.
 
 Consolidated Balance Sheets
 December 31,2009
    
    
    2008(In thousands)AssetsAssets:Cash and due from banks
    
    $
    18,866
    
    
    $
    54,344Overnight investments
    
    
    1,964
    
    
    
    1,113Total cash and cash equivalents
    
    
    20,830
    
    
    
    55,457Available for sale securities (amortized cost of $380,108 and $325,767,
respectively)
    
    
    381,839
    
    
    
    326,406Stock in the Federal Home Loan Bank of Boston
    
    
    16,274
    
    
    
    15,671Loans and leases receivable:Commercial loans and leases
    
    
    732,397
    
    
    
    658,422Residential mortgage loans
    
    
    173,294
    
    
    
    212,665Consumer and other loans
    
    
    206,156
    
    
    
    206,655Total loans and leases receivable
    
    
    1,111,847
    
    
    
    1,077,742Allowance for loan and lease losses
    
    
    (16,536
    )
    
    
    (14,664
    )Net loans and leases receivable
    
    
    1,095,311
    
    
    
    1,063,078Premises and equipment, net
    
    
    12,378
    
    
    
    12,641Goodwill, net
    
    
    12,239
    
    
    
    12,019Accrued interest receivable
    
    
    4,964
    
    
    
    5,240Investment in bank-owned life insurance
    
    
    30,010
    
    
    
    28,765Prepaid expenses and other assets
    
    
    16,101
    
    
    
    8,901Total assets
    
    $
    1,589,946
    
    
    $
    1,528,178Liabilities and Shareholders EquityLiabilities:Deposits:Demand deposit accounts
    
    $
    204,281
    
    
    $
    176,495NOW accounts
    
    
    74,558
    
    
    
    56,703Money market accounts
    
    
    65,076
    
    
    
    4,445Savings accounts
    
    
    367,225
    
    
    
    381,106Certificate of deposit accounts
    
    
    387,144
    
    
    
    423,443Total deposits
    
    
    1,098,284
    
    
    
    1,042,192Overnight and short-term borrowings
    
    
    40,171
    
    
    
    57,676Wholesale repurchase agreements
    
    
    20,000
    
    
    
    10,000Federal Home Loan Bank of Boston borrowings
    
    
    277,183
    
    
    
    238,936Subordinated deferrable interest debentures
    
    
    13,403
    
    
    
    13,403Other liabilities
    
    
    20,244
    
    
    
    16,881Total liabilities
    
    
    1,469,285
    
    
    
    1,379,088Shareholders equity:Preferred stock, par value $0.01, authorized 1,000,000 shares, liquidation
preference per share $1,000:Issued and outstanding: Issued (0 and 30,000 shares, respectively)
    
    
    
    
    
    
    28,595Common stock, par value $0.01 per share, authorized 11,000,000
shares: Issued: (4,969,444 and 4,926,920 shares, respectively)
    
    
    50
    
    
    
    49Additional paid-in capital
    
    
    72,783
    
    
    
    73,323Treasury stock, at cost (364,750 and 352,250 shares respectively)
    
    
    (12,309
    )
    
    
    (12,055
    )Retained earnings
    
    
    59,012
    
    
    
    58,763Accumulated other comprehensive income, net
    
    
    1,125
    
    
    
    415Total shareholders equity
    
    
    120,661
    
    
    
    149,090Total liabilities and shareholders equity
    
    $
    1,589,946
    
    
    $
    1,528,178
   F-4




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Consolidated Statements of Operations
 Year Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands, except per share data)Interest and dividend income:Loans and leases
    
    $
    59,753
    
    
    $
    63,002
    
    
    $
    67,038Mortgage-backed securities
    
    
    13,357
    
    
    
    13,655
    
    
    
    11,166Investment securities
    
    
    2,157
    
    
    
    2,767
    
    
    
    5,707Overnight investments
    
    
    10
    
    
    
    264
    
    
    
    1,103Federal Home Loan Bank of Boston stock dividends
    
    
    
    
    
    
    610
    
    
    
    1,056Total interest and dividend income
    
    
    75,277
    
    
    
    80,298
    
    
    
    86,070Interest expense:Deposits
    
    
    14,868
    
    
    
    21,579
    
    
    
    29,230Overnight and short-term borrowings
    
    
    86
    
    
    
    902
    
    
    
    2,717Wholesale repurchase agreements
    
    
    551
    
    
    
    540
    
    
    
    602Federal Home Loan Bank of Boston borrowings
    
    
    10,720
    
    
    
    10,960
    
    
    
    10,768Subordinated deferrable interest debentures
    
    
    730
    
    
    
    949
    
    
    
    1,509Total interest expense
    
    
    26,955
    
    
    
    34,930
    
    
    
    44,826Net interest income
    
    
    48,322
    
    
    
    45,368
    
    
    
    41,244Provision for loan and lease losses
    
    
    9,917
    
    
    
    4,520
    
    
    
    700Net interest income after provision
for loan and lease losses
    
    
    38,405
    
    
    
    40,848
    
    
    
    40,544Noninterest income:Total other-than-temporary impairment losses on
available for sale securities
    
    
    (2,469
    )
    
    
    (219
    )
    
    
    Non-credit component of other-than-temporary
losses recognized in other comprehensive income
    
    
    2,085
    
    
    
    
    
    
    
    Credit component of other-than-temporary impairment
losses on available for sale securities
    
    
    (384
    )
    
    
    (219
    )
    
    
    Service charges on deposit accounts
    
    
    5,377
    
    
    
    5,711
    
    
    
    5,578Income from bank-owned life insurance
    
    
    1,245
    
    
    
    1,080
    
    
    
    1,038Loan related fees
    
    
    869
    
    
    
    803
    
    
    
    649Commissions on nondeposit investment products
    
    
    776
    
    
    
    745
    
    
    
    575Net gains on lease sales and commissions on
loans originated for others
    
    
    408
    
    
    
    454
    
    
    
    1,216Net gain on sale of available for sale securities
    
    
    61
    
    
    
    725
    
    
    
    254Other income
    
    
    813
    
    
    
    1,310
    
    
    
    1,475Total noninterest income
    
    
    9,165
    
    
    
    10,609
    
    
    
    10,785Noninterest expense:Salaries and employee benefits
    
    
    20,573
    
    
    
    20,091
    
    
    
    20,859Occupancy
    
    
    3,552
    
    
    
    3,530
    
    
    
    3,527Data processing
    
    
    2,640
    
    
    
    2,816
    
    
    
    2,850Professional services
    
    
    2,612
    
    
    
    2,968
    
    
    
    2,212FDIC insurance
    
    
    2,527
    
    
    
    694
    
    
    
    119Marketing
    
    
    1,318
    
    
    
    1,607
    
    
    
    1,562Equipment
    
    
    1,001
    
    
    
    1,048
    
    
    
    1,345Loan workout and other real estate owned
    
    
    688
    
    
    
    543
    
    
    
    190Loan servicing
    
    
    665
    
    
    
    643
    
    
    
    767Other expenses
    
    
    3,953
    
    
    
    3,946
    
    
    
    4,594Total noninterest expense
    
    
    39,529
    
    
    
    37,886
    
    
    
    38,025Income before income taxes
    
    
    8,041
    
    
    
    13,571
    
    
    
    13,304Income tax expense
    
    
    2,502
    
    
    
    4,427
    
    
    
    4,259Net income
    
    
    5,539
    
    
    
    9,144
    
    
    
    9,045Preferred stock dividends
    
    
    (892
    )
    
    
    (50
    )
    
    
    Accretion of preferred shares discount
    
    
    (1,405
    )
    
    
    (8
    )
    
    
    Net income applicable to common shares
    
    $
    3,242
    
    
    $
    9,086
    
    
    $
    9,045Weighted average shares outstanding  basic
    
    
    4,604,308
    
    
    
    4,561,396
    
    
    
    4,793,055Weighted average shares outstanding  diluted
    
    
    4,626,434
    
    
    
    4,631,208
    
    
    
    4,918,763Per share data:Basic earnings per common share
    
    $
    0.71
    
    
    $
    1.99
    
    
    $
    1.89Diluted earnings per common share
    
    $
    0.70
    
    
    $
    1.96
    
    
    $
    1.84Cash dividends declared per common share
    
    $
    0.68
    
    
    $
    0.66
    
    
    $
    0.62
   F-5




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Consolidated Statements of Changes in Shareholders Equity
 For Years Ended December 31, 2009, 2008 and 2007
 AccumulatedOtherAdditional
    
    
    
    
    
    
    Retained
    
    
    ComprehensivePreferred
    
    
    Common
    
    
    Paid-in
    
    
    Treasury
    
    
    Earnings,
    
    
    Income/Stock
    
    
    Stock
    
    
    Capital
    
    
    Stock
    
    
    as Adjusted
    
    
    (Loss)
    
    
    Total(in thousands, except per share data)Balance at December 31, 2006
    
    $
    
    
    
    $
    48
    
    
    $
    67,960
    
    
    $
    
    
    
    $
    46,576
    
    
    $
    (3,014
    )
    
    $
    111,570Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,045
    
    
    
    
    
    
    
    9,045Other comprehensive income:Unrealized holding gains on
securities available for sale,
net of taxes of $(1,586)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,945
    
    
    
    2,945Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,990Exercise of stock options
    
    
    
    
    
    
    1
    
    
    
    1,366
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,367Treasury stock acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,189
    )
    
    
    
    
    
    
    
    
    
    
    (10,189
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    299
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    299Tax benefit from exercise of
stock options
    
    
    
    
    
    
    
    
    
    
    498
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    498Dividends on common stock
($0.62 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,942
    )
    
    
    
    
    
    
    (2,942
    )Balance at December 31, 2007
    
    
    
    
    
    
    49
    
    
    
    70,123
    
    
    
    (10,189
    )
    
    
    52,679
    
    
    
    (69
    )
    
    
    112,593Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,144
    
    
    
    
    
    
    
    9,144Other comprehensive income:Unrealized holding gains on
securities available for sale,
net of taxes of $(438)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    813
    
    
    
    813Reclassification adjustment,
net of taxes of $177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (329
    )
    
    
    (329
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,628Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    562
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    562Macrolease acquisition
    
    
    
    
    
    
    
    
    
    
    656
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    656Treasury stock acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,866
    )
    
    
    
    
    
    
    
    
    
    
    (1,866
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    380
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    380Tax benefit from exercise of
stock options
    
    
    
    
    
    
    
    
    
    
    189
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    189Issuance of preferred stock
    
    
    28,587
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,587Accretion of preferred stock discount
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    1,413
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,413Dividends on preferred stock
($1.67 per preferred share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50
    )
    
    
    
    
    
    
    (50
    )Dividends on common stock
($0.66 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,002
    )
    
    
    
    
    
    
    (3,002
    )Balance at December 31, 2008
    
    
    28,595
    
    
    
    49
    
    
    
    73,323
    
    
    
    (12,055
    )
    
    
    58,763
    
    
    
    415
    
    
    
    149,090Cumulative effect of a change in
accounting principle, net of taxes of ($77)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137
    
    
    
    (137
    )
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,539
    
    
    
    .
    
    
    
    5,539Other comprehensive income, net of tax:Unrealized holding gains on
securities available for sale,
net of taxes of ($1,207)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,242
    
    
    
    2,242Reclassification adjustment for net gains
included in net income, net
of taxes of $21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40
    )
    
    
    (40
    )Non-credit portion OTTI, net of taxes of $730
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,355
    )
    
    
    (1,355
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,386Exercise of stock options
    
    
    
    
    
    
    1
    
    
    
    514
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    515Macrolease acquisition
    
    
    
    
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78Repurchase of warrant
    
    
    
    
    
    
    
    
    
    
    (1,400
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,400
    )Redemption of preferred stock
    
    
    (30,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,000
    )Treasury stock acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (254
    )
    
    
    
    
    
    
    
    
    
    
    (254
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    180
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180Tax benefit from stock option exercises
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88Preferred stock discount accretion
    
    
    123
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (123
    )
    
    
    
    
    
    
    Prepayment charge on preferred stock
discount
    
    
    1,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,282
    )
    
    
    
    
    
    
    Dividends on preferred stock
($29.73 per preferred share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (892
    )
    
    
    
    
    
    
    (892
    )Dividends on common stock
($0.68 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,130
    )
    
    
    
    
    
    
    (3,130
    )Balance at December 31, 2009
    
    $
    
    
    
    $
    50
    
    
    $
    72,783
    
    
    $
    (12,309
    )
    
    $
    59,012
    
    
    $
    1,125
    
    
    $
    120,661
   F-6




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Consolidated Statements of Cash Flows
 Year Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands)Cash flows from operating activities:Net income
    
    $
    5,539
    
    
    $
    9,144
    
    
    $
    9,045Adjustment to reconcile net income to net cash
provided by operating activities:Depreciation, amortization and accretion, net
    
    
    (6,201
    )
    
    
    (3,252
    )
    
    
    (1,295
    )Provision for loan and lease losses
    
    
    9,917
    
    
    
    4,520
    
    
    
    700Income from bank-owned life insurance
    
    
    (1,245
    )
    
    
    (1,080
    )
    
    
    (1,038
    )Net gains on lease sales
    
    
    (326
    )
    
    
    (354
    )
    
    
    (1,024
    )Net gain on sale of available for sale securities
    
    
    (61
    )
    
    
    (725
    )
    
    
    (254
    )Credit component of other-than-temporary impairment
losses on available for sale securities
    
    
    384
    
    
    
    219
    
    
    
    Net loss on sale of premises and equipment
    
    
    
    
    
    
    3
    
    
    
    50Gain on sale of other real estate owned
    
    
    (76
    )
    
    
    (64
    )
    
    
    Proceeds from sales of leases
    
    
    1,476
    
    
    
    11,557
    
    
    
    22,829Leases originated for sale
    
    
    (1,287
    )
    
    
    (9,250
    )
    
    
    (25,071
    )Share-based compensation expense
    
    
    180
    
    
    
    380
    
    
    
    299Decrease in accrued interest receivable
    
    
    276
    
    
    
    1,317
    
    
    
    198(Increase) decrease in prepaid expenses and other assets
    
    
    (6,818
    )
    
    
    (2,139
    )
    
    
    1,505Increase in other liabilities
    
    
    3,221
    
    
    
    43
    
    
    
    3,576Net cash provided by operating activities
    
    
    4,979
    
    
    
    10,319
    
    
    
    9,520Cash flows from investing activities:Available for sale securities:Purchases
    
    
    (221,868
    )
    
    
    (145,205
    )
    
    
    (96,776
    )Maturities and principal repayments
    
    
    165,408
    
    
    
    124,707
    
    
    
    109,861Proceeds from sales
    
    
    1,880
    
    
    
    30,543
    
    
    
    254Proceeds from sale of leases
    
    
    10,428
    
    
    
    
    
    
    
    Net increase in loans and leases
    
    
    (46,747
    )
    
    
    (40,140
    )
    
    
    (28,196
    )Purchase of Federal Home Loan Bank of Boston stock
    
    
    (603
    )
    
    
    
    
    
    
    859Capital expenditures for premises and equipment
    
    
    (1,186
    )
    
    
    (575
    )
    
    
    (2,011
    )Proceeds from disposition of other real estate owned
    
    
    1,321
    
    
    
    189
    
    
    
    590Purchase of bank-owned life insurance
    
    
    
    
    
    
    (3,500
    )
    
    
    Net cash used in investing activities
    
    
    (91,367
    )
    
    
    (33,981
    )
    
    
    (15,419
    )Cash flows from financing activities:Net increase (decrease) in deposits
    
    
    56,092
    
    
    
    27,412
    
    
    
    (1,643
    )Net (decrease) increase in overnight and short-term borrowings
    
    
    (8,882
    )
    
    
    (9,119
    )
    
    
    10,454Proceeds from long-term borrowings
    
    
    113,465
    
    
    
    69,293
    
    
    
    100,710Repayment of long-term borrowings
    
    
    (73,841
    )
    
    
    (71,862
    )
    
    
    (116,558
    )Proceeds from issuance of preferred stock and warrants
    
    
    
    
    
    
    30,000
    
    
    
    Redemption of preferred stock
    
    
    (30,000
    )
    
    
    
    
    
    
    Repurchase of warrant
    
    
    (1,400
    )
    
    
    
    
    
    
    Proceeds from issuance of common stock
    
    
    515
    
    
    
    562
    
    
    
    1,367Tax benefit from exercise of stock options
    
    
    88
    
    
    
    189
    
    
    
    498Purchases of treasury stock
    
    
    (254
    )
    
    
    (1,866
    )
    
    
    (10,189
    )Dividends on preferred stock
    
    
    (892
    )
    
    
    (50
    )
    
    
    Dividends on common stock
    
    
    (3,130
    )
    
    
    (3,002
    )
    
    
    (2,942
    )Net cash provided by (used in) financing
activities
    
    
    51,761
    
    
    
    41,557
    
    
    
    (18,303
    )Net (decrease) increase in cash and cash equivalents
    
    
    (34,627
    )
    
    
    17,895
    
    
    
    (24,202
    )Cash and cash equivalents at beginning of year
    
    
    55,457
    
    
    
    37,562
    
    
    
    61,764Cash and cash equivalents at end of year
    
    $
    20,830
    
    
    $
    55,457
    
    
    $
    37,562
   F-7




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 
 Notes to Consolidated Financial Statements
 (1) Organization
  http://www.bankri.com
 (2) Summary of Significant Accounting Policies
 Basis of Presentation 
 Use of Estimates 
 Principles of Consolidation 
 Cash and Cash Equivalents 
 Securities 
   F-8




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
   Loans and Leases Receivable
      Allowance for Loan and Lease Losses
  F-9




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
    Other Real Estate Owned 
  Premises and Equipment 
 Impairment of Long-Lived Assets except Goodwill 
 Goodwill
  F-10




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
 Bank-Owned Life Insurance 
 Securities Sold Under Agreements to Repurchase 
 Employee Benefits
 Share-Based Compensation Note 16  Employee and Director Benefits
 Income Taxes 
  Revenue Recognition 
 Comprehensive Income 
 Earnings Per Share 
  F-11




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
 Segment Reporting
 Guarantees
  Interest Rate Swaps  Note 9  Derivatives
 Reclassifications 
 Recently Adopted Accounting Pronouncements The FASB
Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting
Principles  a replacement of FASB Statement No. 162 .
  F-12




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
 Business Combinations (Revised 2007) . Business Combinations, Accounting for Costs Associated with Exit or Disposal Activities, Accounting for Contingencies
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging Activities, Note 9  Derivatives.
 Determining Whether
Instruments Granted In Share-Based Payment Transactions Are Participating Securities Note 21  Earnings per Share
 Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies
 Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly Note 19  Fair Value Measurements.
  F-13




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
 Recognition and Presentation
of Other-Than-Temporary Impairments Note 6  Available for sale Securities
 Recently Issued Accounting Pronouncements Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
 Amendments to FASB Interpretation No. 46(R)
 Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Instruments
 (3) Correction of an Immaterial Error
   F-14




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
 (4) Business Combinations
   (5) Restrictions on Cash and Due from Banks
  (6) Available for sale Securities
   Amortized
    
    
    Unrealized
    
    
    FairCost(1)
    
    
    Gains
    
    
    Losses
    
    
    Value(In thousands)At December 31, 2009:GSE obligations
    
    $
    80,866
    
    
    $
    347
    
    
    $
    (287
    )
    
    $
    80,926Trust preferred collateralized debt obligations
    
    
    2,550
    
    
    
    
    
    
    
    (2,085
    )
    
    
    465Collateralized mortgage obligations
    
    
    45,641
    
    
    
    697
    
    
    
    (2,311
    )
    
    
    44,027GSE mortgage-backed securities
    
    
    251,051
    
    
    
    6,353
    
    
    
    (983
    )
    
    
    256,421Total
    
    $
    380,108
    
    
    $
    7,397
    
    
    $
    (5,666
    )
    
    $
    381,839At December 31, 2008:U.S. Treasury obligations
    
    $
    9,990
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    9,988GSE obligations
    
    
    47,131
    
    
    
    256
    
    
    
    
    
    
    
    47,387Corporate debt securities
    
    
    2,001
    
    
    
    
    
    
    
    (14
    )
    
    
    1,987Trust preferred collateralized debt obligations
    
    
    2,735
    
    
    
    
    
    
    
    (1,255
    )
    
    
    1,480Collateralized mortgage obligations
    
    
    62,909
    
    
    
    256
    
    
    
    (2,415
    )
    
    
    60,750GSE mortgage-backed securities
    
    
    201,001
    
    
    
    4,289
    
    
    
    (476
    )
    
    
    204,814Total
    
    $
    325,767
    
    
    $
    4,801
    
    
    $
    (4,162
    )
    
    $
    326,406
 (1)
    
    Amortized cost is net of other-than-temporary impairment write-downs.  F-15




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
  Less than One Year
    
    
    One Year or Longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(In thousands)At December 31, 2009:GSE obligations
    
    $
    37,081
    
    
    $
    (287
    )
    
    $
    
    
    
    $
    
    
    
    $
    37,081
    
    
    $
    (287
    )Trust preferred collateralized debt
obligations
    
    
    
    
    
    
    
    
    
    
    465
    
    
    
    (2,085
    )
    
    
    465
    
    
    
    (2,085
    )Collateralized mortgage obligations
    
    
    5,520
    
    
    
    (182
    )
    
    
    12,088
    
    
    
    (2,129
    )
    
    
    17,608
    
    
    
    (2,311
    )GSE mortgage-backed securities
    
    
    69,310
    
    
    
    (982
    )
    
    
    140
    
    
    
    (1
    )
    
    
    69,450
    
    
    
    (983
    )Total
    
    $
    111,911
    
    
    $
    (1,451
    )
    
    $
    12,693
    
    
    $
    (4,215
    )
    
    $
    124,604
    
    
    $
    (5,666
    )At December 31, 2008:U.S. Treasury obligations
    
    $
    9,988
    
    
    $
    (2
    )
    
    $
    
    
    
    $
    
    
    
    $
    9,988
    
    
    $
    (2
    )Corporate debt securities
    
    
    1,987
    
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    1,987
    
    
    
    (14
    )Trust preferred collateralized debt
obligations
    
    
    
    
    
    
    
    
    
    
    1,480
    
    
    
    (1,255
    )
    
    
    1,480
    
    
    
    (1,255
    )Collateralized mortgage obligations
    
    
    30,771
    
    
    
    (1,385
    )
    
    
    10,343
    
    
    
    (1,030
    )
    
    
    41,114
    
    
    
    (2,415
    )GSE mortgage-backed securities
    
    
    33,016
    
    
    
    (350
    )
    
    
    2,662
    
    
    
    (126
    )
    
    
    35,678
    
    
    
    (476
    )Total
    
    $
    75,762
    
    
    $
    (1,751
    )
    
    $
    14,485
    
    
    $
    (2,411
    )
    
    $
    90,247
    
    
    $
    (4,162
    )
       F-16




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
     Credit Component of Other-Than-Temporary Impairment Losses For Whicha Portion Was Recognized in OtherComprehensive Income(In thousands)
    
    2009
    
    
    2008Balance, January 1
    
    $
    
    
    
    $
    Credit losses for which an other-than-temporary impairment was not previously recognized
    
    
    (384
    )
    
    
    Balance, December 31
    
    $
    (384
    )
    
    $
    
   F-17




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
  After One, But
    
    
    After Five, ButWithin One Year
    
    
    Within Five Years
    
    
    Within Ten Years
    
    
    After Ten YearsFair
    
    
    
    
    
    
    
    
    
    
    Fair
    
    
    
    
    
    
    
    
    
    
    Fair
    
    
    
    
    
    
    
    
    
    
    FairCost(1)
    
    
    Value
    
    
    Yield(2)
    
    
    Cost(1)
    
    
    Value
    
    
    Yield(2)
    
    
    Cost(1)
    
    
    Value
    
    
    Yield(2)
    
    
    Cost(1)
    
    
    Value
    
    
    Yield(2)(Dollars in thousands)At December 31, 2009:GSE obligations
    
    $
    
    
    
    $
    
    
    
    
    0.00
    %
    
    $
    75,866
    
    
    $
    76,013
    
    
    
    2.74
    %
    
    $
    5,000
    
    
    $
    4,913
    
    
    
    3.20
    %
    
    $
    
    
    
    $
    
    
    
    
    0.00
    %Trust preferred securities
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    2,550
    
    
    
    465
    
    
    
    3.63
    %Collateralized mortage
obligations
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    23,156
    
    
    
    22,957
    
    
    
    4.55
    %
    
    
    22,485
    
    
    
    21,070
    
    
    
    5.35
    %GSE mortgage-backed
securities
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    1,548
    
    
    
    1,604
    
    
    
    4.75
    %
    
    
    23,589
    
    
    
    24,624
    
    
    
    4.70
    %
    
    
    225,914
    
    
    
    230,193
    
    
    
    4.51
    %Total
    
    $
    
    
    
    $
    
    
    
    
    0.00
    %
    
    $
    77,414
    
    
    $
    77,617
    
    
    
    2.78
    %
    
    $
    51,745
    
    
    $
    52,494
    
    
    
    4.48
    %
    
    $
    250,949
    
    
    $
    251,728
    
    
    
    4.58
    %At December 31, 2008:U.S. Treasury obligations
    
    $
    9,990
    
    
    $
    9,988
    
    
    
    0.20
    %
    
    $
    
    
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    $
    
    
    
    
    0.00
    %GSE obligations
    
    
    5,000
    
    
    
    5,013
    
    
    
    4.11
    %
    
    
    42,131
    
    
    
    42,374
    
    
    
    4.03
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %Corporate debt securities
    
    
    2,001
    
    
    
    1,987
    
    
    
    4.87
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %Trust preferred securities
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    2,735
    
    
    
    1,480
    
    
    
    5.41
    %Collateralized mortage
obligations
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    20,867
    
    
    
    20,408
    
    
    
    4.43
    %
    
    
    42,042
    
    
    
    40,343
    
    
    
    5.23
    %GSE mortgage-backed
securities
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    25,764
    
    
    
    26,604
    
    
    
    4.83
    %
    
    
    175,237
    
    
    
    178,209
    
    
    
    5.03
    %Total
    
    $
    16,991
    
    
    $
    16,988
    
    
    
    1.90
    %
    
    $
    42,131
    
    
    $
    42,374
    
    
    
    4.03
    %
    
    $
    46,631
    
    
    $
    47,012
    
    
    
    4.65
    %
    
    $
    220,014
    
    
    $
    220,032
    
    
    
    5.07
    %
 (1)
    
    Represents amortized cost of the available for sale securities.(2)
    
    Represents weighted average yield of the available for sale securities.   Year Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands)Amortized cost of available for sale
securities sold
    
    $
    1,819
    
    
    $
    29,818
    
    
    $
    Gains (losses) realized on sales of
available for sale securities
    
    
    61
    
    
    
    725
    
    
    
    254Net proceeds from sales of
available for sale
securities
    
    $
    1,880
    
    
    $
    30,543
    
    
    $
    254
  F-18




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
 (7) Loans and Leases Receivable
  December 31,2009
    
    
    2008(In thousands)Commercial loans and leases:Commercial real estate  owner occupied
    
    $
    167,853
    
    
    $
    175,472Commercial and industrial
    
    
    178,808
    
    
    
    164,569Commercial real estate  nonowner occupied
    
    
    170,148
    
    
    
    133,782Small business
    
    
    56,148
    
    
    
    50,464Multi-family
    
    
    66,350
    
    
    
    53,159Construction
    
    
    23,405
    
    
    
    22,300Leases and other (1)
    
    
    75,057
    
    
    
    63,799Subtotal
    
    
    737,769
    
    
    
    663,545Unearned lease income
    
    
    (7,693
    )
    
    
    (6,980
    )Net deferred loan origination costs
    
    
    2,321
    
    
    
    1,857Total commercial loans and leases
    
    
    732,397
    
    
    
    658,422Residential mortgage loans:One- to four-family adjustable rate
    
    
    115,855
    
    
    
    126,689One- to four-family fixed rate
    
    
    56,724
    
    
    
    85,057Subtotal
    
    
    172,579
    
    
    
    211,746Premium on loans acquired
    
    
    738
    
    
    
    953Net deferred loan origination fees
    
    
    (23
    )
    
    
    (34
    )Total residential mortgage loans
    
    
    173,294
    
    
    
    212,665Consumer and other loans:Home equity  term loans
    
    
    119,909
    
    
    
    127,142Home equity  lines of credit
    
    
    83,771
    
    
    
    76,038Unsecured and other
    
    
    1,410
    
    
    
    2,216Subtotal
    
    
    205,090
    
    
    
    205,396Net deferred loan origination costs
    
    
    1,066
    
    
    
    1,259Total consumer and other loans
    
    
    206,156
    
    
    
    206,655Total loans and leases receivable
    
    $
    1,111,847
    
    
    $
    1,077,742
 (1)
    
    Included within commercial loans and leases were $156,000 of leases held for sale at
December 31, 2008. There were no leases held for sale at December 31, 2009.     F-19




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
    Year Ended December 31,2009
    
    
    2008(In thousands)Impaired loans and leases requiring a specific reserve
    
    $
    9,993
    
    
    $
    2,926Impaired loans and leases not requiring a specific reserve
    
    
    2,403
    
    
    
    7,379Total impaired loans and leases
    
    $
    12,396
    
    
    $
    10,305
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands)Income in accordance with original terms
    
    $
    1,287
    
    
    $
    1,073
    
    
    $
    348Income recognized
    
    
    (385
    )
    
    
    (345
    )
    
    
    (192
    )Foregone interest income
    
    $
    902
    
    
    $
    728
    
    
    $
    156
  Year Ended December 31,2009
    
    
    2008(In thousands)Balance at beginning of year
    
    $
    9,835
    
    
    $
    7,575Additions
    
    
    190
    
    
    
    3,150Repayments
    
    
    (1,664
    )
    
    
    (890
    )Balance at end of year
    
    $
    8,361
    
    
    $
    9,835
  F-20




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
 (8) Allowance for Loan and Lease Losses
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands)Allowance for Loan and Lease LossesBalance at beginning of year
    
    $
    14,664
    
    
    $
    12,619
    
    
    $
    12,377Provision for loan and lease losses
    
    
    9,917
    
    
    
    4,520
    
    
    
    700Loans and leases charged-off
    
    
    (8,189
    )
    
    
    (2,589
    )
    
    
    (528
    )Recoveries of loans and leases previously charged-off
    
    
    144
    
    
    
    114
    
    
    
    70Balance at end of year
    
    $
    16,536
    
    
    $
    14,664
    
    
    $
    12,619
 (9) Derivatives
     F-21




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
  Asset Derivatives
    
    
    Liability DerivativesAs of
    
    
    As of
    
    
    
    
    
    
    As of
    
    
    As ofBalance
    
    
    December 31,
    
    
    December 31,
    
    
    Balance
    
    
    December 31,
    
    
    December 31,Sheet
    
    
    2009
    
    
    2008
    
    
    Sheet
    
    
    2009
    
    
    2008(In thousands)
    
    Location
    
    
    Fair Value
    
    
    Location
    
    
    Fair ValueDerivatives notdesignated as hedging instrumentsInterest rate products
    
    Other assets
    
    $
    391
    
    
    $
    482
    
    
    Other liabilities
    
    $
    426
    
    
    $
    431Total derivatives notdesignated as hedging
instruments
    
    
    
    
    
    $
    391
    
    
    $
    482
    
    
    
    
    
    
    $
    426
    
    
    $
    431
  Amount of Gain or (Loss) Recognized inLocation of Gain or (Loss)
    
    
    Income on Derivative(1)Derivatives Not Designated as
    
    Recognized in Income on
    
    
Year Ended December 31,Hedging Instruments
    
    Derivative
    
    
    2009
    
    
    2008(In thousands)Interest Rate Products
    
    Loan related fees
    
    $
    230
    
    
    $
    250Total
    
    
    
    
    
    $
    230
    
    
    $
    250
 (1)
    
    The amount of gain recognized in income represents net fee income and changes
related to the fair value of the interest rate products.     F-22




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
 (10) Premises and Equipment
  December 31,2009
    
    
    2008(In thousands)Land and improvements
    
    $
    1,895
    
    
    $
    1,871Office buildings and improvements
    
    
    5,624
    
    
    
    5,524Leasehold improvements
    
    
    7,673
    
    
    
    7,597Data processing equipment and software
    
    
    7,175
    
    
    
    6,223Furniture, fixtures and other equipment
    
    
    5,452
    
    
    
    5,421Subtotal
    
    
    27,819
    
    
    
    26,636Less accumulated depreciation and amortization
    
    
    (15,441
    )
    
    
    (13,995
    )Total premises and
equipment
    
    $
    12,378
    
    
    $
    12,641
     MinimumLeasePayments(In thousands)2010
    
    $
    1,4322011
    
    
    1,4002012
    
    
    1,4122013
    
    
    1,2992014
    
    
    913Thereafter
    
    
    5,825$
    12,281
   F-23




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
 (11) Deposits
  December 31,2009
    
    
    2008(In thousands)1 year or less remaining
    
    $
    307,338
    
    
    $
    352,355More than 1 year to 2 years
remaining
    
    
    65,485
    
    
    
    28,746More than 2 years to 3 years
remaining
    
    
    2,990
    
    
    
    32,060More than 3 years to 4 years
remaining
    
    
    9,243
    
    
    
    958More than 4 years remaining
    
    
    2,088
    
    
    
    9,324Total
    
    $
    387,144
    
    
    $
    423,443
  (12) Short-Term Borrowings and Repurchase Agreements
  December 31,2009
    
    
    2008(In thousands)Treasury tax and loan notes
    
    $
    1,803
    
    
    $
    4,280Retail repurchase agreements
    
    
    36,991
    
    
    
    53,396FHLB short-term borrowings
    
    
    1,377
    
    
    
    Wholesale repurchase agreements
    
    
    20,000
    
    
    
    10,000Total
    
    $
    60,171
    
    
    $
    67,676
  Year Ended December 31,2009
    
    
    2008(Dollars in thousands)Outstanding at end of year
    
    $
    1,803
    
    
    $
    4,280Outstanding collateralized by securities with:Par value
    
    
    2,719
    
    
    
    4,251Fair value
    
    
    2,870
    
    
    
    4,366Average outstanding for the year
    
    
    816
    
    
    
    967Maximum outstanding at any month end
    
    
    1,803
    
    
    
    4,280Weighted average rate at end of year
    
    
    0.00
    %
    
    
    0.05
    %Weighted average rate paid for the year
    
    
    0.00
    %
    
    
    1.64
    %
  F-24




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
   Year Ended December 31,2009
    
    
    2008(Dollars in thousands)Outstanding at end of year
    
    $
    1,377
    
    
    $
    Maturity date
    
    January 2010
    
    
    Not applicableAverage outstanding for the year
    
    $
    117
    
    
    $
    376Maximum outstanding at any month end
    
    
    1,377
    
    
    
    4,303Weighted average rate at end of year
    
    
    0.51
    %
    
    Not applicableWeighted average rate paid for the year
    
    
    0.60
    %
    
    
    0.02
    %
   Year Ended December 31,2009
    
    
    2008(Dollars in thousands)Outstanding at end of year
    
    $
    36,991
    
    
    $
    53,396Maturity date
    
    January 2010
    
    
    January 2009Outstanding collateralized by securities with:Par value
    
    $
    43,312
    
    
    $
    59,123Fair value
    
    
    44,327
    
    
    
    59,954Average outstanding for the year
    
    
    43,313
    
    
    
    54,766Maximum outstanding at any month end
    
    
    56,639
    
    
    
    70,889Weighted average rate at end of year
    
    
    0.19
    %
    
    
    0.25
    %Weighted average rate paid for the year
    
    
    0.11
    %
    
    
    1.60
    %
  Year Ended December 31,2009
    
    
    2008(Dollars in thousands)Outstanding at end of year
    
    $
    20,000
    
    
    $
    10,000Maturity dates
    
    January 2010 and June 2011
    
    
    June 2011Outstanding collateralized
by securities with:Par value
    
    $
    21,338
    
    
    $
    10,344Fair value
    
    
    21,944
    
    
    
    10,496Average outstanding for the year
    
    
    13,699
    
    
    
    10,000Maximum outstanding at any month end
    
    
    20,000
    
    
    
    10,000Weighted average rate at end of year
    
    
    3.29
    %
    
    
    5.50
    %Weighted average rate paid for the year
    
    
    4.02
    %
    
    
    5.41
    %
  F-25




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
 Notes to Consolidated Financial Statements (continued)
 (13) Federal Home Loan Bank of Boston Borrowings
  December 31, 2009
    
    
    December 31, 2008Scheduled
    
    
    First
    
    
    Weighted
    
    
    Scheduled
    
    
    First
    
    
    WeightedFinal
    
    
    Call
    
    
    Average
    
    
    Final
    
    
    Call
    
    
    AverageMaturity
    
    
    Date (1)
    
    
    Rate (2)
    
    
    Maturity
    
    
    Date (1)
    
    
    Rate (2)(Dollars in thousands)Within 1 year
    
    $
    53,584
    
    
    $
    223,960
    
    
    
    3.78
    %
    
    $
    2
    
    
    $
    189,002
    
    
    
    5.25
    %Over 1 year to 2 years
    
    
    59,000
    
    
    
    20,000
    
    
    
    4.76
    %
    
    
    26,270
    
    
    
    6,270
    
    
    
    4.19
    %Over 2 years to 3 years
    
    
    10,000
    
    
    
    10,000
    
    
    
    2.92
    %
    
    
    59,000
    
    
    
    20,000
    
    
    
    4.97
    %Over 3 years to 5 years
    
    
    23,400
    
    
    
    13,400
    
    
    
    4.16
    %
    
    
    23,400
    
    
    
    13,400
    
    
    
    4.30
    %Over 5 years
    
    
    131,199
    
    
    
    11,199
    
    
    
    4.39
    %
    
    
    130,264
    
    
    
    10,264
    
    
    
    4.19
    %Total
    
    $
    277,183
    
    
    $
    278,559
    
    
    
    3.86
    %
    
    $
    238,936
    
    
    $
    238,936
    
    
    
    4.39
    %
 (1)
    
    Callable FHLB advances of $199 million and $189 million at December 31, 2009 and 2008,
respectively, are reflected assuming that the callable debt is redeemed at the next call date
while all other advances are shown in the periods corresponding to their scheduled maturity
date.(2)
    
    Weighted average rate based on scheduled maturity dates.   (14)
    
    Company-Obligated Mandatorily Redeemable Capital Securities and Subordinated Deferrable
Interest Debentures
   F-26




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
       F-27




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
 (15) Income Taxes
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands)Current expense:Federal
    
    $
    3,223
    
    
    $
    5,462
    
    
    $
    3,784State
    
    
    94
    
    
    
    51
    
    
    
    20Total current expense
    
    
    3,317
    
    
    
    5,513
    
    
    
    3,804Deferred benefit:Federal
    
    
    (815
    )
    
    
    (1,086
    )
    
    
    455State
    
    
    
    
    
    
    
    
    
    
    Total deferred expense (benefit)
    
    
    (815
    )
    
    
    (1,086
    )
    
    
    455Total income tax expense
    
    $
    2,502
    
    
    $
    4,427
    
    
    $
    4,259
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Increase resulting from:State income tax, net of federal tax benefit
    
    
    0.8
    
    
    
    0.2
    
    
    
    0.1Bank-owned life insurance
    
    
    (5.4
    )
    
    
    (2.8
    )
    
    
    (2.7
    )Salary limitations
    
    
    1.3
    
    
    
    
    
    
    
    Other, net
    
    
    (0.6
    )
    
    
    0.2
    
    
    
    (0.4
    )Effective combined federal and state income
tax rate
    
    
    31.1
    %
    
    
    32.6
    %
    
    
    32.0
    %
  December 31,2009
    
    
    2008(In thousands)Gross deferred tax assets:Allowance for loan and lease losses
    
    $
    5,788
    
    
    $
    5,132Accrued retirement
    
    
    1,379
    
    
    
    1,170Depreciation
    
    
    686
    
    
    
    635Nonaccrual interest
    
    
    383
    
    
    
    250Other
    
    
    671
    
    
    
    593Total gross deferred tax assets
    
    
    8,907
    
    
    
    7,780Gross deferred tax liabilities:Goodwill
    
    
    (3,529
    )
    
    
    (3,217
    )Securities available for sale
    
    
    (606
    )
    
    
    (225
    )Total gross deferred tax liabilities
    
    
    (4,135
    )
    
    
    (3,442
    )Net deferred tax asset
    
    $
    4,772
    
    
    $
    4,338
  F-28




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
      (16) Employee and Director Benefits
 Employee 401(k) Plan 
 Nonqualified Deferred Compensation Plan 
 Supplemental Executive Retirement Plans 
  F-29




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
 Employee Stock Plans 
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Expected term
    
        6 years
    
    
        5 years
    
    
    5 yearsExpected volatility
    
    
    26
    %
    
    
    20
    %
    
    
    19
    %Risk-free interest rate
    
    
    2.55
    %
    
    
    2.77
    %
    
    
    4.14
    %Dividend yield
    
    
    2.79
    %
    
    
    2.19
    %
    
    
    1.60
    %Fair value of options granted
    
    $
    5.22
    
    
    $
    5.29
    
    
    $
    8.21
  Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageOptions
    
    
    Exercise
    
    
    Aggregate
    
    
    ContractualEmployee Stock Options
    
    Outstanding
    
    
    Price
    
    
    Intrinsic Value
    
    
    Term (in years)Outstanding, December 31, 2006
    
    
    403,021
    
    
    $
    24.57Granted
    
    
    71,050
    
    
    $
    39.26Exercised
    
    
    (49,011
    )
    
    $
    18.89Forfeited / Canceled
    
    
    (12,200
    )
    
    $
    39.17Outstanding, December 31, 2007
    
    
    412,860
    
    
    $
    27.34Granted
    
    
    63,975
    
    
    $
    30.55Exercised
    
    
    (31,450
    )
    
    $
    14.90Forfeited / Canceled
    
    
    (38,830
    )
    
    $
    35.45Outstanding, December 31, 2008
    
    
    406,555
    
    
    $
    28.04Granted
    
    
    87,618
    
    
    $
    24.81Exercised
    
    
    (41,650
    )
    
    $
    12.35Forfeited / Canceled
    
    
    (58,005
    )
    
    $
    31.97Outstanding, December 31, 2009
    
    
    394,518
    
    
    $
    28.40
    
    
    $
    
    
    
    
    4.6Exercisable, December 31, 2009
    
    
    231,746
    
    
    $
    27.89
    
    
    $
    
    
    
    
    3.7
   F-30




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
  Weighted
    
    
    WeightedAverage
    
    
    AverageOptions
    
    
    Exercise
    
    
    ContractualExercise Price
    
    Outstanding
    
    
    Price
    
    
    Term (in years)$10.00  $19.99
    
    
    71,000
    
    
    $
    14.40
    
    
    
    1.820.00  29.99
    
    
    120,568
    
    
    $
    24.66
    
    
    
    5.530.00  39.99
    
    
    181,700
    
    
    $
    34.59
    
    
    
    5.340.00  49.99
    
    
    21,250
    
    
    $
    43.45
    
    
    
    4.3Outstanding, December 31, 2009
    
    
    394,518
    
    
    $
    28.40
    
    
    
    4.6
   Year Ended December 31,2009
    
    
    2008
    
    
    2007(in thousands)Share-based compensation
    
    $
    155
    
    
    $
    326
    
    
    $
    212Tax benefit related to share-based
compensation (1)
    
    
    137
    
    
    
    210
    
    
    
    322
 (1)
    
    Represents the tax benefits on stock options exercised and
share-based compensation.  Director Stock Plan 
  F-31




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Expected term
    
    7 years
    
    
    8 years
    
    
    7 yearsExpected volatility
    
    
    26
    %
    
    
    21
    %
    
    
    20
    %Risk-free interest rate
    
    
    2.05
    %
    
    
    3.43
    %
    
    
    4.58
    %Dividend yield
    
    
    3.27
    %
    
    
    2.01
    %
    
    
    1.51
    %Fair value of options granted
    
    $
    3.95
    
    
    $
    7.59
    
    
    $
    10.70
  Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageOptions
    
    
    Exercise
    
    
    Aggregate
    
    
    ContractualDirector Stock Options
    
    Outstanding
    
    
    Price
    
    
    Intrinsic Value
    
    
    Term (in years)Outstanding, December 31, 2006
    
    
    53,000
    
    
    $
    24.09Granted
    
    
    7,500
    
    
    $
    39.62Exercised
    
    
    (23,500
    )
    
    $
    18.77Forfeited / Canceled
    
    
    
    
    
    
    Outstanding, December 31, 2007
    
    
    37,000
    
    
    $
    30.62Granted
    
    
    7,000
    
    
    $
    31.76Exercised
    
    
    (5,500
    )
    
    $
    17.31Forfeited / Canceled
    
    
    
    
    
    
    Outstanding, December 31, 2008
    
    
    38,500
    
    
    $
    32.73Granted
    
    
    6,500
    
    
    $
    20.79Exercised
    
    
    
    
    
    
    Forfeited / Canceled
    
    
    (2,000
    )
    
    $
    29.41Outstanding, December 31, 2009
    
    
    43,000
    
    
    $
    31.08
    
    
    $
    
    
    
    
    6.4Exercisable, December 31, 2009
    
    
    43,000
    
    
    $
    31.08
    
    
    $
    
    
    
    
    6.4
   Weighted
    
    
    WeightedAverage
    
    
    AverageOptions
    
    
    Exercise
    
    
    ContractualExercise Price
    
    Outstanding
    
    
    Price
    
    
    Term (in years)$10.00  $19.99
    
    
    2,500
    
    
    $
    15.63
    
    
    
    1.720.00  29.99
    
    
    11,500
    
    
    $
    22.16
    
    
    
    6.630.00  39.99
    
    
    28,000
    
    
    $
    35.71
    
    
    
    6.740.00  49.99
    
    
    1,000
    
    
    $
    42.85
    
    
    
    6.8Outstanding,
December 31, 2009
    
    
    43,000
    
    
    $
    31.08
    
    
    
    6.4
  F-32




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(in thousands)Share-based compensation
    
    $
    25
    
    
    $
    54
    
    
    $
    87Tax benefit related to
share-based
compensation (1)
    
    
    9
    
    
    
    52
    
    
    
    231
 (1)
    
    Represents the tax benefits on stock options exercised and share-based
compensation.  Change of Control Agreements
 (17) Other Expenses
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands)Postage and mailing
    
    
    541
    
    
    $
    586
    
    
    $
    579Forms and supplies
    
    
    496
    
    
    
    508
    
    
    
    489Telephone
    
    
    415
    
    
    
    435
    
    
    
    459Travel and entertainment
    
    
    340
    
    
    
    320
    
    
    
    270Credit card and interchange fees
    
    
    310
    
    
    
    305
    
    
    
    279Director fees
    
    
    292
    
    
    
    356
    
    
    
    381Charitable contributions
    
    
    283
    
    
    
    273
    
    
    
    279Insurance
    
    
    275
    
    
    
    268
    
    
    
    233Correspondent bank fees
    
    
    223
    
    
    
    196
    
    
    
    168Other
    
    
    778
    
    
    
    699
    
    
    
    1,457Total
    
    $
    3,953
    
    
    $
    3,946
    
    
    $
    4,594
  F-33




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
 (18) Commitments and Contingent Liabilities
 Financial Instruments with Off-Balance Sheet Risk and Derivative Financial Instruments
   December 31,2009
    
    
    2008(In thousands)Financial instruments whose contract amounts represent credit risk:Commitments to extend credit:Commitments to originate or purchase loans and leases
    
    $
    19,425
    
    
    $
    25,474Unused lines of credit and other commitments
    
    
    200,274
    
    
    
    193,870Letters of credit and standby letters of credit
    
    
    4,604
    
    
    
    3,011Financial instruments whose notional amounts exceed the amount of credit risk:Forward loan commitments:Commitments to originate leases to be sold
    
    
    458
    
    
    
    329Commitments to sell leases
    
    
    
    
    
    
    156Interest rate swap contracts:Swaps with customers
    
    
    17,815
    
    
    
    5,000Mirror swaps with counterparties
    
    
    17,815
    
    
    
    5,000
       F-34




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
 (19) Fair Value Measurements
 Fair Value Measurements Effective Date of FASB Statement No. Determining the Fair Value of a Financial Asset When the Market for That Asset Is
Not Active
   
    
    Level 1: Inputs are unadjusted quoted prices in active markets for assets and
liabilities identical to those reported at fair value.
    
    Level 2: Inputs other than quoted prices included within Level 1, Level 2 inputs are
observable either directly or indirectly. These inputs might include quoted prices for
similar assets or liabilities in active markets, quoted prices for identical or similar
assets in markets that are not active, inputs other than quoted prices that are observable
for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit
risks, etc.) or inputs that are derived principally from or corroborated by market data by
correlation or other means.
    
    Level 3: Inputs are unobservable inputs for an asset or liability that reflect an
entitys own assumptions about the assumptions that market participants would use in
pricing the assets or liabilities.
  F-35




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
 
  Fair Value Measurements at December 31, 2009 UsingQuoted Prices in
    
    
    Significant
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Otherfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(In thousands)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)GSE obligations
    
    $
    80,926
    
    
    $
    
    
    
    $
    80,926
    
    
    $
    Trust preferred CDOs
    
    
    465
    
    
    
    
    
    
    
    465
    
    
    
    Collateralized mortgage obligations
    
    
    44,027
    
    
    
    
    
    
    
    44,027
    
    
    
    GSE mortgage-backed securities
    
    
    256,421
    
    
    
    
    
    
    
    256,421
    
    
    
    Total available for sale securities
    
    
    381,839
    
    
    
    
    
    
    
    381,839
    
    
    
    Interest rate swap assets
    
    
    391
    
    
    
    
    
    
    
    391
    
    
    
    Interest rate swap liabilities
    
    
    426
    
    
    
    
    
    
    
    426
    
    
    
    
 Fair Value Measurements at December 31, 2008 UsingQuoted Prices in
    
    
    Significant
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Otherfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(In thousands)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)U.S. Treasury obligations
    
    $
    9,988
    
    
    $
    
    
    
    $
    9,988
    
    
    $
    GSE obligations
    
    
    47,387
    
    
    
    
    
    
    
    47,387
    
    
    
    Corporate debt securities
    
    
    1,987
    
    
    
    
    
    
    
    1,987
    
    
    
    Trust preferred CDOs
    
    
    1,480
    
    
    
    
    
    
    
    
    
    
    
    1,480Collateralized mortgage obligations
    
    
    60,750
    
    
    
    
    
    
    
    60,750
    
    
    
    GSE mortgage-backed securities
    
    
    204,814
    
    
    
    
    
    
    
    204,814
    
    
    
    Total available for sale securities
    
    
    326,406
    
    
    
    
    
    
    
    324,926
    
    
    
    1,480Interest rate swap assets
    
    
    482
    
    
    
    
    
    
    
    482
    
    
    
    Interest rate swap liabilities
    
    
    431
    
    
    
    
    
    
    
    431
    
    
    
    
   F-36




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
  Available for sale securities 
   Interest rate swaps  Note 9  Derivatives
  F-37




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
  Fair Value Measurements Using SignificantUnobservable Inputs2009
    
    
    2008(In thousands)
    
    Available for sale securitiesBalance, January 1
    
    $
    1,480
    
    
    $
    974Cumulative effect of a change in
accounting principle (see Note 6)
    
    
    214
    
    
    
    Increase in unrealized holding losses
    
    
    (845
    )
    
    
    (917
    )Other-than-temporary impairment
    
    
    (384
    )
    
    
    (219
    )Transfers to Level 2
    
    
    (465
    )
    
    
    Transfers to Level 3
    
    
    
    
    
    
    1,642Balance, December 31
    
    $
    
    
    
    $
    1,480
   Fair Value Measurements at December 31, 2009 UsingQuoted Prices in
    
    
    Significant
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Otherfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(In thousands)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Collateral-dependent loans and leases
    
    $
    8,999
    
    
    $
    
    
    
    $
    8,999
    
    
    $
    Restructured loans
    
    
    985
    
    
    
    
    
    
    
    
    
    
    
    985Other real estate owned
    
    
    2,083
    
    
    
    
    
    
    
    2,083
    
    
    
    
 Fair Value Measurements at December 31, 2008 UsingQuoted Prices in
    
    
    Significant
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Otherfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(In thousands)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Collateral-dependent loans and leases
    
    $
    9,356
    
    
    $
    
    
    
    $
    9,356
    
    
    $
    Other real estate owned
    
    
    988
    
    
    
    
    
    
    
    988
    
    
    
    
  F-38




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
 Impaired
Loans
 OREO 
  Loans and leases receivable 
 Stock in the Federal Home Loan Bank of Boston
 Deposits 
 Wholesale repurchase agreements 
 Federal Home Loan Bank of Boston borrowings 
 Subordinated deferrable interest debentures 
 Financial instruments with off-balance sheet risk 
  F-39




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
  December 31, 2009
    
    
    December 31, 2008Book
    
    
    Estimated
    
    
    Book
    
    
    EstimatedValue
    
    
    Fair Value
    
    
    Value
    
    
    Fair Value(In thousands)Assets:Cash and due from banks
    
    $
    18,866
    
    
    $
    18,866
    
    
    $
    54,344
    
    
    $
    54,344Overnight investments
    
    
    1,964
    
    
    
    1,964
    
    
    
    1,113
    
    
    
    1,113Available for sale securities
    
    
    381,839
    
    
    
    381,839
    
    
    
    326,406
    
    
    
    326,406Stock in the FHLB
    
    
    16,274
    
    
    
    16,274
    
    
    
    15,671
    
    
    
    15,671Loans and leases receivable, net of
allowance for loan and lease losses:Commercial loans and leases
    
    
    718,943
    
    
    
    725,967
    
    
    
    646,814
    
    
    
    662,072Residential mortgage loans
    
    
    171,842
    
    
    
    175,816
    
    
    
    211,325
    
    
    
    208,669Consumer and other loans
    
    
    204,526
    
    
    
    197,137
    
    
    
    204,939
    
    
    
    199,252Interest rate swaps
    
    
    391
    
    
    
    391
    
    
    
    482
    
    
    
    482Accrued interest receivable
    
    
    4,964
    
    
    
    4,964
    
    
    
    5,240
    
    
    
    5,240Liabilities:Deposits:Demand deposit accounts
    
    $
    204,281
    
    
    $
    204,281
    
    
    $
    176,495
    
    
    $
    176,495NOW accounts
    
    
    74,558
    
    
    
    74,558
    
    
    
    56,703
    
    
    
    56,703Money market accounts
    
    
    65,076
    
    
    
    65,076
    
    
    
    4,445
    
    
    
    4,445Savings accounts
    
    
    367,225
    
    
    
    367,225
    
    
    
    381,106
    
    
    
    381,106Certificate of deposit accounts
    
    
    387,144
    
    
    
    390,210
    
    
    
    423,443
    
    
    
    427,571Overnight and short-term borrowings
    
    
    40,171
    
    
    
    40,171
    
    
    
    57,676
    
    
    
    57,676Wholesale repurchase agreements
    
    
    20,000
    
    
    
    20,432
    
    
    
    10,000
    
    
    
    11,075FHLB borrowings
    
    
    277,183
    
    
    
    301,210
    
    
    
    238,936
    
    
    
    266,723Subordinated deferrable interest
debentures
    
    
    13,403
    
    
    
    15,440
    
    
    
    13,403
    
    
    
    15,262Interest rate swaps
    
    
    426
    
    
    
    426
    
    
    
    431
    
    
    
    431Accrued interest payable
    
    
    2,122
    
    
    
    2,122
    
    
    
    2,600
    
    
    
    2,600
 (20) Shareholders Equity
   F-40




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
  For Capital
    
    
    To Be ConsideredActual
    
    
    Adequacy Purposes
    
    
    Well-CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)At December 31, 2009:Bancorp Rhode Island, Inc.:Tier I capital (to average assets)
    
    $
    120,297
    
    
    
    7.65
    %
    
    $
    62,941
    
    
    
    4.00
    %
    
    $
    78,676
    
    
    
    5.00
    %Tier I capital (to risk-weighted assets)
    
    
    120,297
    
    
    
    10.71
    %
    
    
    44,913
    
    
    
    4.00
    %
    
    
    67,369
    
    
    
    6.00
    %Total capital (to risk-weighted assets)
    
    
    134,364
    
    
    
    11.97
    %
    
    
    89,825
    
    
    
    8.00
    %
    
    
    112,281
    
    
    
    10.00
    %Bank Rhode Island:Tier I capital (to average assets)
    
    $
    118,412
    
    
    
    7.54
    %
    
    $
    62,855
    
    
    
    4.00
    %
    
    $
    78,569
    
    
    
    5.00
    %Tier I capital (to risk-weighted assets)
    
    
    118,412
    
    
    
    10.55
    %
    
    
    44,882
    
    
    
    4.00
    %
    
    
    67,323
    
    
    
    6.00
    %Total capital (to risk-weighted assets)
    
    
    132,479
    
    
    
    11.81
    %
    
    
    89,764
    
    
    
    8.00
    %
    
    
    112,205
    
    
    
    10.00
    %At December 31, 2008:Bancorp Rhode Island, Inc.:Tier I capital (to average assets)
    
    $
    150,169
    
    
    
    10.04
    %
    
    $
    59,837
    
    
    
    4.00
    %
    
    $
    74,796
    
    
    
    5.00
    %Tier I capital (to risk-weighted assets)
    
    
    150,169
    
    
    
    14.23
    %
    
    
    42,202
    
    
    
    4.00
    %
    
    
    63,302
    
    
    
    6.00
    %Total capital (to risk-weighted assets)
    
    
    163,368
    
    
    
    15.48
    %
    
    
    84,403
    
    
    
    8.00
    %
    
    
    105,504
    
    
    
    10.00
    %Bank Rhode Island:Tier I capital (to average assets)
    
    $
    118,197
    
    
    
    7.92
    %
    
    $
    59,669
    
    
    
    4.00
    %
    
    $
    74,586
    
    
    
    5.00
    %Tier I capital (to risk-weighted assets)
    
    
    118,197
    
    
    
    11.21
    %
    
    
    42,180
    
    
    
    4.00
    %
    
    
    63,269
    
    
    
    6.00
    %Total capital (to risk-weighted assets)
    
    
    131,396
    
    
    
    12.46
    %
    
    
    84,359
    
    
    
    8.00
    %
    
    
    105,449
    
    
    
    10.00
    %
     F-41




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
  Stock Repurchase Program st
  (21) Earnings per Share
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(dollars in thousands)Basic EPS Computation:Numerator:Net income
    
    $
    5,539
    
    
    $
    9,144
    
    
    $
    9,045Preferred dividend
    
    
    (892
    )
    
    
    (50
    )
    
    
    Preferred stock accretion
    
    
    (1,405
    )
    
    
    (8
    )
    
    
    Net income applicable to common
    
    $
    3,242
    
    
    $
    9,086
    
    
    $
    9,045Denominator:Weighted average shares outstanding
    
    
    4,604,308
    
    
    
    4,561,396
    
    
    
    4,793,055Basic EPS
    
    $
    0.71
    
    
    $
    1.99
    
    
    $
    1.89Diluted EPS Computation:Numerator:Net income applicable to common
    
    $
    3,242
    
    
    $
    9,086
    
    
    $
    9,045Denominator:Common shares outstanding
    
    
    4,604,308
    
    
    
    4,561,396
    
    
    
    4,793,055Stock options
    
    
    22,126
    
    
    
    64,414
    
    
    
    112,147Stock warrants
    
    
    
    
    
    
    1,486
    
    
    
    Contingent shares
    
    
    
    
    
    
    3,912
    
    
    
    13,561Total shares
    
    
    4,626,434
    
    
    
    4,631,208
    
    
    
    4,918,763Diluted EPS
    
    $
    0.70
    
    
    $
    1.96
    
    
    $
    1.84
   F-42




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
 (22) Supplementary Disclosures of Cash Flow Information
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands)Supplementary disclosures:Cash paid for interest
    
    $
    31,667
    
    
    $
    36,738
    
    
    $
    45,503Cash paid for income taxes
    
    
    3,429
    
    
    
    5,049
    
    
    
    4,419Non-cash transactions:Change in accumulated other comprehensive income, net of taxes
    
    
    2,202
    
    
    
    484
    
    
    
    2,945Macrolease acquisition
    
    
    78
    
    
    
    656
    
    
    
    455Transfer of loans to OREO
    
    
    2,083
    
    
    
    988
    
    
    
    Non-credit component of other-than-temporary impairment,
net of taxes
    
    
    1,355
    
    
    
    
    
    
    
    
 (23) Regulation and Litigation
    F-43




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
 (24) Parent Company Statements
  Balance Sheets
 December 31,2009
    
    
    2008(In thousands)AssetsAssets:Cash and due from banks
    
    $
    17
    
    
    $
    12Overnight investments
    
    
    1,180
    
    
    
    31,673Investment in subsidiaries
    
    
    132,299
    
    
    
    130,672Prepaid expenses and other assets
    
    
    725
    
    
    
    424Total assets
    
    $
    134,221
    
    
    $
    162,781Liabilities and Shareholders EquityLiabilities:Subordinated deferrable interest debentures
    
    $
    13,403
    
    
    $
    13,403Other liabilities
    
    
    157
    
    
    
    288Total liabilities
    
    
    13,560
    
    
    
    13,691Shareholders equity:Preferred stock: par value $0.01, authorized 1,000,000 shares,
liquidation preference per share $1,000: Issued and
outstanding: Issued: (0 and 30,000 shares, respectively)
    
    
    
    
    
    
    28,595Common stock: par value $0.01 per share, authorized 11,000,000
shares: Issued: (4,969,444 and 4,926,920 shares, respectively)
    
    
    50
    
    
    
    49Additional paid-in capital
    
    
    72,783
    
    
    
    73,323Treasury stock, at cost (364,750 and 352,250 shares, respectively)
    
    
    (12,309
    )
    
    
    (12,055
    )Retained earnings
    
    
    59,012
    
    
    
    58,763Accumulated other comprehensive income, net
    
    
    1,125
    
    
    
    415Total shareholders equity
    
    
    120,661
    
    
    
    149,090Total liabilities and shareholders equity
    
    $
    134,221
    
    
    $
    162,781
  F-44




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
 Statements of Operations
 Year Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands)Income:Dividends received from subsidiaries
    
    $
    6,000
    
    
    $
    5,300
    
    
    $
    1,800Interest on overnight investments
    
    
    39
    
    
    
    21
    
    
    
    633Total income
    
    
    6,039
    
    
    
    5,321
    
    
    
    2,433Expenses:Subordinated deferrable interest debentures
    
    
    730
    
    
    
    949
    
    
    
    1,509Professional services and other expenses
    
    
    791
    
    
    
    935
    
    
    
    669Directors fees
    
    
    157
    
    
    
    204
    
    
    
    233Compensation expense
    
    
    156
    
    
    
    325
    
    
    
    212Total expenses
    
    
    1,834
    
    
    
    2,413
    
    
    
    2,623Income (loss) before income taxes
    
    
    4,205
    
    
    
    2,908
    
    
    
    (190
    )Income tax benefit
    
    
    (587
    )
    
    
    (755
    )
    
    
    (645
    )Income before equity in undistributed
earnings of subsidiaries
    
    
    4,792
    
    
    
    3,663
    
    
    
    455Equity in undistributed earnings of subsidiaries
    
    
    747
    
    
    
    5,481
    
    
    
    8,590Net income
    
    $
    5,539
    
    
    $
    9,144
    
    
    $
    9,045Preferred stock dividends
    
    
    (892
    )
    
    
    (50
    )
    
    
    Prepayment charges and accretion of preferred stock discount
    
    
    (1,405
    )
    
    
    (8
    )
    
    
    Net income applicable to common shares
    
    $
    3,242
    
    
    $
    9,086
    
    
    $
    9,045
  F-45




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
 Statements of Cash Flow
 Year Ended December 31,2009
    
    
    2008
    
    
    2007(In thousands)Cash flows from operating activities:Net income
    
    $
    5,539
    
    
    $
    9,144
    
    
    $
    9,045Adjustment to reconcile net income to net cash provided
by (used in) operating activities:Equity in undistributed earnings of subsidiaries
    
    
    (747
    )
    
    
    (5,481
    )
    
    
    (8,590
    )Share-based compensation expense
    
    
    180
    
    
    
    380
    
    
    
    299(Increase) decrease in other assets
    
    
    (250
    )
    
    
    (54
    )
    
    
    61(Decrease) increase in other liabilities
    
    
    193
    
    
    
    (229
    )
    
    
    489Other, net
    
    
    
    
    
    
    
    
    
    
    Net cash provided by operating activities
    
    
    4,915
    
    
    
    3,760
    
    
    
    1,304Cash flows from financing activities:Investment in subsidiaries
    
    
    (330
    )
    
    
    363
    
    
    
    (274
    )Repayment of subordinated deferrable interest debentures
    
    
    
    
    
    
    
    
    
    
    (5,155
    )Proceeds from issuance of preferred stock and warrants
    
    
    
    
    
    
    30,000
    
    
    
    Redemption of preferred stock
    
    
    (30,000
    )
    
    
    
    
    
    
    Repurchase of warrant
    
    
    (1,400
    )
    
    
    
    
    
    
    Proceeds from issuance of common stock
    
    
    515
    
    
    
    562
    
    
    
    1,367Tax benefit from stock option exercises
    
    
    88
    
    
    
    189
    
    
    
    498Purchases of treasury stock
    
    
    (254
    )
    
    
    (1,866
    )
    
    
    (10,189
    )Dividends on preferred stock
    
    
    (892
    )
    
    
    (50
    )
    
    
    Dividends on common stock
    
    
    (3,130
    )
    
    
    (3,002
    )
    
    
    (2,942
    )Net cash (used in) provided by financing activities
    
    
    (35,403
    )
    
    
    26,196
    
    
    
    (16,695
    )Net (decrease) increase in cash and due from banks
    
    
    (30,488
    )
    
    
    29,956
    
    
    
    (15,391
    )Cash and cash equivalents at beginning of year
    
    
    31,685
    
    
    
    1,729
    
    
    
    17,120Cash and cash equivalents at end of year
    
    $
    1,197
    
    
    $
    31,685
    
    
    $
    1,729Supplementary disclosures:Cash received for income taxes
    
    $
    (693
    )
    
    $
    (879
    )
    
    $
    (1,155
    )Non-cash transactions:Change in accumulated other comprehensive income, net of taxes
    
    
    2,202
    
    
    
    484
    
    
    
    2,945Macrolease acquisition
    
    
    78
    
    
    
    656
    
    
    
    455Transfer of loans to OREO
    
    
    2,083
    
    
    
    988
    
    
    
    Non-credit component of other-than-temporary impairment,
net of taxes
    
    
    1,355
    
    
    
    
    
    
    
    
   F-46




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##### Table of Contents



BANCORP RHODE ISLAND, INC.
Notes to Consolidated Financial Statements (continued)
 (25) Quarterly Results of Operations (unaudited)
 2009 Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(In thousands, except per share data)Interest and dividend income
    
    $
    18,560
    
    
    $
    18,792
    
    
    $
    19,000
    
    
    $
    18,925Interest expense
    
    
    7,478
    
    
    
    7,219
    
    
    
    6,334
    
    
    
    5,924Net interest income
    
    
    11,082
    
    
    
    11,573
    
    
    
    12,666
    
    
    
    13,001Provision for loan and lease losses
    
    
    1,610
    
    
    
    2,600
    
    
    
    1,900
    
    
    
    3,807Net interest income after
provision for loan and lease losses
    
    
    9,472
    
    
    
    8,973
    
    
    
    10,766
    
    
    
    9,194Noninterest income
    
    
    2,357
    
    
    
    2,214
    
    
    
    2,241
    
    
    
    2,353Noninterest expense
    
    
    9,623
    
    
    
    10,145
    
    
    
    9,812
    
    
    
    9,949Income before taxes
    
    
    2,206
    
    
    
    1,042
    
    
    
    3,195
    
    
    
    1,598Income taxes
    
    
    743
    
    
    
    302
    
    
    
    992
    
    
    
    465Net income
    
    
    1,463
    
    
    
    740
    
    
    
    2,203
    
    
    
    1,133Preferred stock dividends
    
    
    (375
    )
    
    
    (375
    )
    
    
    (142
    )
    
    
    Prepayment charges and accretion of preferred
stock discount
    
    
    (61
    )
    
    
    (62
    )
    
    
    (1,282
    )
    
    
    Net income applicable to common shares
    
    $
    1,027
    
    
    $
    303
    
    
    $
    779
    
    
    $
    1,133Basic EPS
    
    $
    0.22
    
    
    $
    0.07
    
    
    $
    0.17
    
    
    $
    0.25Diluted EPS
    
    $
    0.22
    
    
    $
    0.07
    
    
    $
    0.17
    
    
    $
    0.24
 2008 Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(In thousands, except per share data)Interest and dividend income
    
    $
    20,532
    
    
    $
    19,981
    
    
    $
    20,137
    
    
    $
    19,648Interest expense
    
    
    10,228
    
    
    
    8,553
    
    
    
    8,216
    
    
    
    7,933Net interest income
    
    
    10,304
    
    
    
    11,428
    
    
    
    11,921
    
    
    
    11,715Provision for loan and lease losses
    
    
    285
    
    
    
    970
    
    
    
    1,515
    
    
    
    1,750Net interest income after
provision for loan and lease losses
    
    
    10,019
    
    
    
    10,458
    
    
    
    10,406
    
    
    
    9,965Noninterest income
    
    
    2,903
    
    
    
    2,492
    
    
    
    2,333
    
    
    
    2,881Noninterest expense
    
    
    9,460
    
    
    
    9,612
    
    
    
    9,304
    
    
    
    9,510Income before taxes
    
    
    3,462
    
    
    
    3,338
    
    
    
    3,435
    
    
    
    3,336Income taxes
    
    
    1,136
    
    
    
    1,097
    
    
    
    1,111
    
    
    
    1,083Net income
    
    
    2,326
    
    
    
    2,241
    
    
    
    2,324
    
    
    
    2,253Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50
    )Prepayment charges and accretion of preferred
stock discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )Net income applicable to common shares
    
    $
    2,326
    
    
    $
    2,241
    
    
    $
    2,324
    
    
    $
    2,195Basic EPS
    
    $
    0.51
    
    
    $
    0.49
    
    
    $
    0.51
    
    
    $
    0.48Diluted EPS
    
    $
    0.50
    
    
    $
    0.48
    
    
    $
    0.50
    
    
    $
    0.48
  F-47