UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)
      |X|  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2008

      |_|  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
            For the transition period from __________ to __________

                         Commission file number 2-80070

                         CASS INFORMATION SYSTEMS, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Missouri                                              43-1265338
--------------------------------------------------------------------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

13001 Hollenberg Drive, Bridgeton, Missouri                        63044
--------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code: (314) 506-5500

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class                 Name of each exchange on which registered
-------------------                 -----------------------------------------
Common Stock par value $.50              The Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock par value $.50
--------------------------------------------------------------------------------
                                (Title of Class)

Indicate by checkmark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.                      Yes |_|   No |X|

Indicate by checkmark if the registrant is not required to file reports pursuant
to Section 13 or Section 15(d) of the Act.                      Yes |_|   No |X|

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.                                           Yes |X|   No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one)

       Large accelerated filer:   |_|     Accelerated filer:          |X|

       Non-accelerated filer:     |_|     Smaller reporting company:  |_|

Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).                               Yes  |_|   No |X|

The aggregate market value of the common stock held by non-affiliates of the
Registrant was approximately $240,337,000 based on the closing price of the
common stock of $32.03 on June 30, 2008, as reported by The Nasdaq Global Select
Market.

As of March 6, 2009, the Registrant had 9,213,242 shares outstanding of common
stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain information required for Part III of this report is incorporated by
reference to the Registrant's Proxy Statement for the 2009 Annual Meeting of
Shareholders.

<PAGE>

                         CASS INFORMATION SYSTEMS, INC.
                             FORM 10-K ANNUAL REPORT
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I.

<S>        <C>                                                               <C>
Item 1.    BUSINESS                                                           1

Item 1A.   RISK FACTORS                                                       3

Item 1B.   UNRESOLVED STAFF COMMENTS                                          7

Item 2.    PROPERTIES                                                         7

Item 3.    LEGAL PROCEEDINGS                                                  7

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                7

PART II.
Item 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
           STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES      8

Item 6.    SELECTED FINANCIAL DATA                                           10

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS                                         10

Item 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK        26

Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                       28

Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
           ACCOUNTING AND FINANCIAL DISCLOSURE                               54

Item 9A.   CONTROLS AND PROCEDURES                                           54

Item 9B.   OTHER INFORMATION                                                 56

PART III.

Item 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE            56

Item 11.   EXECUTIVE COMPENSATION                                            56

Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
           AND RELATED STOCKHOLDER MATTERS                                   56

Item 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
           INDEPENDENCE                                                      57

Item 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES                            57

PART IV.

Item 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                        57

           SIGNATURES                                                        59
</TABLE>

Forward-looking Statements - Factors That May Affect Future Results

This report may contain or incorporate by reference forward-looking statements
made pursuant to the safe harbor provisions of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Although we believe that, in making any such statements, our
expectations are based on reasonable assumptions, forward-looking statements are
not guarantees of future performance and involve risks, uncertainties and other
factors which may cause future performance to be materially different from
expected performance summarized in the forward-looking statements. These risks,
uncertainties and other factors are discussed in Part I, Item 1A, "Risk
Factors." We undertake no obligation to publicly update or revise any
forward-looking statements to reflect changed assumptions, the occurrence of
anticipated or unanticipated events, or changes to future results over time.
<PAGE>

                                     PART I.

ITEM 1. BUSINESS

Description of Business

Cass Information Systems, Inc. ("Cass" or "the Company") is a leading provider
of payment and information processing services to large manufacturing,
distribution and retail enterprises across the United States. The Company
provides freight invoice rating, payment, audit, accounting and transportation
information to many of the nation's largest companies. It is also a processor
and payer of utility invoices, including electricity, gas, and other facility
related expenses. Additionally, Cass competes in the telecommunications expense
management market which includes bill processing, audit and payment services for
telephone, data line, cellular and communication equipment expense. Also the
Company, through its wholly owned bank subsidiary, Cass Commercial Bank ("the
Bank"), provides commercial banking services. The Bank's primary focus is to
support the Company's payment operations and provide banking services to its
target markets, which include privately owned businesses and churches and
church-related ministries. Services include commercial and commercial real
estate, checking, savings and time deposit accounts and other cash management
services. The principal offices of the Company are at 13001 Hollenberg Drive,
Bridgeton, Missouri 63044. Other operating locations are in Columbus, Ohio,
Boston, Massachusetts, Greenville, South Carolina and Wellington, Kansas. The
Bank's headquarters are also located at the Bridgeton location, and the Bank
operates five other branches, four in the St. Louis metropolitan area and one in
southern California.

Company Strategy and Core Competencies

Cass is an information services company with a primary focus on processing
payables and payables-related transactions for large corporations located in the
United States. Cass possesses four core competencies that encompass most of its
processing services.

Data acquisition - This refers to the gathering of data elements from diverse,
heterogeneous sources and the building of complete databases for our customers.
Data is the raw material of the information economy. Cass gathers vital data
from complex and diverse input documents, electronic media, proprietary
databases and data feeds, including data acquired from vendor invoices as well
as customer procurement and sales systems. Through its numerous methods of
obtaining streams and pieces of raw data, Cass is able to assemble vital data
into centralized data management systems and warehouses, thus producing an
engine to create the power of information for managing critical corporate
functions and processing systems.

Data management - Once data is assembled, Cass is able to utilize the power from
derived information to produce significant savings and benefits for its clients.
This information is integrated into customers' unique financial and accounting
systems, eliminating the need for internal accounting processing and providing
internal and external support for these critical systems. Information is also
used to produce management and exception reporting for operational control,
feedback, planning assistance and performance measurement.

Information delivery - Receiving information in the right place at the right
time and in the required format is paramount for business survival. Cass'
information delivery solutions provide reports, digital images, data files and
retrieval capabilities through the Internet or directly into customer internal
systems. Cass' proprietary Internet management delivery system is the foundation
for driving these critical functions. Transaction, operational, control, status
and processing exception information are all delivered through this system
creating an efficient, accessible and highly reliable asset for Cass customers.

Financial exchange - Since Cass is unique among its competition in that it owns
a commercial bank, it is also able to manage the movement of funds from its
customers to their suppliers. This is a distinguishing factor, which clearly
requires the processing capability, operating systems and financial integrity of
a banking organization. Cass provides immediate, accurate, controlled and
protected funds management and transfer system capabilities for all of its
customers. Old and costly check processing and delivery mechanisms are replaced
with more efficient electronic cash management and funds transfer systems.

Cass' core competencies allow it to perform the highest levels of transaction
processing in an integrated, efficient and systematic approach. Not only is Cass
able to process the transaction, it is also able to collect the data defining
the transaction and effect the financial payment governing its terms.

Cass' shared business processes - Accounting, Human Resources and Technology -
support its core competencies. Cass' accounting function provides the internal
control systems to ensure the highest levels of accountability and protection
for customers. Cass' human resources department provides experienced people
dedicated to streamlining business procedures and reducing expenses. Cass'
technology is proven and reliable. The need to safeguard data and secure the
efficiency, speed and timeliness that govern its business is a priority within
the organization. The ability to leverage technology over its strategic units
allows Cass the advantage of deploying technology in a proven and reliable

                                       1
<PAGE>

manner without hindering clients' strategic business and system requirements.

These core competencies, enhanced through shared business processes, drive Cass'
strategic business units. Building upon these foundations, Cass continues to
explore new business opportunities that leverage these competencies and
processes.

Marketing, Customers and Competition

The Company, through its Transportation Information Services business unit, is
one of the largest firms in the freight bill processing and payment industry in
the United States based on the total dollars of freight bills paid and items
processed. Competition consists of a few primary competitors and numerous small
freight bill audit firms located throughout the United States. While offering
freight payment services, few of these audit firms compete on a national basis.
These competitors compete mainly on price, functionality and service levels. The
Company, through its Utility Information Services business unit, also competes
with other companies, located throughout the United States, that pay utility
bills and provide management reporting. Available data indicates that the
Company is one of the largest providers of utility information processing and
payment services. Cass' Utility Information Services is unique among these
competitors in that it is not exclusively affiliated with any one energy service
provider ("ESP"). The ESPs market the Company's services adding value with their
unique auditing, consulting and technological capabilities. Many of Cass'
services are customized for the ESPs, providing a full-featured solution without
any development costs to the ESP. Also the Company, through its Telecom
Information Services business unit, is a leader in the growing telecom expense
management market, and competes with other companies located throughout the
United States in this market.

The Bank is organized as a Missouri trust company with banking powers and was
founded in 1906. Due to its ownership of a federally insured commercial bank,
the Company is a bank holding corporation and was originally organized in 1982
as Cass Commercial Corporation under the laws of Missouri. It was approved by
the Board of Governors of the Federal Reserve System (the "Federal Reserve") in
February 1983. The Company changed its name to Cass Information Systems, Inc. in
January 2001. The Company's bank subsidiary encounters competition from numerous
banks and financial institutions located throughout the St. Louis, Missouri
metropolitan area and other areas in which the Bank competes. The Bank's
principal competitors, however, are large bank holding companies that are able
to offer a wide range of banking and related services through extensive branch
networks. The Bank targets its services to privately held businesses located in
the St. Louis, Missouri area and church and church-related institutions located
in St. Louis, Missouri, Orange County, California and other selected cities
located throughout the United States. The Bank has not financed, and does not
currently finance, sub-prime mortgage loans.

The Company holds several trademarks for the payment and rating services it
provides. These include: FreightPay(R), Transdata(R), TransInq(R), Ratemaker(R),
Rate Advice(R), First Rate(R), Best Rate(R), Rate Exchange(R) and CassPort(R).
The Company and its subsidiaries are not dependent on any one customer for a
significant portion of their businesses. The Company and its subsidiaries have a
varied client base with no individual client exceeding 10% of total revenue.

Employees

The Company and its subsidiaries had 709 full-time and 227 part-time employees
as of March 2, 2009. Of these employees, the Bank had 62 full-time and two
part-time employees.

Supervision and Regulation

The Company and its bank subsidiary are extensively regulated under federal and
state law. These laws and regulations are intended to protect depositors, not
shareholders. The Bank is subject to regulation and supervision by the Missouri
Division of Finance, the Federal Reserve Bank (the "FRB") and the Federal
Deposit Insurance Corporation (the "FDIC"). The Company is a bank holding
company within the meaning of the Bank Holding Company Act of 1956, as amended,
and as such, it is subject to regulation, supervision and examination by the
FRB. The Company is required to file quarterly and annual reports with the FRB
and to provide to the FRB such additional information as the FRB may require,
and it is subject to regular inspections by the FRB. Bank regulatory agencies
use Capital Adequacy Guidelines in their examination and regulation of bank
holding companies and banks. If the capital falls below the minimum levels
established by these guidelines, the agencies may force certain remedial action
to be taken. The Capital Adequacy Guidelines are of several types and include
risk-based capital guidelines, which are designed to make capital requirements
more sensitive to various risk profiles and account for off-balance sheet
exposure; guidelines that consider market risk, which is the risk of loss due to
change in value of assets and liabilities due to changes in interest rates; and
guidelines that use a leverage ratio which places a constraint on the maximum
degree of risk to which a bank holding company may leverage its equity capital
base. For further discussion of the capital adequacy guidelines and ratios,
please refer to Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Item 8, Note 3 of this report.

                                       2
<PAGE>

The FRB also has extensive enforcement authority over bank holding companies,
including, among other things, the ability to assess civil money penalties, to
issue cease and desist or removal orders and to require that a holding company
divest subsidiaries (including its bank subsidiaries). In general, enforcement
actions may be initiated for violations of law or regulations or for unsafe or
unsound practices. Both the FRB and Missouri Division of Finance also have
restrictions on the amount of dividends that banks and bank holding companies
may pay.

As a bank holding company, the Company must obtain prior approval from the FRB
before acquiring ownership or control of more than 10% of the voting shares of
another bank or bank holding company or acquiring all or substantially all of
the assets of such a company. In many cases, prior approval is also required for
the Company to engage in similar acquisitions involving a non-bank company or to
engage in new non-bank activities. Any change in applicable laws or regulations
may have a material effect on the business and prospects of the Company.

Website Availability of SEC Reports

Cass files annual, quarterly and current reports with the Securities and
Exchange Commission (the "SEC"). Cass will, as soon as reasonably practicable
after they are electronically filed with or furnished to the SEC, make available
free of charge on its website each of its Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports of Form 8-K, all amendments to those
reports, and its definitive proxy statements. The address of Cass' website is:
www.cassinfo.com. All reports filed with the SEC are available for reading and
copying at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC
20549-0213 or for more information call the Public Reference Room at
1-800-SEC-0330. The SEC also makes all filed reports, proxy statements and
information statements available on its website at www.sec.gov.

The reference to our website address does not constitute incorporation by
reference of the information contained on the website and should not be
considered part of this report.

Financial Information about Segments

The services provided by the Company are classified in two reportable segments:
Information Services and Banking Services. The revenues from external customers,
net income and total assets by segment as of and for the three years ended
December 31, 2008, are set forth in Item 8, Note 18 of this report.

Statistical Disclosure by Bank Holding Companies

For the statistical disclosure by bank holding companies refer to Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

ITEM 1A. RISK FACTORS

This section highlights specific risks that could affect the Company's business.
Although this section attempts to highlight key factors, please be aware that
other risks may prove to be important in the future. New risks may emerge at any
time, and Cass cannot predict such risks or estimate the extent to which they
may affect the Company's financial performance. In addition to the factors
discussed elsewhere or incorporated by reference in this report, the identified
risks that could cause actual results to differ materially include the
following:

General political, economic or industry conditions may be less favorable than
expected.

Local, domestic, and international economic, political and industry-specific
conditions and governmental monetary and fiscal policies affect the industries
in which the Company competes, directly and indirectly. Conditions such as
inflation, recession, unemployment, volatile interest rates, tight money supply,
real estate values, international conflicts and other factors outside of Cass'
control may adversely affect the Company. Economic downturns could result in the
delinquency of outstanding loans, which could have a material adverse impact on
Cass' earnings. If the weak global economic conditions persist well into the
future, the Company's financial condition could be negatively impacted.

Unfavorable developments concerning customer credit quality could affect Cass'
financial results.

Although the Company regularly reviews credit exposure related to its customers
and various industry sectors in which it has business relationships, default
risk may arise from events or circumstances that are difficult to detect or
foresee. Under such circumstances, the Company could experience an increase in
the level of provision for credit losses, delinquencies, nonperforming assets,
net charge-offs and allowance for credit losses.

                                       3
<PAGE>

The Company has lending concentrations, including, but not limited to, churches
and church-related entities located in selected cities and privately-held
businesses located in or near St. Louis, Missouri, that could suffer a
significant decline which could adversely affect the Company.

Cass' customer base consists, in part, of lending concentrations in several
segments and geographical areas. If any of these segments or areas is
significantly affected by the general weak economic conditions that currently
exist, the Company could experience increased credit losses, and its business
could be adversely affected.

Fluctuations in interest rates could affect Cass' net interest income and
balance sheet.

The operations of financial institutions such as the Company are dependent to a
large degree on net interest income, which is the difference between interest
income from loans and investments and interest expense on deposits and
borrowings. Prevailing economic conditions, the fiscal and monetary policies of
the federal government and the policies of various regulatory agencies all
affect market rates of interest, which in turn significantly affect financial
institutions' net interest income. Fluctuations in interest rates affect Cass'
financial statements, as they do for all financial institutions. Volatility in
interest rates can also result in disintermediation, which is the flow of funds
away from financial institutions into direct investments, such as federal
government and corporate securities and other investment vehicles, which,
because of the absence of federal insurance premiums and reserve requirements,
generally pay higher rates of return than financial institutions. As discussed
in greater detail in Item 7A, "Quantitative and Qualitative Disclosures about
Market Risk," a continuation of the decline in the general level of interest
rates, as has been experienced during 2008, can have a negative impact on net
interest income.

Methods of reducing risk exposures might not be effective.

Instruments, systems and strategies used to hedge or otherwise manage exposure
to various types of credit, interest rate, market and liquidity, operational,
regulatory/compliance, business risks and enterprise-wide risks could be less
effective than anticipated. As a result, the Company may not be able to
effectively mitigate its risk exposures in particular market environments or
against particular types of risk.

Customer borrowing, repayment, investment, deposit, and payable processing
practices may be different than anticipated.

The Company uses a variety of financial tools, models and other methods to
anticipate customer behavior as part of its strategic and financial planning and
to meet certain regulatory requirements. Individual, economic, political,
industry-specific conditions and other factors outside of Cass' control could
alter predicted customer borrowing, repayment, investment, deposit, and payable
processing practices. Such a change in these practices could adversely affect
Cass' ability to anticipate business needs, including cash flow and its impact
on liquidity, and to meet regulatory requirements.

Operational difficulties or security problems could damage Cass' reputation and
business.

The Company depends on the reliable operation of its computer operations and
network connections from its clients to its systems. Any operational problems or
outages in these systems would cause Cass to be unable to process transactions
for its clients, resulting in decreased revenues. In addition, any system
delays, failures or loss of data, whatever the cause, could reduce client
satisfaction with the Company's products and services and harm Cass' financial
results. Cass also depends on the security of its systems. Company networks may
be vulnerable to unauthorized access, computer viruses and other disruptive
problems. A material security problem affecting Cass could damage its
reputation, deter prospects from purchasing its products, deter customers from
using its products or result in liability to Cass.

Cass' stock price can become volatile and fluctuate widely in response to a
variety of factors.

The Company's stock price can fluctuate based on factors that can include actual
or anticipated variations in Cass' quarterly results; new technology or services
by competitors; unanticipated losses or gains due to unexpected events,
including losses or gains on securities held for investment purposes;
significant acquisitions or business combinations, strategic partnerships, joint
ventures or capital commitments by or involving the Company or its competitors;
changes in accounting policies or practices; failure to integrate acquisitions
or realize anticipated benefits from acquisitions; or changes in government
regulations.

General market fluctuations, industry factors and general economic and political
conditions, such as economic slowdowns or recessions, governmental intervention,
interest rate changes, credit loss trends, low trading volume or currency
fluctuations also could cause Cass' stock price to decrease regardless of the
Company's operating results.

                                       4
<PAGE>

Cass must respond to rapid technological changes and these changes may be more
difficult or expensive than anticipated.

If competitors introduce new products and services embodying new technologies,
or if new industry standards and practices emerge, the Company's existing
product and service offerings, technology and systems may become obsolete.
Further, if Cass fails to adopt or develop new technologies or to adapt its
products and services to emerging industry standards, Cass may lose current and
future customers, which could have a material adverse effect on its business,
financial condition and results of operations. The payment processing and
financial services industries are changing rapidly and in order to remain
competitive, Cass must continue to enhance and improve the functionality and
features of its products, services and technologies. These changes may be more
difficult or expensive than the Company anticipates.

Competitive product and pricing pressure within Cass' markets may change.

The Company operates in a very competitive environment, which is characterized
by competition from a number of other vendors and financial institutions in each
market in which it operates. The Company competes with large payment processors
and national and regional financial institutions and also smaller auditing
companies and banks in terms of products and pricing. If the Company is unable
to compete effectively in products and pricing in its markets, business could
decline.

Management's ability to maintain and expand customer relationships may differ
from expectations.

The industries in which the Company operates are very competitive. The Company
not only competes for business opportunities with new customers, but also
competes to maintain and expand the relationships it has with its existing
customers. The Company continues to experience pressures to maintain these
relationships as its competitors attempt to capture its customers.

The introductions, withdrawal, success and timing of business initiatives and
strategies, including, but not limited to, the expansion of payment and
processing activities to new markets, the expansion of products and services to
existing markets and opening of new bank branches, may be less successful or may
be different than anticipated. Such a result could adversely affect Cass'
business.

The Company makes certain projections and develops plans and strategies for its
payment processing and banking products. If the Company does not accurately
determine demand for its products and services, it could result in the Company
incurring significant expenses without the anticipated increases in revenue,
which could result in an adverse effect on its earnings.

Management's ability to retain key officers and employees may change.

Cass' future operating results depend substantially upon the continued service
of Cass' executive officers and key personnel. Cass' future operating results
also depend in significant part upon Cass' ability to attract and retain
qualified management, financial, technical, marketing, sales and support
personnel. Competition for qualified personnel is intense, and the Company
cannot ensure success in attracting or retaining qualified personnel. There may
be only a limited number of persons with the requisite skills to serve in these
positions, and it may be increasingly difficult for the Company to hire
personnel over time. Cass' business, financial condition and results of
operations could be materially adversely affected by the loss of any of its key
employees, by the failure of any key employee to perform in his or her current
position, or by Cass' inability to attract and retain skilled employees.

Changes in regulation or oversight may have a material adverse impact on Cass'
operations.

The Company is subject to extensive regulation, supervision and examination by
the Missouri Division of Finance, the FDIC, the FRB, the SEC and other
regulatory bodies. Such regulation and supervision governs the activities in
which the Company may engage. Regulatory authorities have extensive discretion
in their supervisory and enforcement activities, including the imposition of
restrictions on Cass' operations, investigations and limitations related to
Cass' securities, the classification of Cass' assets and determination of the
level of Cass' allowance for loan losses. Any change in such regulation and
oversight, whether in the form of regulatory policy, regulations, legislation or
supervisory action, may have a material adverse impact on Cass' operations.

Legal and regulatory proceedings and related matters with respect to the
financial services industry, including those directly involving the Company and
its subsidiaries, could adversely affect Cass or the financial services industry
in general.

                                       5
<PAGE>

The Company is subject to various legal and regulatory proceedings. It is
inherently difficult to assess the outcome of these matters, and there can be no
assurance that the Company will prevail in any proceeding or litigation. Any
such matter could result in substantial cost and diversion of Cass' efforts,
which by itself could have a material adverse effect on Cass' financial
condition and operating results. Further, adverse determinations in such matters
could result in actions by Cass' regulators that could materially adversely
affect Cass' business, financial condition or results of operations.

The Company's accounting policies and methods are the basis of how Cass reports
its financial condition and results of operations, and they may require
management to make estimates about matters that are inherently uncertain. In
addition, changes in accounting policies and practices, as may be adopted by the
regulatory agencies, the Financial Accounting Standards Board, or other
authoritative bodies, could materially impact Cass' financial statements.

The Company's accounting policies and methods are fundamental to how Cass
records and reports its financial condition and results of operations.
Management must exercise judgment in selecting and applying many of these
accounting policies and methods in order to ensure that they comply with
generally accepted accounting principles and reflect management's judgment as to
the most appropriate manner in which to record and report Cass' financial
condition and results of operations. In some cases, management must select the
accounting policy or method to apply from two or more alternatives, any of which
might be reasonable under the circumstances yet might result in the Company
reporting materially different amounts than would have been reported under a
different alternative.

Cass has identified four accounting policies as being "critical" to the
presentation of its financial condition and results of operations because they
require management to make particularly subjective and/or complex judgments
about matters that are inherently uncertain and because of the likelihood that
materially different amounts would be reported under different conditions or
using different assumptions. More information on Cass' critical accounting
policies is contained in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

From time to time, the regulatory agencies, the Financial Accounting Standards
Board ("FASB"), and other authoritative bodies change the financial accounting
and reporting standards that govern the preparation of the Company's financial
statements. These changes can be hard to predict and can materially impact how
management records and reports the Company's financial condition and results of
operations.

Cass is subject to examinations and challenges by tax authorities, which, if not
resolved in the Company's favor, could adversely affect the Company's financial
condition and results of operations.

In the normal course of business, Cass and its affiliates are routinely subject
to examinations and challenges from federal and state tax authorities regarding
the amount of taxes due in connection with investments it has made and the
businesses in which it is engaged. Recently, federal and state taxing
authorities have become increasingly aggressive in challenging tax positions
taken by financial institutions. These tax positions may relate to tax
compliance, sales and use, franchise, gross receipts, payroll, property and
income tax issues, including tax base, apportionment and tax credit planning.
The challenges made by tax authorities may result in adjustments to the timing
or amount of taxable income or deductions or the allocation of income among tax
jurisdictions. If any such challenges are made and are not resolved in the
Company's favor, they could have an adverse effect on Cass' financial condition
and results of operations.

There could be terrorist activities or other hostilities, which may adversely
affect the general economy, financial and capital markets, specific industries,
and the Company.

The terrorist attacks in September 2001 in the United States and ensuing events,
as well as the resulting decline in consumer confidence, had a material adverse
effect on the economy. Any similar future events may disrupt Cass' operations or
those of its customers. In addition, these events had and may continue to have
an adverse impact on the U.S. and world economy in general and consumer
confidence and spending in particular, which could harm Cass' operations. Any of
these events could increase volatility in the U.S. and world financial markets,
which could harm Cass' stock price and may limit the capital resources available
to its customers and the Company. This could have a significant impact on Cass'
operating results, revenues and costs and may result in increased volatility in
the market price of Cass' common stock.

There could be natural disasters, including, but not limited to, hurricanes,
tornadoes, earthquakes, fires and floods, which may adversely affect the general
economy, financial and capital markets, specific industries, and the Company.

The Company has significant operations and customer base in Missouri,
California, Ohio, Massachusetts, South Carolina, and other regions where natural
disasters may occur. These regions are known for being vulnerable to

                                       6
<PAGE>

natural disasters and other risks, such as tornadoes, hurricanes, earthquakes,
fires and floods. These types of natural disasters at times have disrupted the
local economy, Cass' business and customers and have posed physical risks to
Cass' property. A significant natural disaster could materially affect Cass'
operating results.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company's headquarters are located at 13001 Hollenberg Drive, Bridgeton,
Missouri. This location is owned by the Company, and includes a building with
approximately 61,500 square feet of office space. The Company also owns a
production facility of approximately 45,500 square feet located at 2675
Corporate Exchange Drive, Columbus, Ohio. Additional production facilities are
located in Lowell, Massachusetts where approximately 25,800 square feet of
office space is leased through March 2011, Greenville, South Carolina where
approximately 8,500 square feet of office space is leased through November 2013,
Wellington, Kansas where approximately 2,000 square feet of office space is
leased through July 2011 and Columbus, Ohio where approximately 8,500 square
feet of office space is leased through November 2009.

The Bank's headquarters are also located at 13001 Hollenberg Drive, Bridgeton,
Missouri. The Bank occupies approximately 20,500 square feet of the 61,500
square foot building. In addition, the Bank owns a banking facility near
downtown St. Louis, Missouri that consists of approximately 1,750 square feet
with adjoining drive-up facilities. The Bank has additional leased facilities in
Maryland Heights, Missouri (2,500 square feet), Fenton, Missouri (2,000 square
feet), Chesterfield, Missouri (2,850 square feet) and Santa Ana, California
(3,400 square feet).

Management believes that these facilities are suitable and adequate for the
Company's operations.

ITEM 3. LEGAL PROCEEDINGS

The Company and its subsidiaries are not involved in any pending proceedings
other than ordinary routine litigation incidental to their businesses.
Management believes none of these proceedings, if determined adversely, would
have a material effect on the businesses or financial conditions of the Company
or its subsidiaries.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of 2008.

                                       7
<PAGE>

                                    PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock is quoted on The Nasdaq Global Select Market(R) under
the symbol "CASS." As of March 2, 2009, there were 180 holders of record of the
Company's common stock. High and low sale prices, as reported by The Nasdaq
Global Select Market for each quarter of 2008 and 2007 were as follows:

<TABLE>
<CAPTION>
                                2008                        2007
                                ----                        ----
                         High         Low           High           Low
                         ----         ---           ----           ---
<S>                   <C>          <C>            <C>            <C>
  1st Quarter         $ 34.87      $ 25.01        $ 35.41        $ 29.34
  2nd Quarter           34.71        29.40          34.35          28.28
  3rd Quarter           39.15        29.00          34.77          28.90
  4th Quarter           36.50        27.14          40.55          30.00
</TABLE>

The Company has continuously paid regularly scheduled cash dividends since 1934
and expects to continue to pay quarterly cash dividends in the future. Cash
dividends paid per share, restated for stock dividends, by the Company during
the two most recent fiscal years were as follows:

<TABLE>
<CAPTION>
                                         2008              2007
                                         ----              ----
<S>                                    <C>               <C>
             March                     $ .120            $ .109
             June                        .120              .109
             September                   .120              .109
             December                    .130              .120
</TABLE>

The Company maintains a treasury stock buyback program pursuant to which the
Board of Directors has authorized the repurchase of up to 300,000 shares of the
Company's common stock. The Company repurchased 120,000 shares for $3,984,000 in
2008 and did not repurchase any shares during 2007. As of December 31, 2008,
180,000 shares remained available for repurchase under the program. A portion of
the repurchased shares may be used for the Company's employee benefit plans, and
the balance will be available for other general corporate purposes. The stock
repurchase authorization does not have an expiration date and the pace of
repurchase activity will depend on factors such as levels of cash generation
from operations, cash requirements for investments, repayment of debt, current
stock price, and other factors. The Company may repurchase shares from time to
time on the open market or in private transactions, including structured
transactions. The stock repurchase program may be modified or discontinued at
any time.

                                       8
<PAGE>

Performance Quoted on The Nasdaq Stock Market for the last Five Fiscal Years

The following graph compares the cumulative total returns over the last five
fiscal years of a hypothetical investment of $100 in shares of common stock of
the Company with a hypothetical investment of $100 in The Nasdaq Stock Market
(US) ("Nasdaq") and in the index of Nasdaq computer and data processing stocks.
The graph assumes $100 was invested on December 31, 2003, with dividends
reinvested. Returns are based on period end prices.



[THE FOLLOWING DATA IS A REPRESENTATION OF A LINE CHART IN THE PRINTED MATERIAL]

<TABLE>
<CAPTION>
                                                        Dec-2003     Dec-2004      Dec-2005     Dec-2006    Dec-2007     Dec-2008
                                                        --------     --------      --------     --------    --------     --------
<S>                                        <C>          <C>          <C>           <C>          <C>         <C>          <C>
Cass Information Systems Inc.               Return %                   18.84         44.64        65.28        2.98        -7.44
                                            Cum $        100.00       118.84        171.89       284.09      292.56       270.80

NASDAQ Computer and Data Processing Index   Return %                   10.25          3.39        12.28       22.19       -42.44
                                            Cum $        100.00       110.25        113.99       127.99      156.39        90.02

NASDAQ 100 Stock Index                      Return %                   10.75          1.90         7.30       19.28       -41.57
                                            Cum $        100.00       110.75        112.85       121.09      144.43        84.39
</TABLE>

                                       9
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The following table presents selected financial information for each of the five
years ended December 31. The selected financial data should be read in
conjunction with the Company's consolidated financial statements and
accompanying notes included in Item 8 of this report.

<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)    2008            2007           2006           2005            2004
---------------------------------------------------------------------------------------------------------------------
<S>                                          <C>             <C>            <C>            <C>             <C>
Fee revenue and other income                 $ 53,170        $ 48,200       $ 42,821       $ 38,653        $ 34,047
Interest income on loans                       34,204          36,288         36,164         32,214          27,055
Interest income on debt and equity securities   7,716           5,531          3,627          2,441           2,558
Other  interest income                          2,218           7,527          7,262          3,596           1,120
   Total interest income                       44,138          49,346         47,053         38,251          30,733
Interest expense on deposits                    3,179           7,728          6,414          4,486           3,024
Interest expense on short-term borrowings          12               6              7              5               1
Interest on debentures and other                  187             230            198            196              70
   Total interest expense                       3,378           7,964          6,619          4,687           3,095
   Net interest income                         40,760          41,382         40,434         33,564          27,638
Provision for loan losses                       2,200             900          1,150            775             550
   Net interest income after provision         38,560          40,482         39,284         32,789          27,088
Operating expense                              65,564          62,739         58,277         55,216          47,045
   Income before income tax expense            26,166          25,943         23,828         16,226          14,090
   Income tax expense                           7,160           8,148          8,367          4,982           4,209
---------------------------------------------------------------------------------------------------------------------
Income from continuing operations             $19,006        $ 17,795       $ 15,461       $ 11,244        $  9,881
Net loss from discontinued operations              --              --           (395)          (298)         (1,876)
Net income                                     19,006          17,795         15,066         10,946           8,005
=====================================================================================================================
Diluted earnings per share from
   continuing operations                     $   2.03        $   1.90       $   1.65       $   1.21        $   1.06
Diluted  earnings per share                      2.03            1.90           1.61           1.17             .86
Dividends per share                              .490            .447           .400           .352            .332
Dividend payout ratio                           24.14%         23.53%          24.84%         29.24%          37.79%
=====================================================================================================================
Average total assets                         $922,471        $891,734       $839,208       $776,899        $709,518
Average net loans                             546,110         508,621        516,164        506,898         471,412
Average debt and equity securities            197,273         141,363         91,555         71,037          78,745
Average total deposits                        241,844         279,831        278,546        290,555         292,379
Average subordinated convertible debentures     3,669           3,699          3,700          3,700           1,314
Average total shareholders' equity            104,185          89,427         79,736         71,892          65,804
=====================================================================================================================
Return on average total assets                   2.06%           2.00%          1.80%          1.41%           1.13%
Return on average equity                        18.24           19.90          18.89          15.23           12.16
Average equity to assets ratio                  11.29           10.03           9.50           9.25            9.27
Equity to assets ratio at year-end              12.00           11.01           9.78           9.20            9.71
Net interest margin                              5.34            5.45           5.50           4.95            4.48
Allowance for loan losses to loans at year-end   1.09            1.26           1.31           1.19            1.21
Nonperforming assets to loans and foreclosed
   assets                                         .57             .77            .16            .28             .18
Net loan charge-offs to average loans
   outstanding                                    .37             .24            .16            .10              --
=====================================================================================================================
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following discussion and analysis provides information about the financial
condition and results of operations of the Company for the years ended December
31, 2008, 2007 and 2006. All share and per share data have been restated to give
effect to the 50% and 10% stock dividends issued on September 15, 2006 and
December 17, 2007, respectively. This discussion and analysis should be read in
conjunction with the Company's consolidated financial statements and
accompanying notes and other selected financial data presented elsewhere in this
report.

                                       10
<PAGE>

Executive Overview

Cass provides payment and information processing services to large
manufacturing, distribution and retail enterprises from its processing centers
in St. Louis, Missouri, Columbus, Ohio, Boston, Massachusetts, Greenville, South
Carolina and Wellington, Kansas. The Company's services include freight invoice
rating, payment processing, auditing, and the generation of accounting and
transportation information. Cass also processes and pays utility invoices, which
include electricity, gas and telecommunications expenses, and is a provider of
telecom expense management solutions. Cass extracts, stores and presents
information from freight, utility and telecommunication invoices, assisting its
customers' transportation, energy and information technology managers in making
decisions that will enable them to improve operating performance. The Company
receives data from multiple sources, electronic and otherwise, and processes the
data to accomplish the specific operating requirements of its customers. It then
provides the data in a central repository for access and archiving. The data is
finally transformed into information through the Company's databases that allow
client interaction as required and provide Internet-based tools for analytical
processing. The Company also, through Cass Commercial Bank, its St. Louis,
Missouri based bank subsidiary, provides banking services in the St. Louis
metropolitan area, Orange County, California and other selected cities in the
United States. In addition to supporting the Company's payment operations, the
Bank provides banking services to its target markets, which include privately
owned businesses and churches and church-related ministries.

The specific payment and information processing services provided to each
customer are developed individually to meet each customer's requirements, which
can vary greatly. In addition, the degree of automation such as electronic data
interchange, imaging, and web-based solutions varies greatly among customers and
industries. These factors combine so that pricing varies greatly among the
customer base. In general, however, Cass is compensated for its processing
services through service fees and account balances that are generated during the
payment process. The amount, type and calculation of service fees vary greatly
by service offering, but generally follow the volume of transactions processed.
Interest income from the balances generated during the payment processing cycle
is affected by the amount of time Cass holds the funds prior to payment and the
dollar volume processed. Both the number of transactions processed and the
dollar volume processed are therefore key metrics followed by management. Other
factors will also influence revenue and profitability, such as changes in the
general level of interest rates, which have a significant effect on net interest
income. The funds generated by these processing activities are invested in
overnight investments, investment grade securities and loans generated by the
Bank. The Bank earns most of its revenue from net interest income, or the
difference between the interest earned on its loans and investments and the
interest paid on its deposits. The Bank also assesses fees on other services
such as cash management services.

Industry-wide factors that impact the Company include the willingness of large
corporations to outsource key business functions such as freight, utility and
telecommunication payment and audit. The benefits that can be achieved by
outsourcing transaction processing and the management information generated by
Cass' systems can be influenced by factors such as the competitive pressures
within industries to improve profitability, the general level of transportation
costs, deregulation of energy costs and consolidation of telecommunication
providers. Economic factors that impact the Company include the general level of
economic activity that can affect the volume and size of invoices processed, the
ability to hire and retain qualified staff and the growth and quality of the
loan portfolio. As lower levels of economic activity are encountered, such as
those experienced in the second half of 2008, the number and total dollar amount
of transactions processed by the Company may decline thereby reducing fee
revenue, interest income, and possibly liquidity. The general level of interest
rates also has a significant effect on the revenue of the Company. As discussed
in greater detail in Item 7A, "Quantitative and Qualitative Disclosures about
Market Risk," a decline in the general level of interest rates, as has been
experienced during 2008, can have a negative impact on net interest income.

On July 7, 2006, the Company acquired 100% of the stock of NTransit, Inc.
("NTransit"), a company that provides auditing and expense management of parcel
shipments. While this acquisition did not meet the Regulation S-X criteria of a
significant business combination, it positioned the Company to expand its
offerings in the specialized service and expertise in parcel shipping, which is
a unique segment of the transportation industry that has experienced significant
growth in recent years.

Total fee revenue and other income in 2008 increased $4,970,000, or 10%, and net
interest income after provision for loan losses (also referred to as net
investment income) decreased $1,922,000, or 5%, while total operating expenses
increased $2,825,000, or 5%. These results were driven by a 1,950,000, or 11%,
increase in items processed and $4,715,346,000, or 21%, increase in dollars
processed, which were somewhat offset by the impact of a higher provision for
loan losses and the decline in the general level of interest rates. The asset
quality of the Company's loans and investments appears strong.

Currently, management views Cass' major opportunity and challenge as the
continued expansion of its payment and information processing service offerings
and customer base. Management intends to accomplish this by maintaining

                                       11
<PAGE>

the Company's lead in applied technology, which we believe, when combined with
the security and processing controls of the Bank, makes Cass unique in the
industry.

Recent Developments

The U.S. and global economies have experienced and are experiencing significant
stress and disruptions in the financial sector. In response to the financial
crisis, in October 2008, the Emergency Economic Stabilization Act of 2008 (the
"EESA") was signed into law. In addition, the U.S. Treasury Department announced
that it has been authorized to purchase equity stakes in participating U.S.
financial institutions. Under this program, known as the Troubled Asset Relief
Program - Capital Purchase Program (the "TARP Capital Purchase Program"), the
U.S. Treasury Department will make capital available to participating U.S.
financial institutions in exchange for, generally, preferred stock.

Further, after receiving a recommendation from the boards of the FDIC and the
FRB, the U.S. Treasury signed the systemic risk exception to the FDIC Act,
enabling the FDIC to temporarily provide a 100% guarantee of the senior debt of
all FDIC-insured institutions and their holding companies, as well as
non-interest bearing transaction deposit accounts under a Temporary Liquidity
Guarantee Program.

After careful assessment, and due to its strong capital base, the Company chose
not to participate in the TARP Capital Purchase Program.

The Company elected to participate in the Temporary Liquidity Guarantee Program,
as not participating could have put the Company at a competitive disadvantage
without the 100% FDIC guarantee of its non-interest bearing transaction deposit
accounts. The FDIC guarantee of senior debt was not a factor in the Company's
decision process, as it has no senior debt outstanding.

Critical Accounting Policies

The Company has prepared the consolidated financial information in this report
in accordance with U.S. generally accepted accounting principles ("U.S. GAAP").
In preparing the consolidated financial statements in accordance with U.S. GAAP,
management makes estimates and assumptions that affect the reported amount of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenue and
expenses during the reporting period. These estimates have been generally
accurate in the past, have been consistent and have not required any material
changes. There can be no assurances that actual results will not differ from
those estimates. Certain accounting policies that require significant management
estimates and are deemed critical to our results of operations or financial
position have been discussed with the Audit Committee of the Board of Directors
and are described below.

Impairment of Assets. The Company periodically evaluates certain long-term
assets such as intangible assets including goodwill, foreclosed assets,
internally developed software and investments in private equity securities for
impairment. Generally, these assets are initially recorded at cost, and
recognition of impairment is required when events and circumstances indicate
that the carrying amounts of these assets will not be recoverable in the future.
If impairment occurs, various methods of measuring impairment may be called for
depending on the circumstances and type of asset, including quoted market
prices, estimates based on similar assets, and estimates based on valuation
techniques such as discounted projected cash flows. Assets held for sale are
carried at the lower of cost or fair value less costs to sell. These policies
affect both segments of the Company and require significant management
assumptions and estimates that could result in materially different results if
conditions or underlying circumstances change.

Pension Plans. The amounts recognized in the consolidated financial statements
related to pensions are determined from actuarial valuations. Inherent in these
valuations are assumptions including expected return on plan assets, discount
rates at which the liabilities could be settled at December 31, 2008, rate of
increase in future compensation levels and mortality rates. These assumptions
are updated annually and are disclosed in Note 12 to the consolidated financial
statements. The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 158, "Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans" ("SFAS No. 158") on December 31, 2006. SFAS No. 158
requires companies to recognize the overfunded or underfunded status of a
defined benefit postretirement plan as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income. The funded status is
measured as the difference between the fair value of the plan assets and the
projected benefit obligation as of the date of its fiscal year-end.

                                       12
<PAGE>

Income Taxes. The objectives of accounting for income taxes are to recognize the
amount of taxes payable or refundable for the current year and deferred tax
liabilities and assets for the future tax consequences of events that have been
recognized in an entity's financial statements or tax returns. Judgment is
required in addressing the future tax consequences of events that have been
recognized in the Company's financial statements or tax returns such as the
realization of deferred tax assets, changes in tax laws or interpretations
thereof. In addition, the Company is subject to the continuous examination of
its income tax returns by the Internal Revenue Service and other taxing
authorities. Effective January 1, 2007, the Company adopted FASB Interpretation
No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides
guidance for the recognition threshold and measurement attribute for financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. See Note 15 to the consolidated financial statements.

Allowance for Loan Losses. The Company performs periodic and systematic detailed
reviews of its loan portfolio to assess overall collectability. The level of the
allowance for loan losses reflects management's estimate of the collectability
of the loan portfolio. Although these estimates are based on established
methodologies for determining allowance requirements, actual results can differ
significantly from estimated results. These policies affect both segments of the
Company. The impact and associated risks related to these policies on the
Company's business operations are discussed in the "Provision and Allowance for
Loan Losses" section of this report.

Summary of Results

<TABLE>
<CAPTION>
                                                        December 31,                                % Change
                                        ---------------------------------------------     ----------------------------
(In thousands, except per share data)         2008          2007               2006       2008 v. 2007    2007 v. 2006
----------------------------------------------------------------------------------------------------------------------
<S>                                     <C>           <C>                <C>                  <C>            <C>
Total processing volume                      36,416        32,740             29,266          11.2%          11.9%
Total processing dollars                $26,900,535   $22,185,189        $19,871,281          21.3%          11.6%
Payment and processing fees                 $50,721       $45,642            $40,343          11.1%          13.1%
Net investment income                       $38,560       $40,482            $39,284          (4.7)%          3.1%
Total net revenue                           $91,730       $88,682            $82,105           3.4%           8.0%
Average earning assets                     $841,367      $809,739           $762,397           3.9%           6.2%
Net interest margin*                           5.34%         5.45%              5.50%         (2.0)%          (.9)%
Net income from continuing operations       $19,006       $17,795            $15,461           6.8%          15.1%
Diluted EPS from continuing operations        $2.03         $1.90              $1.65           6.8%          15.2%
Net income                                  $19,006       $17,795            $15,066           6.8%          18.1%
Diluted earnings per share                    $2.03         $1.90              $1.61           6.8%          18.0%
Return on average assets                       2.06%         2.00%              1.80%
Return on average equity                      18.24%        19.90%             18.89%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Presented on a tax-equivalent basis

The results of 2008 compared to 2007 include the following significant items:

     Payment and processing fee revenue from continuing operations increased as
     the number of transactions processed increased. This increase was driven
     mainly by Utility Information Services processing activity which added a
     significant amount of new business during 2008. Transportation Information
     Services also achieved record levels of processing during 2008 and record
     levels of new customers added.

     Net investment income decreased $1,922,000 primarily due to both a decline
     in the general level of interest rates and an increase in the provision for
     loan losses. The net interest margin on a tax equivalent basis was 5.34% in
     2008 compared to 5.45% in 2007. The growth in average earning assets was
     funded mainly by increases in accounts and drafts payable due to the
     increase in dollars processed.

     There were $552,000 gains from the sale of securities in 2008 and no gains
     in 2007. Bank service fees decreased $352,000, or 21%, to $1,330,000. Other
     income from continuing operations decreased $309,000 in 2008 or 35%.
     Operating expenses from continuing operations increased $2,825,000, or 5%,
     due mainly to expenses relating to the increase in processing activity.

The results of 2007 compared to 2006 include the following significant items:

     Payment and processing fee revenue from continuing operations increased as
     the number of transactions processed increased. This increase was driven
     mainly by Utility Information Services processing activity which added a
     significant amount of new business during 2007. Transportation Information
     Services also achieved record levels of processing during 2007 and record
     levels of new customers added.

                                       13
<PAGE>

     Net investment income increased $1,198,000 due to an increase in average
     earning assets. The net interest margin on a tax equivalent basis was 5.45%
     in 2007 compared to 5.50% in 2006. The growth in average earning assets was
     funded mainly by increases in accounts and drafts payable due to the
     increase in dollars processed.

     There were no gains from the sale of securities in 2007 and 2006. Bank
     service fees increased $57,000, or 4%, to $1,682,000. Other income from
     continuing operations remained fairly constant at $876,000 in 2007 and
     $853,000 in 2006. Operating expenses from continuing operations increased
     $4,462,000, or 8%, due mainly to expenses relating to the increase in
     processing activity.

Fee Revenue and Other Income from Continuing Operations

The Company's fee revenue is derived mainly from freight and utility payment and
processing fees. As the Company provides its processing and payment services, it
is compensated by service fees which are typically calculated on a per-item
basis and by the accounts and drafts payable balances generated in the payment
process which can be used to generate interest income. Processing volumes, fee
revenue and other income for the years ended December 31, 2008, 2007 and 2006
were as follows:

<TABLE>
<CAPTION>
                                                         December 31,                          % Change
                                       -------------------------------------------   ------------------------------
(In thousands)                                2008           2007            2006     2008 v. 2007    2007 v. 2006
-------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>             <C>               <C>            <C>
Freight invoice transaction volume           25,854         23,480          22,601        10.1%           3.9%
Freight invoice dollar volume           $17,482,520    $14,519,906     $14,199,389        20.4%           2.3%
Utility transaction volume                   10,562          9,260           6,665        14.1%          38.9%
Utility transaction dollar volume        $9,418,015     $7,665,283      $5,671,892        22.9%          35.1%
Payment and processing revenue              $50,721        $45,642         $40,343        11.1%          13.1%
Bank service fees                            $1,330         $1,682          $1,625       (20.9)%          3.5%
Gains on sales of investment securities        $552             --              --         N/A            N/A
Other                                          $567           $876            $853       (35.3)%          2.7%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

Fee revenue and other income in 2008 compared to 2007 include the following
significant pre-tax components:

Freight volume increased by 2,374,000 transactions during the past year. This
increase was due mainly to new business in 2008 somewhat offset by the impact of
the general economic slow down on existing customer processing activity,
particularly in the second half of the year. Utility volume experienced solid
growth, adding more than 1,302,000 transactions in 2008. This growth was due
mainly to new business. These transaction volume increases drove most of the
$5,079,000 increase in payment and processing revenue.

Fee revenue and other income in 2007 compared to 2006 include the following
significant pre-tax components:

Freight volume increased by 879,000 transactions during 2007. This increase was
due mainly to new business in 2007. Utility volume experienced significant
growth, adding more than 2,595,000 transactions in 2007. This growth was due
mainly to new business. These transaction volume increases drove most of the
$5,299,000 increase in payment and processing revenue.

Net Interest Income

Net interest income is the difference between interest earned on loans,
investments, and other earning assets and interest expense on deposits and other
interest-bearing liabilities. Net interest income is a significant source of the
Company's revenues. The following table summarizes the changes in tax-equivalent
net interest income and related factors for the three periods ended December 31,
2008, 2007 and 2006:

<TABLE>
<CAPTION>
                                                                                 % Change          % Change
(In Thousands)                             2008          2007         2006      2008 v. 2007      2007 v. 2006
---------------------------------------------------------------------------------------------------------------
<S>                                      <C>          <C>          <C>            <C>                <C>
Average earning assets                   $841,366     $809,739     $762,397          3.9%             6.2%
Net interest income*                       44,966       44,115       41,950          1.9%             5.2%
Net interest margin*                        5.34%        5.45%        5.50%        (2.0)%            (.9)%
Yield on earning assets                     5.75%        6.43%        6.37%       (10.6)%              .9%
Rate on interest bearing liabilities        2.16%        4.20%        3.62%       (48.6)%            16.0%
---------------------------------------------------------------------------------------------------------------
</TABLE>
*Presented on a tax-equivalent basis using a tax rate of 35%.

Net interest income in 2008 compared to 2007:

         The increase in net interest income was caused by the increase in
         earning assets partially offset by a decrease in net interest margin.
         The increase in earning assets was funded mainly by the increase in
         accounts and drafts payable due to the increased dollars processed. The
         decrease in net interest margin was due mainly to

                                       14
<PAGE>

         the reduction in the general level of interest rates. The Company is
         negatively affected by decreases in the level of interest rates.
         Conversely, the Company is positively affected by increases in the
         level of interest rates due to the fact that its rate sensitive assets
         significantly exceed its rate sensitive liabilities. This is primarily
         due to the non-interest-bearing liabilities generated by the Company
         in the form of accounts and drafts payable. More information is
         contained in the tables below and in Item 7A of this report.

         Total average loans increased $37,210,000, or 7%, to $552,333,000.
         Loans have a positive effect on interest income and the net interest
         margin due to the fact that loans are one of the Company's highest
         yielding earning assets for any given maturity.

         Total average investment in securities increased $55,910,000, or 40%,
         to $197,273,000. The investment portfolio will expand and contract over
         time as the interest rate environment changes and the Company manages
         its liquidity and interest rate position. The increase in 2008 was due
         to the purchase of state and political subdivision securities with AA
         or better credit ratings and maturities approaching ten years. With the
         declining interest rate environment, the Company made these purchases
         to reduce the level of short-term rate sensitive assets. All purchases
         were made in accordance with the Company's investment policy. Total
         average federal funds sold and other short-term investments decreased
         $61,493,000, or 40%, to $91,760,000. This decrease was the primary
         offset to the previously mentioned increases in loans and investment
         securities.

         The Bank's average interest-bearing deposits decreased $33,634,000, or
         18%, compared to the prior year. This decrease was primarily the result
         of the reduction of higher-cost time deposits. Average rates paid on
         interest-bearing liabilities decreased from 4.20% to 2.16% as a result
         of an overall decline in the interest rate environment during 2008
         combined with the previously mentioned reduction in higher-cost time
         deposits.

Net interest income in 2007 compared to 2006:

         The increase in net interest income was caused by the increase in
         earning assets partially offset by a slight decrease in net interest
         margin. The increase in earning assets was funded mainly by the
         increase in accounts and drafts payable due to the increased dollars
         processed. The decrease in net interest margin was due mainly to the
         reduction in the general level of interest rates. The Company is
         negatively affected by decreases in the level of interest rates.
         Conversely, the Company is positively affected by increases in the
         level of interest rates due to the fact that its rate sensitive assets
         significantly exceed its rate sensitive liabilities. This is primarily
         due to the non-interest-bearing liabilities generated by the Company in
         the form of accounts and drafts payable. More information is contained
         in the tables below and in Item 7A of this report.

         Total average loans decreased $7,244,000, or 1%, to $515,123,000. Loans
         have a positive effect on interest income and the net interest margin
         due to the fact that loans are one of the Company's highest yielding
         earning assets for any given maturity.

         Total average investment in securities increased $49,808,000, or 54%,
         to $141,363,000. The investment portfolio will expand and contract over
         time as the interest rate environment changes and the Company manages
         its liquidity and interest rate position. The increase in 2007 was due
         to the purchase of state and political subdivision securities with AA
         or better credit ratings and maturities approaching ten years. With the
         expectations of a declining interest rate environment, the Company made
         these purchases to reduce the level of short-term rate sensitive
         assets. All purchases were made in accordance with the Company's
         investment policy. Total average federal funds sold and other
         short-term investments increased $4,778,000, or 3%, to $153,253,000.
         This increase was funded by the increase in accounts and drafts
         payable.

         The Bank's average interest-bearing deposits remained relatively flat
         with a $6,450,000, or 4%, increase compared to the prior year. Average
         demand deposits decreased $5,165,000, or 5%, as customers moved their
         deposited funds into higher yielding off-balance sheet investment
         products. Average rates paid on interest-bearing liabilities increased
         from 3.62% to 4.20% as a result of increased rate competition for
         savings deposits and certificates of deposit in the markets served by
         the Bank.

                                       15
<PAGE>

Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rate and
Interest Differential

The following table contains condensed average balance sheets for each of the
periods reported, the tax-equivalent interest income and expense on each
category of interest-earning assets and interest-bearing liabilities, and the
average yield on such categories of interest-earning assets and the average
rates paid on such categories of interest-bearing liabilities for each of the
periods reported:

<TABLE>
<CAPTION>
                                             2008                              2007                              2006
                                  --------------------------       --------------------------        ----------------------------
                                   Interest                        Interest                          Interest
                                   Average   Income/  Yield/       Average    Income/  Yield/        Average     Income/  Yield/
(Dollars in thousands)             Balance   Expense    Rate       Balance    Expense    Rate        Balance     Expense    Rate
---------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>        <C>        <C>       <C>         <C>        <C>         <C>         <C>        <C>
Assets(1)
Earning assets:
   Loans (2,3):
     Taxable                      $548,500   $34,030    6.20%     $509,409    $36,021    7.07%       $516,958    $35,923    6.95%
     Tax-exempt (4)                  3,833       268    6.97         5,714        411    7.19           5,409        371    6.86
   Securities (5):
     Taxable                         2,758        78    2.83        15,309        722    4.72          24,506      1,052    4.29
     Tax-exempt (4)                194,515    11,750    6.04       126,054      7,398    5.87          67,049      3,961    5.91
   Federal funds sold and other
     short-term investments         91,760     2,218    2.42       153,253      7,527    4.91         148,475      7,262    4.89
---------------------------------------------------------------------------------------------------------------------------------
Total earning assets               841,366    48,344    5.75       809,739     52,079    6.43         762,397     48,569    6.37
Nonearning assets:
   Cash and due from banks          11,607                          24,313                             28,645
   Premises and equipment, net      12,393                          12,915                             12,641
   Bank owned life insurance        12,802                          12,261                             11,763
   Goodwill and other
     intangibles, net                8,216                           8,495                              6,167
   Other assets                     42,310                          30,513                             23,531
   Assets related to discontinued
   operations                           --                              --                                267
Allowance for loan losses           (6,223)                         (6,502)                            (6,203)
---------------------------------------------------------------------------------------------------------------------------------
Total assets                      $922,471                        $891,734                           $839,208
---------------------------------------------------------------------------------------------------------------------------------
Liabilities And Shareholders' Equity (1)
Interest-bearing liabilities:
   Interest-bearing demand
     deposits                      $77,835    $1,086    1.40%     $ 67,719     $2,122    3.13%       $ 71,043     $1,831    2.58%
   Savings deposits                 21,434       290    1.35        23,859        795    3.33          25,113        730    2.91
   Time deposits of
     $100 or more                   32,052     1,102    3.44        65,127      3,357    5.15          53,550      2,556    4.77
   Other time deposits              20,712       701    3.38        28,962      1,454    5.02          29,511      1,297    4.40
---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits    152,033     3,179    2.09       185,667      7,728    4.16         179,217      6,414    3.58
   Short-term borrowings               876        12    1.37           138          6    4.35             161          7    4.46
   Subordinated convertible
     debentures                      3,669       187    5.10         3,699        230    5.33           3,700        198    5.35
---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
   liabilities                     156,578     3,378    2.16       189,504      7,964    4.20         183,078      6,619    3.62
Noninterest-bearing liabilities:
   Demand deposits                  89,811                          94,164                             99,329
   Accounts and drafts payable     559,230                         504,678                            468,303
   Other liabilities                12,667                          13,961                              8,107
Liabilities related to
discontinued operations                 --                              --                                655
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities                  818,286                         802,307                            759,472
Shareholders' equity               104,185                          89,427                             79,736
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
   shareholders' equity           $922,471                        $891,734                           $839,208
---------------------------------------------------------------------------------------------------------------------------------
Net interest income                          $44,966                          $44,115                            $41,950
Net interest margin                            5.34%                            5.45%                              5.50%
Interest spread                                3.59%                            2.23%                              2.75%
=================================================================================================================================
</TABLE>

1.   Balances shown are daily averages.
2.   For purposes of these computations, nonaccrual loans are included in the
     average loan amounts outstanding. Interest on nonaccrual loans is recorded
     when received as discussed further in Item 8, Note 1 of this report.
3.   Interest income on loans includes net loan fees of $310,000, $202,000 and
     $213,000 for 2008, 2007 and 2006, respectively.
4.   Interest income is presented on a tax-equivalent basis assuming a tax rate
     of 35% for 2008, 2007 and 2006. The tax-equivalent adjustment was
     approximately $4,206,000, $2,733,000 and $1,516,000 for 2008, 2007 and
     2006, respectively.
5.   For purposes of these computations, yields on investment securities are
     computed as interest income divided by the average amortized cost of the
     investments.

                                       16
<PAGE>

Analysis of Net Interest Income Changes

The following table presents the changes in interest income and expense between
years due to changes in volume and interest rates.

<TABLE>
<CAPTION>
                                                             2008 Over 2007                      2007 Over 2006
                                                      -----------------------------       -----------------------------
(Dollars in thousands)                                Volume(1)   Rate(1)     Total       Volume(1)   Rate(1)     Total
-----------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>      <C>        <C>             <C>         <C>     <C>
Increase (decrease) in interest income:
   Loans (2,3):
     Taxable                                          $2,643   $(4,634)   $(1,991)         $(527)     $625       $98
     Tax-exempt (4)                                     (132)      (11)      (143)            22        18        40
   Securities:
     Taxable                                            (433)     (211)      (644)          (426)       96      (330)
     Tax-exempt (4)                                    4,129       223      4,352          3,464       (27)    3,437
   Federal funds sold and other
     short-term investments                           (2,343)   (2,966)    (5,309)           234        31       265
-----------------------------------------------------------------------------------------------------------------------
Total interest income                                 $3,864   $(7,599)   $(3,735)        $2,767      $743    $3,510
-----------------------------------------------------------------------------------------------------------------------
Interest expense on:
   Interest-bearing demand deposits                      281    (1,317)    (1,036)           (89)      380       291
   Savings deposits                                      (74)     (431)      (505)           (36)      101        65
   Time deposits of $100 or more                      (1,363)     (892)    (2,255)           585       216       801
   Other time deposits                                  (350)     (403)      (753)           (24)      181       157
   Short-term borrowings                                  13        (7)         6             (1)       --        (1)
   Subordinated convertible debenture                    (16)      (27)       (43)             6        26        32
-----------------------------------------------------------------------------------------------------------------------
Total interest expense                                (1,509)   (3,077)    (4,586)           441       904     1,345
-----------------------------------------------------------------------------------------------------------------------
Net interest income                                   $5,373   $(4,522)      $851         $2,326     $(161)   $2,165
=======================================================================================================================
</TABLE>
1.   The change in interest due to the combined rate/volume variance has been
     allocated in proportion to the absolute dollar amounts of the change in
     each.
2.   Average balances include nonaccrual loans.
3.   Interest income includes net loan fees.
4.   Interest income is presented on a tax-equivalent basis assuming a tax rate
     of 35% for 2008, 2007 and 2006.

Loan Portfolio

Interest earned on the loan portfolio is a primary source of income for the
Company. The loan portfolio was $591,976,000 and represented 67% of the
Company's total assets as of December 31, 2008 and generated $34,204,000 in
revenue during the year then ended. The Company had no sub-prime mortgage loans
or residential development loans in its portfolio as of December 31, 2008. The
following tables show the composition of the loan portfolio at the end of the
periods indicated and remaining maturities for loans as of December 31, 2008.

Loans by Type
(At December 31)

<TABLE>
<CAPTION>
(Dollars in thousands)                         2008           2007            2006           2005           2004
--------------------------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>             <C>            <C>            <C>
Commercial and industrial                  $118,044       $100,827        $113,162       $146,892       $117,777
Real estate: (Commercial and Church)
   Mortgage                                 412,788        360,907         352,044        348,554        346,711
   Construction                              56,221         31,082          29,779         28,170         25,838
Industrial revenue bonds                      3,363          4,149           6,293          4,514          4,955
Installment                                      --             --              --            107          1,741
Other                                         1,560          1,490           2,847          1,069          3,426
--------------------------------------------------------------------------------------------------------------------
Total loans                                $591,976       $498,455        $504,125       $529,306       $500,448
====================================================================================================================
</TABLE>

                                       17
<PAGE>

Loans by Maturity
(At December 31, 2008)

<TABLE>
<CAPTION>
                                        One Year              Over 1 Year                 Over
                                        Or Less             Through 5 Years              5 Years
                                   -----------------     --------------------       ------------------
                                   Fixed    Floating     Fixed       Floating       Fixed     Floating
(Dollars in thousands)             Rate     Rate(1)      Rate        Rate(1)        Rate      Rate(1)       Total
-------------------------------------------------------------------------------------------------------------------
<S>                              <C>        <C>          <C>          <C>          <C>         <C>        <C>
Commercial and industrial        $21,294    $ 68,597     $ 18,387     $ 8,505      $1,261      $    --    $118,044
Real estate: (Commercial
and Church)
  Mortgage                        41,369      37,161      323,854       6,078       4,326           --     412,788
  Construction                    25,856      13,442        3,398      13,525          --           --      56,221
Industrial revenue bonds           1,026         -          2,337          --          --           --       3,363
Other                                418         933          206           3          --           --       1,560
-------------------------------------------------------------------------------------------------------------------
Total loans                      $89,963    $120,133     $348,182     $28,111      $5,587           --    $591,976
===================================================================================================================
</TABLE>

(1) Loans have been classified as having "floating" interest rates if the rate
specified in the loan varies with the prime commercial rate of interest. Note:
Due to the historically low interest rates encountered during 2008 the Company
instituted a 4% floor for its prime lending rate.

The Company has no concentrations of loans exceeding 10% of total loans, which
are not otherwise disclosed in the loan portfolio composition table and as are
discussed in Item 8, Note 5 of this report. As can be seen in the loan
composition table above and as are discussed in Item 8, Note 5, the Company's
primary market niche for banking services is privately held businesses and
churches and church-related ministries.

Loans to commercial entities are generally secured by the business assets of the
borrower, including accounts receivable, inventory, machinery and equipment, and
the real estate from which the borrower operates. Operating lines of credit to
these companies generally are secured by accounts receivable and inventory, with
specific percentages of each determined on a customer-by-customer basis based on
various factors including the type of business. Intermediate term credit for
machinery and equipment is generally provided at some percentage of the value of
the equipment purchased, depending on the type of machinery or equipment
purchased by the entity. Loans secured exclusively by real estate to businesses
and churches are generally made with a maximum 80% loan to value ratio,
depending upon the Company's estimate of the resale value and ability of the
property to generate cash. The Company's loan policy requires an independent
appraisal for all loans over $250,000 secured by real estate. Company management
monitors the local economy in an attempt to determine whether it has had a
significant deteriorating effect on such real estate credits. When problems are
identified, appraised values are updated on a continual basis, either internally
or through an updated external appraisal.

Loan portfolio changes from December 31, 2007 to December 31, 2008:

         Total loans increased $93,521,000, or 19%, to $591,976,000. This
         increase was the result of two primary factors: 1) the successful
         implementation of new marketing efforts by the Company's lending staff
         and 2) the negative impact of the credit crisis on many of the
         Company's competitors resulted in more attractive loan growth
         opportunities. The growth in real estate construction loans was
         primarily due to increased activity in the church portfolio. At
         year-end, church and church-related real estate and construction loans
         totaled $310,329,000, which represents a 22% increase over 2007.
         Additional details regarding the types and maturities of loans in the
         loan portfolio are contained in the tables above and in Item 8, Note 5.

Loan portfolio changes from December 31, 2006 to December 31, 2007:

         Total loans decreased $5,670,000, or 1%, to $498,455,000. This decrease
         was due mainly to the reduction in commercial and industrial loans as
         loans were paid down. At the end of 2007, church and church-related
         real estate and construction credits totaled $253,626,000, which
         represents a 12% increase over 2006. Additional details regarding the
         types and maturities of loans in the loan portfolio are contained in
         the tables above and in Item 8, Note 5.

Provision and Allowance for Loan Losses

The Company recorded a provision for loan losses of $2,200,000 in 2008, $900,000
in 2007 and $1,150,000 in 2006. The amount of the provisions for loan losses was
derived from the Company's quarterly analysis of the allowance for loan losses
in relation to probable losses in the loan portfolio. The amount of the
provision will fluctuate as determined by these quarterly analyses. The Company
had net loan charge-offs of $2,029,000, $1,212,000 and $842,000 in 2008, 2007
and 2006, respectively. The allowance for loan losses was $6,451,000 at December
31, 2008 compared to $6,280,000 at December 31, 2007 and $6,592,000 at December
31, 2006. The year-end 2008 allowance

                                       18
<PAGE>

represented 1.09% of outstanding loans, compared to 1.26% at year-end 2007 and
1.31% at year-end 2006. From December 31, 2007 to December 31, 2008, the level
of nonperforming loans decreased $1,262,000 from $2,481,000 to $1,219,000, which
represents .21% of outstanding loans. Nonperforming loans are more fully
explained in the section entitled "Nonperforming Assets."

The allowance for loan losses has been established and is maintained to absorb
probable losses in the loan portfolio. An ongoing assessment of risk of loss is
performed to determine if the current balance of the allowance is adequate to
cover probable losses in the portfolio. Charges or credits are made to expense
to cover any deficiency or reduce any excess, as required. The current
methodology employed to determine the appropriate allowance consists of two
components, specific and general. The Company develops specific valuation
allowances on commercial, commercial real estate, and construction loans based
on individual review of these loans and an estimate of the borrower's ability to
repay the loan given the availability of collateral, other sources of cash flow
and collection options available. The general component relates to all other
loans, which are evaluated based on loan grade. The loan grade assigned to each
loan is typically evaluated on an annual basis, unless circumstances require
interim evaluation. The Company assigns a reserve amount consistent with each
loan's rating category. The reserve amount is based on derived loss experience
over prescribed periods. In addition to the amounts derived from the loan
grades, a portion is added to the general reserve to take into account other
factors including national and local economic conditions, downturns in specific
industries including loss in collateral value, trends in credit quality at the
Company and the banking industry, and trends in risk rating changes. As part of
their examination process, federal and state agencies review the Company's
methodology for maintaining the allowance for loan losses and the balance in the
account. These agencies may require the Company to increase the allowance for
loan losses based on their judgments and interpretations about information
available to them at the time of their examination.

The following schedule summarizes activity in the allowance for loan losses and
the allocation of the allowance to the Company's loan categories. During 2008,
the allocation of the allowance to the commercial loan portfolio declined
because one loan with a reserve allocation of $900,000 was paid off and one loan
of $809,000 was charged off. The allocation to the real estate portfolio
increased primarily due to the $51,881,000 in additional loan balances.

Summary of Loan Loss Experience

<TABLE>
<CAPTION>
                                                                          December 31,
                                                   ---------------------------------------------------------
(Dollars in thousands)                                 2008        2007        2006        2005        2004
------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>         <C>         <C>         <C>
Allowance at beginning of year                       $6,280      $6,592      $6,284      $6,037      $5,506
------------------------------------------------------------------------------------------------------------
Loans charged-off:
   Commercial and industrial loans and
     industrial revenue bonds ("IRB's")               2,120         337         864         532          --
   Real estate: (Commercial and Church)
     Mortgage                                            --       1,038          --          22          48
   Other                                                 53          --          --           1          --
------------------------------------------------------------------------------------------------------------
Total loans charged-off                               2,173       1,375         864         555          48
------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged-off:
   Commercial, industrial and IRB's                     136         159          22          10          29
   Real estate: (Commercial and Church)
     Mortgage                                            --           4          --          13          --
Other                                                     8          --          --           4          --
------------------------------------------------------------------------------------------------------------
Total recoveries of loans previously charged-off        144         163          22          27          29
============================================================================================================
Net loans charged-off                                 2,029       1,212         842         528          19
Provision charged to expense                          2,200         900       1,150         775         550
------------------------------------------------------------------------------------------------------------
Allowance at end of year                             $6,451      $6,280      $6,592      $6,284      $6,037
------------------------------------------------------------------------------------------------------------
Loans outstanding:
   Average                                         $552,333    $515,123    $522,367    $512,966    $477,234
   December 31                                      591,976     498,455     504,125     529,306     500,448
Ratio of allowance for loan losses to
   loans outstanding:
   Average                                             1.17%       1.22%       1.26%       1.23%       1.26%
   December 31                                         1.09%       1.26%       1.31%       1.19%       1.21%
Ratio of net charge-offs to
   average loans outstanding                            .37%        .24%        .16%        .10%         --
------------------------------------------------------------------------------------------------------------
</TABLE>

                                       19
<PAGE>

<TABLE>
<S>                                                  <C>         <C>         <C>         <C>         <C>
Allocation of allowance for loan losses(1):
   Commercial, industrial and IRB's                  $1,521      $3,380      $3,507      $3,419      $3,066
   Real estate: (Commercial and Church)
     Mortgage                                         4,343       2,564       2,723       2,645       2,742
     Construction                                       569         318         271         200         207
   Other loans                                           18          18          91          20          22
------------------------------------------------------------------------------------------------------------
Total                                                $6,451      $6,280      $6,592      $6,284      $6,037
============================================================================================================
Percent of categories to total loans:
   Commercial and industrial and IRB's                 20.5%       21.1%       22.5%       28.6%       24.5%
   Real estate: (Commercial and Church)
     Mortgage                                          69.7        72.4        69.8        65.9        69.3
     Construction                                       9.5         6.2         5.9         5.3         5.2
   Other                                                 .3          .3         1.8          .2         1.0
------------------------------------------------------------------------------------------------------------
Total                                                 100.0%      100.0%      100.0%      100.0%      100.0%
============================================================================================================
</TABLE>

(1) Although specific allocations exist, the entire allowance is available to
absorb losses in any particular loan category.

Nonperforming Assets

It is the policy of the Company to continually monitor its loan portfolio and to
discontinue the accrual of interest on any loan on which payment of principal or
interest in a timely manner in the normal course of business, is doubtful.
Subsequent payments received on such loans are applied to principal if there is
any doubt as to the collectability of such principal; otherwise, these receipts
are recorded as interest income. Interest on nonaccrual and renegotiated loans,
which would have been recorded under the original terms of the loans, was
approximately $86,000 for the year ended December 31, 2008. Of this amount,
approximately $56,000 was actually recorded as interest income on such loans.

Total nonaccrual loans at December 31, 2008 consists of five loans totaling
$1,178,000 that relate to businesses that have weak financial positions and/or
collateral deficiencies. Allocations of the allowance for loan losses have been
established for the estimated loss exposure.

Foreclosed assets and accruing loans 90 days or more past due were $2,177,000
and $41,000, respectively, at December 31, 2008. The foreclosed assets relate to
the foreclosure of two loans which were secured by commercial real estate
buildings in St. Louis County and St. Charles County, Missouri. These buildings
are currently listed for sale and have been recorded at their estimated fair
value less costs to sell. The decrease in accruing loans 90 days or more past
due is primarily related to one loan of $41,000 that was past its maturity date;
however, full payment was received in March, 2009.

The Company does not have any foreign loans. The Company's loan portfolio does
not include a significant amount of single family real estate mortgages, as the
Company does not market its services to retail customers. Also, the Company had
no sub-prime mortgage loans or residential development loans in its portfolio as
of December 31, 2008.

The Company does not have any other interest-earning assets which would have
been included in nonaccrual, past due or restructured loans if such assets were
loans.

Summary of Nonperforming Assets

<TABLE>
<CAPTION>
                                                                               December 31,
                                                      --------------------------------------------------------------
(Dollars in thousands)                                    2008         2007         2006         2005          2004
--------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>          <C>            <C>          <C>           <C>
Commercial, industrial and IRB's:
   Nonaccrual                                         $    278     $  1,277       $  795       $  983        $  297
   Contractually past due 90 days
     or more and still accruing                             41          496           --           --            --
   Renegotiated loans                                       --           --           --           --            --
Real estate-mortgage:
   Nonaccrual                                              900          708           --           --            69
   Contractually past due 90 days
     or more and still accruing                             --           --           --          481             4
   Renegotiated loans                                       --           --           --           --           168
--------------------------------------------------------------------------------------------------------------------
Total nonperforming loans                                1,219        2,481          795        1,464           538
--------------------------------------------------------------------------------------------------------------------
Total foreclosed assets                                  2,177        1,388           --           --           375
--------------------------------------------------------------------------------------------------------------------
Total nonperforming assets                            $  3,396     $  3,869       $  795       $1,464        $  913
====================================================================================================================
</TABLE>

                                       20
<PAGE>


Operating Expenses from Continuing Operations

Operating expenses from continuing operations in 2008 compared to 2007 include
the following significant pre-tax components:

         Salaries and employees benefits expense increased $2,758,000, or 6%, to
         $49,723,000. This is mainly attributable to additional staff related to
         the increase in processing volume, annual salary increases and the
         associated increase in benefit expenses.

         Occupancy expense increased $122,000, or 6%, to $2,228,000 as a result
         of additional maintenance and repairs expense plus an increase in rent
         expense.

         Equipment expense decreased $25,000, or 1%, to $3,331,000. This
         decrease is primarily due to a reduction in contract maintenance
         expense.

         Amortization of intangibles was $280,000 in 2008 and 2007 due to the
         intangible assets acquired in the acquisition of NTransit in July 2006.

         Other operating expense decreased $30,000, or less than 1%, to
         $10,002,000 due to reductions in postage and supplies, promotional
         expense and professional services offset by an increase in other real
         estate owned expense.

Operating expenses from continuing operations in 2007 compared to 2006 include
the following significant pre-tax components:

         Salaries and employees benefits expense increased $4,289,000, or 10%,
         to $46,965,000. This is mainly attributable to additional staff related
         to the increase in processing volume, annual salary increases and the
         associated increase in benefit expenses.

         Occupancy expense increased $127,000, or 6%, to $2,106,000.

         Equipment expense increased $428,000, or 15%, to $3,356,000. This
         increase is primarily due to depreciation related to capital
         expenditures in 2006 and 2007.

         Amortization of intangibles increased $54,000, or 24%, to $280,000 due
         to the intangible assets acquired in the acquisition of NTransit in
         July 2006.

         Other operating expense decreased $436,000, or 4%, to $10,032,000 due
         to reductions in outside imaging and legal expenses.

Income Tax Expense

Income tax expense from continuing operations in 2008 totaled $7,160,000
compared to $8,148,000 in 2007, and compared to $8,367,000 in 2006. When
measured as a percent of income from continuing operations, the Company's
effective tax rate was 27% in 2008, 31% in 2007 and 35% in 2006. The effective
tax rate varies from year-to-year primarily due to changes in the Company's
amount of investment in tax-exempt municipal bonds and income recognized on bank
owned life insurance. The Company's income tax benefit from discontinued
operations was $0, $0 and $280,000 with effective rates of 0%, 0%, and 41% for
the years 2008, 2007 and 2006, respectively.

Investment Portfolio

Investment portfolio changes from December 31, 2007 to December 31, 2008:

         U.S. Treasury securities decreased $1,796,000, or 90%, to $200,000.
         U.S. government-sponsored corporation and agency securities decreased
         from $1,499,000 to $0. State and political subdivision securities
         increased $25,440,000, or 15%, to $192,918,000. The investment
         portfolio provides the Company with a significant source of earnings,
         secondary source of liquidity, and mechanisms to manage the effects of
         changes in loan demand and interest rates. Therefore, the size, asset
         allocation and maturity distribution of the investment portfolio will
         vary over time depending on management's assessment of current and
         future interest rates, changes in loan demand, changes in the Company's
         sources of funds and the economic outlook. During this period, the size
         of the investment portfolio increased as the Company purchased state
         and political subdivision securities. These securities all had AA or
         better credit ratings and maturities approaching ten

                                       21
<PAGE>

         years. With the additional liquidity provided by the increase in
         accounts and drafts payables and the declining rate environment, the
         Company made these purchases to continue to reduce the level of
         short-term rate sensitive assets. All purchases were made in
         accordance with the Company's investment policy. As of December 31,
         2008, the Company had no mortgage-backed securities in its portfolio.

Investment portfolio changes from December 31, 2006 to December 31, 2007:

         U.S. Treasury securities decreased $14,828,000, or 88%, to $1,996,000.
         U.S. government-sponsored corporation and agency securities decreased
         $1,486,000, or 50%, to $1,499,000. State and political subdivision
         securities increased $85,271,000, or 104%, to $167,478,000. The
         investment portfolio provides the Company with a significant source of
         earnings, secondary source of liquidity, and mechanisms to manage the
         effects of changes in loan demand and interest rates. Therefore, the
         size, asset allocation and maturity distribution of the investment
         portfolio will vary over time depending on management's assessment of
         current and future interest rates, changes in loan demand, changes in
         the Company's sources of funds and the economic outlook. During this
         period the size of the investment portfolio increased as the Company
         purchased state and political subdivision securities. These securities
         all had AA or better credit ratings and maturities approaching ten
         years. With the additional liquidity provided by the increase in
         accounts and drafts payables and the expectation of a declining rate
         environment, the Company made these purchases to reduce the level of
         short-term rate sensitive assets. All purchases were made in accordance
         with the Company's investment policy. As of December 31, 2007, the
         Company had no mortgage-backed securities in its portfolio.

There was no single issuer of securities in the investment portfolio at December
31, 2008 for which the aggregate amortized cost exceeded 10% of total
shareholders' equity.

Investments by Type

<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                           ---------------------------------------
(Dollars in thousands)                                                          2008          2007          2006
------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>           <C>           <C>
U.S. Treasury securities                                                   $     200     $   1,996     $  16,824
U.S. government-sponsored corporations and agencies                               --         1,499         2,985
State and political subdivisions                                             192,918       167,478        82,207
Stock of the Federal Home Loan Bank                                              465           451           451
Stock of the Federal Reserve Bank                                                282           282           282
------------------------------------------------------------------------------------------------------------------
Total investments                                                          $ 193,865     $ 171,706     $ 102,749
==================================================================================================================
</TABLE>

Investment in Debt Securities by Maturity
(At December 31, 2008)

<TABLE>
<CAPTION>
                                                  Within 1     Over 1 to     Over 5 to      Over
(Dollars in thousands)                              Year        5 Years      10 Years      10 Years      Yield
----------------------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>          <C>           <C>             <C>
U.S. Treasury securities                          $    200     $     --     $      --     $      --       5.25%
State and political subdivisions(1)                 13,229       45,999        72,066        61,624       6.08%
----------------------------------------------------------------------------------------------------------------
Total investment in debt securities               $ 13,429     $ 45,999     $  72,066     $  61,624
----------------------------------------------------------------------------------------------------------------
Weighted average yield                              4.99%         5.72%         6.18%         6.46%       6.08%
================================================================================================================
</TABLE>

1. Weighted average yield is presented on a tax-equivalent basis assuming a tax
rate of 35%.

Deposits and Accounts and Drafts Payable

Noninterest-bearing demand deposits increased $10,110,000, or 11%, from December
31, 2007 to $103,300,000 at December 31, 2008. The average balances of these
deposits decreased $4,353,000, or 5%, from 2007 to $89,811,000 in 2008. The
increase in ending balances relates mainly to growth in these accounts during
the latter part of the year. These balances are primarily maintained by
commercial customers and churches and can fluctuate on a daily basis.

Interest-bearing deposits decreased $6,165,000, or 3%, from December 31, 2007 to
$174,241,000 at December 31, 2008. The average balances of these deposits
decreased to $152,033,000 in 2008 from $185,667,000 in 2007. This decrease was
primarily the result of the Company's decision to reduce higher-cost time
deposits.

Accounts and drafts payable generated by the Company in its payment processing
operations decreased $34,709,000, or 7%, from December 31, 2007 to $479,025,000
at December 31, 2008. The average balance of these funds increased $54,552,000,
or 11%, from 2007 to $559,230,000 in 2008. The increase relates to the increase
in dollars processed. Due to the Company's payment processing cycle, average
balances are much more indicative of the underlying

                                       22
<PAGE>

activity than period-end balances since point-in-time comparisons can be
misleading if the comparison dates fall on different days of the week.

The composition of average deposits and the average rates paid on those deposits
is represented in the table entitled "Distribution of Assets, Liabilities and
Shareholders' Equity; Interest Rate and Interest Differential" which is included
earlier in this discussion. The Company does not have any significant deposits
from foreign depositors.

As discussed in "Recent Developments," the company elected to participate in the
Temporary Liquidity Guarantee Program, as not participating could have put the
Company at a competitive disadvantage without the 100% FDIC guarantee of its
non-interest bearing transaction deposit accounts. The cost of this program is
10 basis points or approximately $60,000 on an annual basis based upon the
additional covered deposits at December 31, 2008.

Maturities of Certificates of Deposits of $100,000 or More
(At December 31, 2008)

<TABLE>
<CAPTION>
(Dollars in thousands)
--------------------------------------------------------------------------------
<S>                                                                     <C>
Three months or less                                                    $18,602
Three to six months                                                      15,697
Six to twelve months                                                     10,635
Over twelve months                                                        2,325
                                                                        -------
Total                                                                   $47,259
--------------------------------------------------------------------------------
</TABLE>

Subordinated Convertible Debentures

Total subordinated convertible debentures at December 31, 2008 and 2007 were
$2,991,000 and $3,688,000, respectively and the average balances of these funds
were and $3,669,000 and $3,699,000, respectively. The debentures were issued on
August 24, 2004 as part of the Company's purchase of PROFITLAB, Inc.
("PROFITLAB"). For more information on these debentures please refer to Item 8,
Note 10 of this report.

Liquidity

The discipline of liquidity management as practiced by the Company seeks to
ensure that funds are available to fulfill all payment obligations relating to
invoices processed as they become due, meet depositor withdrawal requests and
borrower credit demands while at the same time maximizing profitability. This is
accomplished by balancing changes in demand for funds with changes in supply of
funds. Primary liquidity to meet demand is provided by short-term liquid assets
that can be converted to cash, maturing securities and the ability to obtain
funds from external sources. The Company's Asset/Liability Committee ("ALCO")
has direct oversight responsibility for the Company's liquidity position and
profile. Management considers both on-balance sheet and off-balance sheet items
in its evaluation of liquidity.

The balances of liquid assets consist of cash and cash equivalents, which
include cash and due from banks, federal funds sold, and money market funds, and
were $29,485,000 at December 31, 2008, a decrease of $146,585,000 or 83% from
December 31, 2007. At December 31, 2008 these assets represented 3% of total
assets. The Company decreased liquid assets during 2008 as a result of the
significant drop in short-term interest rates. The excess liquidity held at the
end of 2007 was invested in higher-yielding loans and investment securities to
help maximize net interest income during 2008. Cash and cash equivalents are the
Company's and its subsidiaries' primary source of liquidity to meet future
expected and unexpected loan demand, depositor withdrawals or reductions in
accounts and drafts payable.

Secondary sources of liquidity include the investment portfolio and borrowing
lines. Total investment in debt securities available-for-sale at fair value was
$193,865,000 at December 31, 2008, an increase of $22,159,000 or 13% from
December 31, 2007. These assets represented 22% of total assets at December 31,
2008 and all but less than 1% were state and political subdivision securities.
Of the total portfolio, 6% mature in one year, 22% mature after one year through
five years and 72% mature after five years. The Company sold $20,867,000 of
securities available-for-sale during 2008 in managing its liquidity position and
to take advantage of favorable reinvestment opportunities.

The Bank has unsecured lines of credit at correspondent banks to purchase
federal funds up to a maximum of $46,000,000. Additionally, the Bank maintains
lines of credit at unaffiliated financial institutions in the maximum amount of
$81,643,000 collateralized by U.S. Treasury securities and commercial mortgage
loans.

The deposits of the Company's banking subsidiary have historically been stable,
consisting of a sizable volume of core deposits related to customers that
utilize many other commercial products of the Bank. The accounts and drafts
payable generated by the Company have also historically been a stable source of
funds.

                                       23
<PAGE>

Net cash flows provided by operating activities from continuing operations for
the years 2008, 2007 and 2006 were $22,030,000, $23,652,000 and $17,031,000
respectively. Net income plus depreciation and amortization accounts for most of
the operating cash provided. Net cash flows from investing and financing
activities fluctuate greatly as the Company actively manages its investment and
loan portfolios and customer activity influences changes in deposit and accounts
and drafts payable balances. Further analysis of the changes in these account
balances is discussed earlier in this report. Due to the daily fluctuations in
these account balances, management believes that the analysis of changes in
average balances, also discussed earlier in this report, can be more indicative
of underlying activity than the period-end balances used in the statements of
cash flows. Management anticipates that cash and cash equivalents, maturing
investments, cash from operations, and borrowing lines will continue to be
sufficient to fund the Company's operations and capital expenditures in 2009.

Capital Resources

One of management's primary objectives is to maintain a strong capital base to
warrant the confidence of customers, shareholders, and bank regulatory agencies.
A strong capital base is needed to take advantage of profitable growth
opportunities that arise and to provide assurance to depositors and creditors.
The Company and its banking subsidiary continue to exceed all regulatory capital
requirements, as evidenced by the capital ratios at December 31, 2008 as shown
in Item 8, Note 3 of this report.

In 2008, cash dividends paid were $.49 per share for a total of $4,499,000, an
increase of $381,000, or 9%, compared to $.447 per share and a total of
$4,118,000 in 2007. The increase is attributable primarily to the per share
amount paid.

Shareholders' equity was $106,241,000, or 12%, of total assets, at December 31,
2008, an increase of $6,789,000 over the balance at December 31, 2007. This
increase resulted from net income of $19,006,000, proceeds from the exercise of
stock options of $24,000, $697,000 related to the conversion of subordinated
debentures, a decrease in other comprehensive loss of $508,000 and other items
of $1,026,000 related to the stock bonuses, which were offset by cash dividends
paid of $4,499,000, the purchase of treasury shares of $3,984,000 and the
pension adjustment per SFAS No. 158 of $5,989,000.

Dividends from the Bank are a source of funds for payment of dividends by the
Company to its shareholders. The only restrictions on dividends are those
dictated by regulatory capital requirements and prudent and sound banking
principles. As of December 31, 2008, unappropriated retained earnings of
$1,530,000 were available at the Bank for the declaration of dividends to the
Company without prior approval from regulatory authorities.

The Company maintains a treasury stock buyback program pursuant to which the
Board of Directors has authorized the repurchase of up to 300,000 shares of the
Company's common stock. This repurchase plan was updated by the Board of
Directors on January 22, 2008 and replaced the Company's previous plan under
which 120,000 shares had remained available for repurchase. The Company
repurchased 120,000 shares during 2008 and did not repurchase any shares during
2007. As of December 31, 2008, 180,000 shares remained available for repurchase
under the program. A portion of the repurchased shares may be used for the
Company's employee benefit plans, and the balance will be available for other
general corporate purposes. The stock repurchase authorization does not have an
expiration date and the pace of repurchase activity will depend on factors such
as levels of cash generation from operations, cash requirements for investments,
repayment of debt, current stock price, and other factors. The Company may
repurchase shares from time to time on the open market or in private
transactions, including structured transactions. The stock repurchase program
may be modified or discontinued at any time.

As discussed in the "Recent Developments" section above, after careful
assessment and due to its strong capital base, the Company chose not to
participate in the TARP Capital Purchase Program.

Commitments, Contractual Obligations and Off-Balance Sheet Arrangements

In the normal course of business, the Company is party to activities that
involve credit, market and operational risk that are not reflected in whole or
in part in the Company's consolidated financial statements. Such activities
include traditional off-balance sheet credit-related financial instruments and
commitments under operating and capital leases. These financial instruments
include commitments to extend credit, commercial letters of credit and standby
letters of credit. The Company's maximum potential exposure to credit loss in
the event of nonperformance by the other party to the financial instrument for
commitments to extend credit, commercial letters of credit and standby letters
of credit is represented by the contractual amounts of those instruments. At
December 31, 2008, no amounts have been accrued for any estimated losses for
these instruments.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commercial
and standby letters of credit are conditional commitments issued by the Company
or its subsidiaries to guarantee the performance of a customer to a third party.
These off-balance sheet financial instruments generally have fixed expiration
dates or other termination clauses and may require payment of a

                                       24
<PAGE>

fee. At December 31, 2008, the balance of loan commitments, standby and
commercial letters of credit were $33,525,000, $7,585,000 and $3,185,000,
respectively. Since some of the financial instruments may expire without being
drawn upon, the total amounts do not necessarily represent future cash
requirements. Commitments to extend credit and letters of credit are subject to
the same underwriting standards as those financial instruments included on the
consolidated balance sheets. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary upon extension of the credit, is based on management's credit
evaluation of the borrower. Collateral held varies, but is generally accounts
receivable, inventory, residential or income-producing commercial property or
equipment. In the event of nonperformance, the Company or its subsidiaries may
obtain and liquidate the collateral to recover amounts paid under its guarantees
on these financial instruments.

On August 24, 2004, the Company issued $3,700,000 in subordinated convertible
debentures as part of the Company's acquisition of PROFITLAB. Interest, at a
rate of 5.33%, is payable annually on the anniversary date of the acquisition.
The holders of the debentures can convert the principal amount into fully paid
and non-assessable shares of the common stock of the Company at a rate per share
of $19.47 at various amounts over a 10-year period, at which time the securities
mature. The debentures may be called by the Company without penalty after August
24, 2010. For more information please refer to Item 8, Note 10 of this report.

The following table summarizes contractual cash obligations of the Company
related to operating lease commitments, time deposits and convertible
subordinated debentures at December 31, 2008:

<TABLE>
<CAPTION>
                                                               Amount of Commitment Expiration per Period
                                                               ------------------------------------------
                                                                  Less than      1-3          3-5       Over 5
(Dollars in thousands at December 31, 2008)            Total       1 Year       Years        Years       Years
----------------------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>          <C>         <C>         <C>
Operating lease commitments                          $  3,148     $    624     $   949     $   788     $   787
Time deposits*                                         69,648       65,410       3,028       1,210          --
Convertible subordinated debentures *                   2,991           --          --          --       2,991
----------------------------------------------------------------------------------------------------------------
     Total                                           $ 75,787     $ 66,034     $ 3,977     $ 1,998     $ 3,778
================================================================================================================
</TABLE>

* Includes principal payments only.

During 2008, the Company contributed $5,900,000 to its noncontributory defined
benefit pension plan. The contribution had no significant effect on the
Company's overall liquidity. In determining pension expense, the Company makes
several assumptions, including the discount rate and long-term rate of return on
assets. These assumptions are determined at the beginning of the plan year based
on interest rate levels and financial market performance. For 2008 these
assumptions were as follows:

<TABLE>
<S>                                                                <C>
  ----------------------------------------------------------------------
  Weighted average discount rate                                   6.50%
  Rate of increase in compensation levels                          4.25%
  Expected long-term rate of return on assets                      7.25%
  ----------------------------------------------------------------------
</TABLE>

Impact of Accounting Pronouncements Not Yet Adopted

In December 2007, the FASB issued SFAS No. 141(R) - Business Combinations ("SFAS
No. 141(R)"). SFAS No. 141(R) will significantly change how entities apply the
acquisition method to business combinations. The most significant changes
affecting how entities will account for business combinations under SFAS No.
141(R) include: (a) the acquisition date will be the date the acquirer obtains
control; (b) all (and only) identifiable assets acquired, liabilities assumed,
and noncontrolling interests in the acquiree will be stated at fair value on the
acquisition date; (c) assets or liabilities arising from noncontractual
contingencies will be measured at their acquisition date fair value only if it
is more likely than not that they meet the definition of an asset or liability
on the acquisition date; (d) adjustments subsequently made to the provisional
amounts recorded on the acquisition date will be made retroactively during a
measurement period not to exceed one year; (e) acquisition-related restructuring
costs that do not meet the criteria in SFAS No. 146 - Accounting for Costs
Associated with Exit or Disposal Activities, will be expensed as incurred; (f)
transaction costs will be expensed as incurred; (g) reversals of deferred income
tax valuation allowances and income tax contingencies will be recognized in
earnings subsequent to the measurement period; and (h) the allowance for loan
losses of an acquiree will not be permitted to be recognized by the acquirer.
Additionally, SFAS No. 141(R) will require new and modified disclosures
surrounding subsequent changes to acquisition-related contingencies, contingent
consideration, noncontrolling interests, acquisition-related transaction costs,
fair values and cash flows not expected to be collected for acquired loans, and
an enhanced goodwill rollforward. SFAS No. 141(R) is effective for all business
combinations completed on or after January 1, 2009. Early adoption is not
permitted. For business combinations in which the acquisition date was before
the effective date, the provisions of SFAS No. 141(R) will apply to the
subsequent accounting for deferred income tax valuation allowances and income
tax contingencies and will require

                                       25
<PAGE>

any changes in those amounts to be recorded in earnings. We are currently
evaluating the impact that SFAS No. 141(R) will have on our financial condition,
results of operations and the disclosures that will be presented in our
consolidated financial statements and we do not expect there will be a material
impact.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity

The Company faces market risk to the extent that its net interest income and its
fair market value of equity are affected by changes in market interest rates.
The asset/liability management discipline as applied by the Company seeks to
limit the volatility, to the extent possible, of both net interest income and
the fair market value of equity that can result from changes in market interest
rates. This is accomplished by limiting the maturities of fixed rate
investments, loans, and deposits; matching fixed rate assets and liabilities to
the extent possible; and optimizing the mix of fees and net interest income.
However, as discussed below, the Company's asset/liability position differs
significantly from most other bank holding companies with significant positive
cumulative "gaps" shown for each time horizon presented. This asset sensitive
position is caused primarily by the operations of the Company, which generate
large balances of accounts and drafts payable. These balances, which are
noninterest bearing, contribute to the Company's historical high net interest
margin but cause the Company to become susceptible to changes in interest rates,
with a decreasing net interest margin and fair market value of equity in periods
of declining interest rates and an increasing net interest margin and fair
market value of equity in periods of rising interest rates.

The Company's ALCO measures the Company's interest rate risk sensitivity on a
quarterly basis to monitor and manage the variability of earnings and fair
market value of equity in various interest rate environments. The ALCO evaluates
the Company's risk position to determine whether the level of exposure is
significant enough to hedge a potential decline in earnings and value or whether
the Company can safely increase risk to enhance returns. The ALCO uses gap
reports, twelve-month net interest income simulations, and fair market value of
equity analyses as its main analytical tools to provide management with insight
into the Company's exposure to changing interest rates.

Management uses a gap report to review any significant mismatch between the
re-pricing points of the Company's rate sensitive assets and liabilities in
certain time horizons. A negative gap indicates that more liabilities re-price
in that particular time frame and, if rates rise, these liabilities will
re-price faster than the assets. A positive gap would indicate the opposite. Gap
reports can be misleading in that they capture only the re-pricing timing within
the balance sheet, and fail to capture other significant risks such as basis
risk and embedded options risk. Basis risk involves the potential for the spread
relationship between rates to change under different rate environments and
embedded options risk relates to the potential for the alteration of the level
and/or timing of cash flows given changes in rates.

Another measurement tool used by management is net interest income simulation,
which forecasts net interest income during the coming twelve months under
different interest rate scenarios in order to quantify potential changes in
short term accounting income. Management has set policy limits specifying
acceptable levels of interest rate risk given multiple simulated rate movements.
These simulations are more informative than gap reports because they are able to
capture more of the dynamics within the balance sheet, such as basis risk and
embedded options risk. A table containing simulation results as of December 31,
2008, from an immediate and sustained parallel change in interest rates is shown
below.

While net interest income simulations do an adequate job of capturing interest
rate risk to short term earnings, they do not capture risk within the current
balance sheet beyond twelve months. The Company uses fair market value of equity
analyses to help identify longer-term risk that may reside on the current
balance sheet. The fair market value of equity is represented by the present
value of all future income streams generated by the current balance sheet. The
Company measures the fair market value of equity as the net present value of all
asset and liability cash flows discounted at forward rates suggested by the
current U.S. Treasury curve plus appropriate credit spreads. This representation
of the change in the fair market value of equity under different rate scenarios
gives insight into the magnitude of risk to future earnings due to rate changes.
Management has set policy limits relating to declines in the market value of
equity. The table below contains the analysis, which illustrates the effects of
an immediate and sustained parallel change in interest rates as of December 31,
2008:

<TABLE>
<CAPTION>
                                 % Change in            % Change in Fair
 Change in Interest Rates     Net Interest Income     Market Value of Equity
-----------------------------------------------------------------------------
<S>                                   <C>                     <C>
     +200 basis points                 10%                     10%
     +100 basis points                  5%                      5%
       Stable Rates                   ----                    ----
     -100 basis points                 (3%)                    (3%)
     -200 basis points                 (6%)                    (3%)
</TABLE>

                                       26
<PAGE>

Interest Rate Sensitivity Position

The following table presents the Company's gap or interest rate risk position at
December 31, 2008 for the various time periods indicated.

<TABLE>
<CAPTION>
                                         Variable     0-90      91-180    181-364      1-5      Over
(Dollars in thousands)                     Rate       Days       Days      Days       Years    5 Years     Total
------------------------------------------------------------------------------------------------------------------
<S>                                      <C>        <C>         <C>       <C>       <C>        <C>        <C>
Earning assets:
    Loans:
         Taxable                         $148,244   $  4,830    $30,131   $53,980   $345,841   $  5,587   $588,613
         Tax-exempt                            --         --        124       898      2,341         --      3,363
    Debt and equity securities(1):
         Taxable                               --        200         --        --         --         --        200
             Tax-exempt                        --      1,973      2,793     6,738     44,535    133,690    189,729
             Other                            747         --         --        --         --         --        747
    Federal funds sold and other
         short-term investments            19,442         --         --        --         --         --     19,442
------------------------------------------------------------------------------------------------------------------
Total earning assets                     $168,433   $  7,003    $33,048   $61,616   $392,717   $139,277   $802,094
==================================================================================================================
Interest-sensitive liabilities:
         Money market accounts           $ 49,604   $     --    $    --   $    --   $     --   $     --   $ 49,604
         Now accounts                      31,749         --         --        --         --         --     31,749
         Savings deposits                  23,240         --         --        --         --         --     23,240
         Time deposits:
           $100K and more                      --     18,602     15,697    10,635      2,325         --     47,259
            Less than $100K                    --     10,677      8,236     1,563      1,913         --     22,389
         Federal funds purchased and
            other short-term borrowing        305         --         --        --         --         --        305
         Subordinated convertible              --         --         --        --         --      2,991      2,991
            debentures
------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities       $104,898   $ 29,279    $23,933   $12,198   $  4,238   $  2,991   $177,537
==================================================================================================================
Interest sensitivity gap:
    Periodic                             $ 63,535   $(22,276)   $ 9,115   $49,418   $388,479   $136,286   $624,557
    Cumulative                             63,535     41,259     50,374    99,792    488,271    624,557    624,557
Ratio of interest-bearing assets
    to interest-bearing liabilities:
    Periodic                                 1.61       0.24       1.38     5.05       92.67      46.57       4.52
    Cumulative                               1.61       1.31       1.32     1.59        3.80       4.52       4.52
==================================================================================================================
</TABLE>

(1) Balances shown reflect earliest re-pricing date.

                                       27
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                 CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                              ----------------------------
(In thousands, except share and per share data)                                   2008             2007
----------------------------------------------------------------------------------------------------------
<S>                                                                           <C>               <C>
Assets
Cash and due from banks                                                       $   10,043        $   26,719
Federal funds sold and other short-term investments                               19,442           149,351
                                                                              ----------        ----------
     Cash and cash equivalents                                                    29,485           176,070
                                                                              ----------        ----------
Securities available-for-sale, at fair value                                     193,865           171,706

Loans                                                                            591,976           498,455
     Less: Allowance for loan losses                                               6,451             6,280
                                                                              ----------        ----------
         Loans, net                                                              585,525           492,175
                                                                              ----------        ----------
Premises and equipment, net                                                       11,617            12,771
Investment in bank owned life insurance                                           13,093            12,544
Payments in excess of funding                                                     21,865            11,664
Goodwill                                                                           7,471             7,471
Other intangible assets, net                                                         597               877
Other assets                                                                      21,710            17,762
                                                                              ----------        ----------
           Total assets                                                         $885,228        $  903,040
                                                                              ==========        ==========

Liabilities and Shareholders' Equity
Liabilities:
Deposits:
     Noninterest-bearing                                                      $  103,300        $   93,190
     Interest-bearing                                                            174,241           180,406
                                                                              ----------        ----------
         Total deposits                                                          277,541           273,596
Accounts and drafts payable                                                      479,025           513,734
Subordinated convertible debentures                                                2,991             3,688
Other liabilities                                                                 19,430            12,570
                                                                              ----------        ----------
         Total liabilities                                                       778,987           803,588
                                                                              ----------        ----------
Shareholders' Equity:
Preferred stock, par value $.50 per share; 2,000,000
    shares authorized and no shares issued                                            --                --
Common stock, par value $.50 per share;
   20,000,000 shares authorized: 9,949,324
   shares issued at December 31, 2008 and 2007, respectively                       4,975             4,975
Additional paid-in capital                                                        45,746            45,837
Retained earnings                                                                 81,197            66,690
Common shares in treasury, at cost (775,288 and 740,642
     shares at December 31, 2008 and 2007, respectively)                         (18,264)          (16,118)
Accumulated other comprehensive loss                                              (7,413)           (1,932)
                                                                              ----------        ----------
         Total shareholders' equity                                              106,241            99,452
                                                                              ----------        ----------
           Total liabilities and shareholders' equity                         $  885,228         $ 903,040
                                                                              ==========        ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       28
<PAGE>

                 CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                          For the Years Ended December 31,
                                                                  -------------------------------------------------
(In thousands, except share and per share data)                         2008               2007                2006
-------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                <C>                 <C>
Fee Revenue and Other Income:
Information services payment and processing revenue               $   50,721         $   45,642          $   40,343
Bank service fees                                                      1,330              1,682               1,625
Gains on sales of investment securities                                  552                  -                   -
Other                                                                    567                876                 853
                                                                  ----------         ----------          ----------
       Total fee revenue and other income                             53,170             48,200              42,821
                                                                  ----------         ----------          ----------

Interest Income:
Interest and fees on loans                                            34,204             36,288              36,164
Interest and dividends on securities:
     Taxable                                                              78                722               1,052
     Exempt from federal income taxes                                  7,638              4,809               2,575
Interest on federal funds sold and
   other short-term investments                                        2,218              7,527               7,262
                                                                  ----------         ----------          ----------
       Total interest income                                          44,138             49,346              47,053
                                                                  ----------         ----------          ----------

Interest Expense:
Interest on deposits                                                   3,179              7,728               6,414
Interest on short-term borrowings                                         12                  6                   7
Interest on subordinated convertible debentures and other                187                230                 198
                                                                  ----------         ----------          ----------
       Total interest expense                                          3,378              7,964               6,619
                                                                  ----------         ----------          ----------
         Net interest income                                          40,760             41,382              40,434
Provision for loan losses                                              2,200                900               1,150
                                                                  ----------         ----------          ----------
         Net interest income after provision
           for loan losses                                            38,560             40,482              39,284
                                                                  ----------         ----------          ----------
         Total net revenue                                            91,730             88,682              82,105
                                                                  ----------         ----------          ----------

Operating Expense:
Salaries and employee benefits                                        49,723             46,965              42,676
Occupancy                                                              2,228              2,106               1,979
Equipment                                                              3,331              3,356               2,928
Amortization of intangible assets                                        280                280                 226
Other operating                                                       10,002             10,032              10,468
                                                                  ----------         ----------          ----------
       Total operating expense                                        65,564             62,739              58,277
                                                                  ----------         ----------          ----------
         Income before income tax expense and discontinued
         operations                                                   26,166             25,943              23,828
Income tax expense                                                     7,160              8,148               8,367
                                                                  ----------         ----------          ----------
         Net income from continuing operations                        19,006             17,795              15,461
                                                                  ----------         ----------          ----------

Net loss from discontinued operations                                     --                 --                (395)
                                                                  ----------         ----------          ----------
Net income                                                        $   19,006         $   17,795          $   15,066
                                                                  ==========         ==========          ==========

Basic Earnings Per Share:
       From continuing operations                                 $     2.08         $     1.95          $     1.69
       From discontinued operations                                       --                 --                (.04)
       Basic earnings per share                                         2.08               1.95                1.65

Diluted Earnings Per Share:
       From continuing operations                                 $     2.03         $     1.90          $     1.65
       From discontinued operations                                       --                 --                (.04)
       Diluted earnings per share                                       2.03               1.90                1.61
</TABLE>

See accompanying notes to consolidated financial statements.

                                       29
<PAGE>

                 CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                             For the Years Ended December 31,
                                                                   ------------------------------------------------
(Dollars in thousands)                                                  2008               2007              2006
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                 <C>               <C>
Cash Flows From Operating Activities:
Net income from continuing operations                              $   19,006          $   17,795        $   15,461
Adjustments to reconcile net income from continuing operations
   to net cash provided by operating activities:
       Depreciation and amortization                                    4,336               3,186             2,049
       Gains on sales of investment securities                           (552)                 --                --
       Stock-based compensation expense                                 1,026                 678               227
       Provision for loan losses                                        2,200                 900             1,150
       Deferred income tax expense (benefit)                            1,575               1,409              (289)
       Increase in income tax liability                                 1,393                 743             1,628
       (Decrease) increase in pension liability                        (4,013)               (992)            2,496
       Other operating activities, net                                 (2,941)                (67)           (5,691)
Operating activities of discontinued operations                            --                  --            (1,536)
                                                                   ----------          ----------        ----------
         Net cash provided by operating activities                     22,030              23,652            15,495
                                                                   ----------          ----------        ----------

Cash Flows From Investing Activities:
From continuing operations:
Proceeds from sales of securities available-for-sale                   20,867                  --                --
Proceeds from maturities of securities available-for-sale              11,106              52,500            83,510
Purchase of securities available-for-sale                             (54,460)           (120,304)          (90,326)
Net (increase) decrease in loans                                      (95,550)              3,158            24,339
Increase in payments in excess of funding                             (10,201)             (2,331)           (1,668)
Purchases of premises and equipment, net                               (1,240)             (2,112)           (2,953)
Payment for business acquisition, net of cash acquired                     --                  --            (3,172)
Proceeds from sale of discontinued operations                              --                  --               205
                                                                   ----------          ----------        ----------
         Net cash (used in) provided by investing activities         (129,478)            (69,089)            9,935
                                                                   ----------          ----------        ----------

Cash Flows From Financing Activities:
From continuing operations:
Net increase (decrease) in noninterest-bearing deposits                10,110             (13,397)           (9,809)
Net increase (decrease) in interest-bearing demand
     and savings deposits                                               6,813               3,269            (9,038)
Net (decrease) increase in time deposits                              (12,978)             (6,170)           21,743
Net (decrease) increase in accounts and drafts payable                (34,709)             45,341            22,582
Cash proceeds from exercise of stock options                               24                  15               327
Cash dividends paid                                                    (4,499)             (4,118)           (3,666)
Purchase of common shares for treasury                                 (3,984)                 --              (870)
Other financing activities, net                                            86                  63               113
                                                                   ----------          ----------        ----------
     Net cash (used in) provided by financing activities              (39,137)             25,003            21,382
                                                                   ----------          ----------        ----------
Net (decrease) increase in cash and cash equivalents                 (146,585)            (20,434)           46,812
Cash and cash equivalents at beginning of year                        176,070             196,504           149,692
                                                                   ----------          ----------        ----------
Cash and cash equivalents at end of year                           $   29,485          $  176,070        $  196,504
                                                                   ==========          ==========        ==========

Supplemental information:
   Cash paid for interest                                          $    3,665          $    8,119        $    6,171
   Cash paid for income taxes                                           4,949               6,258             8,136

Noncash transactions:
   Other real estate transferred from loans                        $      788          $    1,300        $       --
</TABLE>

See accompanying notes to consolidated financial statements.

                                       30
<PAGE>

                 CASS INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                       Additional                           Other
                                             Common     Paid-in    Retained   Treasury   Comprehensive               Comprehensive
(In thousands, except per share data)         Stock     Capital    Earnings    Stock     Income (Loss)      Total    Income (Loss)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>        <C>        <C>       <C>            <C>            <C>          <C>
Balance, December 31, 2005                   $3,168     $18,326    $71,506   $(17,313)      $(406)         $75,281
Net income                                                          15,066                                  15,066      $15,066
Cash dividends ($.400 per share)                                    (3,666)                                 (3,666)
50% common stock dividend                     1,388                 (1,390)                                     (2)
Purchase of 30,000 common shares                                                 (870)                        (870)
Other comprehensive income (loss):
   Net unrealized gain on securities
     available-for-sale, net of tax                                                           550              550          550
Adoption of SFAS No. 158, net of tax                                                       (3,114)          (3,114)         162
Issuance of 15,010 common shares pur-
   suant to stock-based compensation plan                  (198)                  198                           --
Exercise of stock options                                  (581)                  908                          327
Tax benefit of stock awards                                 122                                                122
Stock-based compensation expense                            227                                                227
                                          --------------------------------------------------------------------------
Balance, December 31, 2006                   $4,556     $17,896    $81,516   $(17,077)    $(2,970)         $83,921
                                          -----------------------------------------------------------------------------------------
   Comprehensive income for 2006                                                                                        $15,778
                                                                                                                        =======

Net income                                                          17,795                                  17,795       17,795
Cash dividends ($.447 per share)                                    (4,118)                                 (4,118)
10% common stock dividend                       419      28,159    (28,590)                                    (12)
Other comprehensive income (loss):
   Net unrealized gain on securities
     available-for-sale, net of tax                                                         1,184            1,184        1,184
SFAS No. 158 adjustment, net of tax                                                          (146)            (146)        (146)
FIN 48 adjustment                                                       87                                      87
Issuance of 47,432 common shares pur-
   suant to stock-based compensation plan                  (938)                  938                           --
Exercise of stock options                                     6                     9                           15
Tax benefit of stock awards                                  36                                                 36
Stock-based compensation expense                            678                                                678
Subordinated debenture conversion                                                  12                           12
                                          --------------------------------------------------------------------------
Balance, December 31, 2007                   $4,975     $45,837    $66,690   $(16,118)    $(1,932)         $99,452
                                          -----------------------------------------------------------------------------------------
   Comprehensive income for 2007                                                                                        $18,833
                                                                                                                        =======

Net income                                                          19,006                                  19,006       19,006
Cash dividends ($.49 per share)                                     (4,499)                                 (4,499)
Purchase of 120,000 shares                                                     (3,984)                      (3,984)
Other comprehensive income (loss):
   Reclassification adjustments for gains
     included in net income, net of tax                                                      (359)            (359)        (359)
   Net unrealized gain on securities
     available-for-sale, net of tax                                                           867              867          867
SFAS No. 158 adjustment, net of tax                                                        (5,989)          (5,989)      (5,989)
Issuance of 31,924 common shares pur-
   suant to stock-based compensation plan                  (705)                  705                           --
Exercise of stock options                                  (282)                  306                           24
Stock-based compensation expense                          1,026                                              1,026
Subordinated debenture conversion                          (130)                  827                          697
                                          --------------------------------------------------------------------------
Balance, December 31, 2008                   $4,975     $45,746    $81,197   $(18,264)    $(7,413)        $106,241
                                          -----------------------------------------------------------------------------------------
   Comprehensive income for 2008                                                                                        $13,525
                                                                                                                        =======
</TABLE>

See accompanying notes to consolidated financial statements.

                                       31
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1
Summary of Significant Accounting Policies

Summary of Operations Cass Information Systems, Inc. (the "Company") provides
payment and information services, which include processing and payment of
freight, utility and telecommunications invoices. These services include the
acquisition and management of data, information delivery and financial exchange.
The consolidated balance sheet captions, "Accounts and drafts payable" and
"Payments in excess of funding," consist of obligations related to the payment
services that are performed for customers. The Company also provides a full
range of banking services to individual, corporate and institutional customers
through Cass Commercial Bank (the "Bank"), its wholly owned bank subsidiary.

Basis of Presentation The accounting and reporting policies of the Company and
its subsidiaries conform to U.S. generally accepted accounting principles. The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries after elimination of intercompany transactions.
Certain amounts in the 2007 and 2006 consolidated financial statements have been
reclassified to conform to the 2008 presentation. Such reclassifications have no
effect on previously reported net income or shareholders' equity. The Company
issued a 10% stock dividend on December 17, 2007 and a 50% stock dividend on
September 15, 2006. The share and per share information have been restated for
all periods presented in the accompanying consolidated financial statements.

Use of Estimates In preparing the consolidated financial statements, Company
management is required to make estimates and assumptions which significantly
affect the reported amounts in the consolidated financial statements. A
significant estimate, which is particularly susceptible to change in a short
period of time, is the determination of the allowance for loan losses.

Cash and Cash Equivalents For purposes of the consolidated statements of cash
flows, the Company considers cash and due from banks, federal funds sold and
other short-term investments as segregated in the accompanying consolidated
balance sheets to be cash equivalents.

Investment in Debt and Equity Securities The Company classifies its debt and
marketable equity securities as available-for-sale. Securities classified as
available-for-sale are carried at fair value. Unrealized gains and losses, net
of the related tax effect, are excluded from earnings and reported in
accumulated other comprehensive income, a component of shareholders' equity. A
decline in the fair value of any available-for-sale security below cost that is
deemed other than temporary results in a charge to earnings and the
establishment of a new cost basis for the security. To determine whether
impairment is other than temporary, the Company considers whether it has the
ability and intent to hold the investment until a marketplace recovery and
considers whether evidence indicating the cost of the investment is recoverable
outweighs evidence to the contrary. Evidence considered in this assessment
includes the reasons for impairment, the severity and duration of the
impairment, changes in value subsequent to year-end and forecasted performance
of the investee. Premiums and discounts are amortized or accreted to interest
income over the estimated lives of the securities using the level-yield method.
Interest income is recognized when earned. Gains and losses are calculated using
the specific identification method.

Allowance for Loan Losses The allowance for loan losses is increased by
provisions charged to expense and is available to absorb charge-offs, net of
recoveries. Management utilizes a systematic, documented approach in determining
the appropriate level of the allowance for loan losses. Management's approach,
which provides for general and specific allocations, is based on current
economic conditions, past losses, collection experience, risk characteristics of
the portfolio, assessments of collateral values by obtaining independent
appraisals for significant properties, and such other factors which, in
management's judgment, deserve current recognition in estimating loan losses.

Management believes the allowance for loan losses is adequate to absorb probable
losses in the loan portfolio. While management uses all available information to
recognize losses on loans, future additions to the allowance may be necessary
based on changes in economic conditions. Additionally, various regulatory
agencies, as an integral part of their examination process, periodically review
the Company's allowance for loan losses. Such agencies may require the Company
to increase the allowance for loan losses based on their judgments and
interpretations about information available to them at the time of their
examination.

Premises and Equipment Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is computed over the
estimated useful lives of the assets, or the respective lease terms for
leasehold improvements, using straight-line and accelerated methods. Estimated
useful lives do not exceed 40 years for

                                       32
<PAGE>

buildings, the lesser of 10 years or the life of the lease for leasehold
improvements and range from 3 to 7 years for software, equipment, furniture and
fixtures. Maintenance and repairs are charged to expense as incurred.

Intangible Assets Cost in excess of fair value of net assets acquired has
resulted from business acquisitions, which were accounted for using the purchase
method. Goodwill and intangible assets with indefinite useful lives are not
amortized, but instead are tested for impairment at least annually. Intangible
assets with definite useful lives are amortized over their respective estimated
useful lives.

Periodically, the Company reviews intangible assets for events or changes in
circumstances that may indicate that the carrying amount of the assets may not
be recoverable. Based on those reviews, adjustments of recorded amounts have not
been required.

Non-marketable Equity Investments The Company accounts for non-marketable equity
investments, in which it holds less than a 20% ownership, under the cost method.
Under the cost method of accounting, investments are carried at cost and are
adjusted only for other than temporary declines in fair value, distributions of
earnings and additional investments. The Company periodically evaluates whether
any declines in fair value of its investments are other than temporary. In
performing this evaluation, the Company considers various factors including any
decline in market price, where available, the investee's financial condition,
results of operations, operating trends and other financial ratios.
Non-marketable equity investments are included in other assets on the
consolidated balance sheets.

Foreclosed Assets Other real estate, included in other assets in the
accompanying consolidated balance sheets, is recorded at the lower of cost or
fair value less costs to sell. If the fair value of other real estate declines
subsequent to foreclosure, the difference is recorded as a valuation allowance
through a charge to expense. Subsequent increases in fair value are recorded
through reversal of the valuation allowance. Expenses incurred in maintaining
the properties are charged to expense.

Treasury Stock Purchases of the Company's common stock are recorded at cost.
Upon reissuance, treasury stock is reduced based upon the average cost basis of
shares held.

Comprehensive Income Comprehensive income consists of net income, changes in net
unrealized gains (losses) on available-for-sale securities and pension liability
adjustments and is presented in the accompanying consolidated statements of
shareholders' equity and comprehensive income.

Interest on Loans Interest on loans is recognized based upon the principal
amounts outstanding. It is the Company's policy to discontinue the accrual of
interest when there is reasonable doubt as to the collectability of principal or
interest. Subsequent payments received on such loans are applied to principal if
there is any doubt as to the collectability of such principal; otherwise, these
receipts are recorded as interest income. The accrual of interest on a loan is
resumed when the loan is current as to payment of both principal and interest
and/or the borrower demonstrates the ability to pay and remain current.

Impairment of Loans A loan is considered impaired when it is probable that a
creditor will be unable to collect all amounts due, both principal and interest,
according to the contractual terms of the loan agreement. When measuring
impairment, the expected future cash flows of an impaired loan are discounted at
the loan's effective interest rate. Alternatively, impairment could be measured
by reference to an observable market price, if one exists, or the fair value of
the collateral for a collateral-dependent loan. Regardless of the historical
measurement method used, the Company measures impairment based on the fair value
of the collateral when the Company determines foreclosure is probable.
Additionally, impairment of a restructured loan is measured by discounting the
total expected future cash flows at the loan's effective rate of interest as
stated in the original loan agreement. The Company uses its nonaccrual methods
as discussed above for recognizing interest on impaired loans.

Information Services Revenue A majority of the Company's revenues are
attributable to fees for providing services. These services include freight
invoice rating, payment processing, auditing, and the generation of accounting
and transportation information. The Company also processes, pays and generates
management information from electric, gas, telecommunications and other
invoices. The specific payment and information processing services provided to
each customer are developed individually to meet each customer's specific
requirements. The Company enters into service agreements with customers
typically for fixed fees per transaction that are invoiced monthly. Revenues are
recognized in the period services are rendered and earned under the service
agreements, as long as collection is reasonably assured.

Income Taxes Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. Deferred tax assets are
reduced if necessary, by a deferred tax asset valuation allowance. In the event
that management determines it will not be able to realize all or part of net
deferred tax assets in the future, the Company adjusts the recorded value of
deferred tax assets, which

                                       33
<PAGE>

would result in a direct charge to income tax expense in the period that such
determination is made. Likewise, the Company will reverse the valuation
allowance when realization of the deferred tax asset is expected. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

Earnings Per Share Basic earnings per share is computed by dividing net income
by the weighted average number of common shares outstanding. Diluted earnings
per share is computed by dividing net income, adjusted for the net income effect
of the interest expense on the outstanding convertible debentures, by the sum of
the weighted average number of common shares outstanding and the weighted
average number of potential common shares outstanding.

Stock-Based Compensation Effective January 1, 2006, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 123R ("SFAS No. 123R")
"Share-based Payment." SFAS No. 123R requires that all stock-based compensation
be recognized as an expense in the financial statements and that such cost be
measured at the fair value of the award. This statement was adopted using the
modified prospective method of application, which requires the Company to
recognize compensation expense on a prospective basis. SFAS No. 123R also
requires that excess tax benefits related to stock option exercises and
restricted stock awards be reflected as financing cash inflows instead of
operating cash inflows.

Pension Plans The amounts recognized in the consolidated financial statements
related to pension are determined from actuarial valuations. Inherent in these
valuations are assumptions including expected return on plan assets, discount
rates at which the liabilities could be settled at December 31, 2008, rate of
increase in future compensation levels and mortality rates. These assumptions
are updated annually and are disclosed in Note 12. The Company adopted SFAS No.
158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans" ("SFAS No. 158") on December 31, 2006. SFAS No. 158 requires companies to
recognize the overfunded or underfunded status of a defined benefit
postretirement plan as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income. The funded status is measured as the
difference between the fair value of the plan assets and the projected benefit
obligation as of the date of its fiscal year-end.

Impact of Accounting Pronouncements Not Yet Adopted

In December 2007, the FASB issued SFAS No. 141(R) - Business Combinations ("SFAS
No. 141(R)"). SFAS No. 141(R) will significantly change how entities apply the
acquisition method to business combinations. The most significant changes
affecting how entities will account for business combinations under SFAS No.
141(R) include: (a) the acquisition date will be the date the acquirer obtains
control; (b) all (and only) identifiable assets acquired, liabilities assumed,
and noncontrolling interests in the acquiree will be stated at fair value on the
acquisition date; (c) assets or liabilities arising from noncontractual
contingencies will be measured at their acquisition date fair value only if it
is more likely than not that they meet the definition of an asset or liability
on the acquisition date; (d) adjustments subsequently made to the provisional
amounts recorded on the acquisition date will be made retroactively during a
measurement period not to exceed one year; (e) acquisition-related restructuring
costs that do not meet the criteria in SFAS No. 146 - Accounting for Costs
Associated with Exit or Disposal Activities, will be expensed as incurred; (f)
transaction costs will be expensed as incurred; (g) reversals of deferred income
tax valuation allowances and income tax contingencies will be recognized in
earnings subsequent to the measurement period; and (h) the allowance for loan
losses of an acquiree will not be permitted to be recognized by the acquirer.
Additionally, SFAS No. 141(R) will require new and modified disclosures
surrounding subsequent changes to acquisition-related contingencies, contingent
consideration, noncontrolling interests, acquisition-related transaction costs,
fair values and cash flows not expected to be collected for acquired loans, and
an enhanced goodwill rollforward. SFAS No. 141(R) is effective for all business
combinations completed on or after January 1, 2009. Early adoption is not
permitted. For business combinations in which the acquisition date was before
the effective date, the provisions of SFAS No. 141(R) will apply to the
subsequent accounting for deferred income tax valuation allowances and income
tax contingencies and will require any changes in those amounts to be recorded
in earnings. We are currently evaluating the impact that SFAS No. 141(R) will
have on our financial condition, results of operations and the disclosures that
will be presented in our consolidated financial statements and we do not expect
there will be a material impact.

Note 2
Acquisition of NTransit

On July 7, 2006, the Company acquired 100% of the common stock of NTransit, Inc.
("NTransit"), a company whose service provides auditing and expense management
of parcel shipments. While this acquisition did not meet the Regulation S-X
criteria of a significant business combination, it positioned the Company to
expand its offerings in the specialized service and expertise in parcel
shipping, which is a unique segment of the transportation industry that has
experienced tremendous growth in recent years.

                                       34
<PAGE>

Note 3
Capital Requirements And Regulatory Restrictions

The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can result in certain mandatory, and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's consolidated financial statements. Under
capital adequacy guidelines, the Company and the Bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting practices. The
Company and the Bank's capital amounts and classifications are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.

Quantitative measures established by regulators to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of total
and Tier I capital to risk-weighted assets, and of Tier I capital to average
assets. Management believes that as of December 31, 2008 and 2007, the Company
and the Bank met all capital adequacy requirements to which they are subject.

The Bank is also subject to the regulatory framework for prompt corrective
action. As of December 31, 2008, the most recent notification from the
regulatory agencies categorized the Bank as well capitalized. To be categorized
as well capitalized, the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table below. There
are no conditions or events since that notification that management believes
have changed the Bank's category.

Subsidiary dividends are a significant source of funds for payment of dividends
by the Company to its shareholders. At December 31, 2008, unappropriated
retained earnings of $1,530,000 were available at the Bank for the declaration
of dividends to the Company without prior approval from regulatory authorities.
However, dividends paid by the Bank to the Company would be prohibited if the
effect thereof would cause the Bank's capital to be reduced below applicable
minimum capital requirements.

Restricted funds on deposit used to meet regulatory reserve requirement were $0
and $500,000 at December 31, 2008 and 2007, respectively.

The Company's and the Bank's actual and required capital amounts and ratios as
of December 31, 2008 and 2007 are as follows:

<TABLE>
<CAPTION>
                                                                                                  Requirement
                                                                             Capital               to be well
                                                  Actual                  requirements             capitalized
                                        ---------------------------------------------------------------------------
(Dollars in thousands)                        Amount     Ratio          Amount     Ratio        Amount     Ratio
-------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>           <C>          <C>        <C>         <C>
At December 31, 2008
Total capital (to risk-weighted assets):
     Cass Information Systems, Inc.         $115,028     15.93%        $57,780      8.00%      $    N/A    $   N/A
     Cass Commercial Bank                     44,187     11.39          31,027      8.00         38,784     10.00%
Tier I capital (to risk-weighted assets):
     Cass Information Systems, Inc.          105,586     14.62          28,890      4.00            N/A        N/A
     Cass Commercial Bank                     39,782     10.26          15,514      4.00         23,270      6.00%
Tier I capital (to average assets):
     Cass Information Systems, Inc.          105,586     11.26          28,133      3.00          N/A          N/A
     Cass Commercial Bank                     39,782     10.35          11,528      3.00         19,213      5.00%
At December 31, 2007
Total capital (to risk-weighted assets):
     Cass Information Systems, Inc.         $103,044     16.12%        $51,105      8.00%      $    N/A    $   N/A
     Cass Commercial Bank                     41,441     14.39          23,044      8.00         28,805     10.00%
Tier I capital (to risk-weighted assets):
     Cass Information Systems, Inc.           93,036     14.56          25,552      4.00            N/A        N/A
     Cass Commercial Bank                     37,827     13.13          11,522      4.00         17,283      6.00%
Tier I capital (to average assets):
     Cass Information Systems, Inc.           93,036     10.14          27,525      3.00            N/A        N/A
     Cass Commercial Bank                     37,827     11.46           9,903      3.00         16,505      5.00%
</TABLE>

Note 4
Investment in Debt and Equity Securities

Effective January 1, 2008, the Company adopted SFAS No. 157 "Fair Value
Measurements" ("SFAS No. 157") and SFAS No. 159 "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS No. 159"). Investment

                                       35
<PAGE>

securities available-for-sale are recorded at fair value on a recurring basis.
The determination of fair value utilizes several observable inputs rather than
"significant unobservable inputs" and therefore the Company has classified its
entire portfolio of investment securities at December 31, 2008 as Level 2 as
required under SFAS No. 157. The table below presents the balances of securities
available-for-sale measured at fair value on a recurring basis: The amortized
cost, gross unrealized gains, gross unrealized losses and fair value of debt and
equity securities at December 31, 2008 and 2007 are summarized as follows:

<TABLE>
<CAPTION>
                                                                             2008
                                                      ----------------------------------------------------
                                                                      Gross        Gross
                                                       Amortized    Unrealized   Unrealized      Fair
         (In thousands)                                  Cost          Gains       Losses        Value
         -------------------------------------------------------------------------------------------------
         <S>                                          <C>          <C>             <C>         <C>
         U.S. Treasury securities                     $     200    $     --        $  --       $     200
         State and political subdivisions               189,729       3,790          601         192,918
         -------------------------------------------------------------------------------------------------
         Total debt securities                          189,929       3,790          601         193,118
         Stock in Federal Reserve Bank and
           Federal Home Loan Bank                           747          --           --             747
         -------------------------------------------------------------------------------------------------
         Total                                        $ 190,676    $  3,790        $ 601       $ 193,865
         =================================================================================================

<CAPTION>
                                                                              2007
                                                      ----------------------------------------------------
                                                                       Gross       Gross
                                                       Amortized    Unrealized   Unrealized      Fair
         (In thousands)                                  Cost          Gains       Losses        Value
         -------------------------------------------------------------------------------------------------
         <S>                                          <C>          <C>             <C>         <C>
         U.S. Treasury securities                     $   1,995    $      1        $  --       $   1,996
         Obligations of U.S. government-sponsored
           corporations and agencies                      1,500          --            1           1,499
         State and political subdivisions               165,072       2,509          103         167,478
         -------------------------------------------------------------------------------------------------
         Total debt securities                          168,567       2,510          104         170,973
         Stock in Federal Reserve Bank and
           Federal Home Loan Bank                           733          --           --             733
         -------------------------------------------------------------------------------------------------
         Total                                        $ 169,300    $  2,510        $ 104       $ 171,706
         =================================================================================================
</TABLE>

The fair values of securities with unrealized losses at December 31, 2008 and
2007 are as follows:

<TABLE>
<CAPTION>
                                                                           2008
                                     ---------------------------------------------------------------------------------
                                        Less than 12 months         12 months or more                Total
                                     ---------------------------------------------------------------------------------
                                      Estimated    Unrealized    Estimated    Unrealized    Estimated     Unrealized
(In thousands)                       fair value      losses      fair value     losses      Fair value      losses
----------------------------------------------------------------------------------------------------------------------
<S>                                  <C>             <C>           <C>          <C>         <C>             <C>
State and political subdivisions          41,813           601            --        --        41,813           601
----------------------------------------------------------------------------------------------------------------------
Total                                $    41,813     $     601     $      --    $   --      $ 41,813        $  601
======================================================================================================================

<CAPTION>
                                                                           2007
                                     ---------------------------------------------------------------------------------
                                        Less than 12 months         12 months or more                Total
                                     ---------------------------------------------------------------------------------
                                      Estimated    Unrealized    Estimated    Unrealized    Estimated     Unrealized
(In thousands)                       fair value      losses      fair value     losses      Fair value      losses
----------------------------------------------------------------------------------------------------------------------
<S>                                  <C>             <C>           <C>          <C>         <C>             <C>
Obligations of U.S.
government-sponsored corporations
and agencies                         $        --     $      --     $   1,000    $    1      $  1,000        $    1
State and political subdivisions           8,882            35         6,931        68        15,813           103
----------------------------------------------------------------------------------------------------------------------
Total                                $     8,882     $      35     $   7,931    $   69      $ 16,813        $  104
======================================================================================================================
</TABLE>

There were 45 securities (none greater than 12 months) in an unrealized loss
position as of December 31, 2008. All unrealized losses are reviewed to
determine whether the losses are other than temporary. Management believes that
all unrealized losses are temporary since they are market driven and the Company
has the ability and intent to hold these securities until maturity.

There were 21 securities (11 greater than 12 months) in an unrealized loss
position as of December 31, 2007. All unrealized losses are reviewed to
determine whether the losses are other than temporary. Management believes that
all unrealized losses are temporary since they are market driven and the Company
has the ability and intent to hold these securities until maturity.

                                       36
<PAGE>

The amortized cost and fair value of debt and equity securities at December 31,
2008, by contractual maturity, are shown in the following table. Expected
maturities may differ from contractual maturities because borrowers have the
right to prepay obligations with or without prepayment penalties.

<TABLE>
<CAPTION>
   (Dollars in thousands)                                              2008
   -------------------------------------------------------------------------------------
                                                        Amortized Cost        Fair Value
                                                        --------------        ----------
   <S>                                                    <C>                  <C>
   Due in 1 year or less                                  $ 13,249             $ 13,429
   Due after 1 year through 5 years                         44,411               45,999
   Due after 5 years through 10 years                       70,348               72,066
   Due after 10 years                                       61,921               61,624
   No stated maturity                                          747                  747
   -------------------------------------------------------------------------------------
   Total                                                  $190,676             $193,865
   =====================================================================================
</TABLE>

The amortized cost of debt securities pledged to secure public deposits,
securities sold under agreements to repurchase and for other purposes at
December 31, 2008 and 2007 were $200,000 and $3,495,000, respectively.

Proceeds from sales of debt securities classified as available-for-sale were
$20,867,000 in 2008 and $0 in 2007 and 2006. Gross realized gains and losses on
the sales in 2008 were $567,000 and $15,000, respectively.

Note 5
Loans

A summary of loan categories at December 31, 2008 and 2007 is as follows:

<TABLE>
<CAPTION>
   (Dollars in thousands)                                   2008                 2007
   -------------------------------------------------------------------------------------
   <S>                                                    <C>                  <C>
   Commercial and industrial                              $118,044             $100,827
   Real estate:
        Mortgage - Commercial                              141,585              122,397
        Mortgage - Church & related                        271,203              238,510
        Construction                                        17,095               16,035
        Construction - Church & related                     39,126               15,047
   Industrial revenue bonds                                  3,363                4,149
   Other                                                     1,560                1,490
   -------------------------------------------------------------------------------------
   Total                                                  $591,976             $498,455
   =====================================================================================
</TABLE>

The Company originates commercial, industrial and real estate loans to
businesses, and churches throughout the metropolitan St. Louis, Missouri area,
Orange County, California and other selected cities in the United States. The
Company does not have any particular concentration of credit in any one economic
sector; however, a substantial portion of the commercial and industrial loans
are extended to privately-held commercial companies in these market areas, and
are generally secured by the assets of the business. The Company also has a
substantial portion of real estate loans secured by mortgages that are extended
to churches in its market area and selected cities throughout the United States.

Loan transactions involving executive officers and directors of the Company and
its subsidiaries and loans to affiliates of executive officers and directors for
the year ended December 31, 2008, are summarized below. Such loans were made in
the normal course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the same time for
comparable transactions with other persons, and did not involve more than the
normal risk of collectability.

<TABLE>
<CAPTION>
   (In thousands)
   -----------------------------------------------------------------
   <S>                                                        <C>
   Aggregate balance, January 1, 2008                         $941
   New loans                                                    --
   Payments                                                     22
   Aggregate balance, December 31, 2008                       $919
   =================================================================
</TABLE>

                                       37
<PAGE>

A summary of the activity in the allowance for loan losses for 2008, 2007 and
2006 is as follows:

<TABLE>
<CAPTION>
   (In thousands)                                     2008              2007             2006
   ---------------------------------------------------------------------------------------------
   <S>                                              <C>               <C>              <C>
   Balance, January 1                               $ 6,280           $ 6,592          $ 6,284
   Provision charged to expense                       2,200               900            1,150
   Loans charged off                                 (2,173)           (1,375)            (864)
   Recoveries of loans previously
      charged off                                       144               163               22
   ---------------------------------------------------------------------------------------------
   Net loan charge-offs                              (2,029)           (1,212)            (842)
   ---------------------------------------------------------------------------------------------
   Balance, December 31                             $ 6,451           $ 6,280          $ 6,592
   =============================================================================================
</TABLE>

The following is a summary of information pertaining to impaired loans at
December 31, 2008 and 2007:

<TABLE>
<CAPTION>
   (In thousands)                                                       2008             2007
   ---------------------------------------------------------------------------------------------
   <S>                                                                <C>              <C>
   Impaired loans without a valuation allowance                       $    41          $   496
   Impaired loans with a valuation allowance                            1,178            1,985
   Allowance for loan losses related to impaired loans                    480            1,078
   ---------------------------------------------------------------------------------------------
</TABLE>

Impaired loans consist primarily of renegotiated loans, nonaccrual loans and
loans greater than 90 days past due and still accruing interest. Nonaccrual
loans were $1,178,000 and $1,985,000 at December 31, 2008 and 2007,
respectively. Loans delinquent 90 days or more and still accruing interest
totaled $41,000 at December 31, 2008 and $496,000 at December 31, 2007. The
impaired loan of $41,000 was paid in full in March, 2009. The average balances
of impaired loans during 2008, 2007 and 2006 were $1,927,000, $2,227,000 and
$1,177,000, respectively. Income that would have been recognized on non-accrual
loans under the original terms of the contract was $86,000, $163,000 and
$152,000 for 2008, 2007 and 2006, respectively. Income that was recognized on
nonaccrual loans was $56,000, $149,000 and $25,000 for 2008, 2007 and 2006
respectively. There are two foreclosed loans with a book value of $2,177,000
which have been reclassified as other real estate owned (included in other
assets) as of December 31, 2008.

The Company does not record loans at fair value on a recurring basis other than
loans that are considered impaired. Once a loan is identified as impaired,
management measures impairment in accordance with SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan." At December 31, 2008, all impaired loans
were evaluated based on the fair value of the collateral. The fair value of the
collateral is based upon an observable market price or current appraised value
and therefore, the Company classifies these assets as nonrecurring Level 2. The
total principal balance of impaired loans measured at fair value at December 31,
2008 was $699,000.

Note 6
Premises and Equipment

A summary of premises and equipment at December 31, 2008 and 2007, is as
follows:

<TABLE>
<CAPTION>
   (In thousands)                                                       2008             2007
   ---------------------------------------------------------------------------------------------
   <S>                                                                <C>              <C>
   Land                                                               $   873          $   873
   Buildings                                                           10,468           10,468
   Leasehold improvements                                               1,823            2,013
   Furniture, fixtures and equipment                                   11,182           14,164
   Purchased software                                                   4,162            4,887
   Internally developed software                                        3,433            4,037
   ---------------------------------------------------------------------------------------------
                                                                       31,941           36,442
   Less accumulated depreciation and amortization                      20,324           23,671
   ---------------------------------------------------------------------------------------------
   Total                                                              $11,617          $12,771
   =============================================================================================
</TABLE>

Total depreciation and amortization charged to expense in 2008, 2007 and 2006
amounted to $2,394,000, $2,239,000 and $2,042,000, respectively.

                                       38
<PAGE>

The Company and its subsidiaries lease various premises and equipment under
operating lease agreements, which expire at various dates through 2020. Rental
expense for 2008, 2007 and 2006 was $729,000, $646,000 and $614,000,
respectively. The following is a schedule, by year, of future minimum rental
payments required under operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of December 31, 2008:

<TABLE>
<CAPTION>
   (In thousands)                                                       Amount
   ---------------------------------------------------------------------------
   <S>                                                                 <C>
   2009                                                                $   624
   2010                                                                    479
   2011                                                                    470
   2012                                                                    404
   2013                                                                    384
   2014 and after                                                          787
   ---------------------------------------------------------------------------
   Total                                                               $ 3,148
   ===========================================================================
</TABLE>

Note 7
Equity Investments in Non-Marketable Securities

Non-marketable equity investments in low-income housing projects are included in
other assets on the Company's consolidated balance sheets. The total balances of
these investments at December 31, 2008 and 2007 were $605,000 and $475,000,
respectively.

Note 8
Acquired Intangible Assets

The Company accounts for intangible assets in accordance with SFAS No. 142,
"Goodwill and Other Intangible Assets" ("SFAS No. 142") which requires that
intangibles with indefinite useful lives be tested annually for impairment and
those with finite useful lives be amortized over their useful lives. Details of
the Company's intangible assets as of December 31, 2008 and 2007 are as follows:

<TABLE>
<CAPTION>
                                                     December 31, 2008                    December 31, 2007
                                           ---------------------------------     --------------------------------
                                           Gross Carrying      Accumulated       Gross Carrying     Accumulated
(In thousands)                                 Amount          Amortization         Amount          Amortization
-----------------------------------------------------------------------------------------------------------------
<S>                                           <C>               <C>                 <C>               <C>
Assets eligible for amortization:
     Software                                 $   862           $   (747)           $  862            $  (574)
     Customer List                                750               (268)              750               (161)
-----------------------------------------------------------------------------------------------------------------
         Total                                  1,612             (1,015)            1,612               (735)
-----------------------------------------------------------------------------------------------------------------
Assets not eligible for amortization:
     Goodwill                                   7,698               (227)*           7,698               (227)*
-----------------------------------------------------------------------------------------------------------------
         Total                                  7,698               (227)            7,698               (227)
-----------------------------------------------------------------------------------------------------------------
Total intangible assets                       $ 9,310           $ (1,242)           $9,310            $  (962)
-----------------------------------------------------------------------------------------------------------------
</TABLE>

*Amortization through December 31, 2001 prior to adoption of SFAS No. 142.

Software is amortized over four to five years and the customer list that was
acquired in the NTransit purchase is amortized over seven years on a
straight-line basis. Goodwill includes $3,073,000 acquired in 2006 in the
NTransit purchase. The weighted average remaining amortization period at
December 31, 2008 was five years for all amortized intangible assets combined.
Amortization of intangible assets amounted to $280,000, $280,000 and $226,000
for the years ended December 31, 2008, 2007 and 2006, respectively. Estimated
future amortization of intangibles is as follows: $222,000 in 2009, $107,000 in
2010, $107,000 in 2011 and 2012 and $54,000 in 2013.

Note 9
Interest-Bearing Deposits

Interest-bearing deposits consist of the following at December 31, 2008 and
2007:

<TABLE>
<CAPTION>
   (In thousands)                                                       2008             2007
   ---------------------------------------------------------------------------------------------
   <S>                                                                <C>             <C>
   NOW and money market deposit accounts                              $ 81,353        $  75,250
   Savings deposits                                                     23,240           22,530
   Time deposits:
      Less than $100                                                    22,389           26,908
      $100 or more                                                      47,259           55,718
   ---------------------------------------------------------------------------------------------
   Total                                                              $174,241        $ 180,406
   =============================================================================================
</TABLE>

                                       39
<PAGE>

Interest on deposits consists of the following for 2008, 2007 and 2006:

<TABLE>
<CAPTION>
   (In thousands)                                       2008              2007           2006
   --------------------------------------------------------------------------------------------
   <S>                                                <C>              <C>             <C>
   NOW and money market deposit accounts              $ 1,086          $  2,122        $ 1,831
   Savings deposits                                       290               795            730
   Time deposits:
        Less than $100                                    701             1,454          1,297
        $100 or more                                    1,102             3,357          2,556
   --------------------------------------------------------------------------------------------
   Total                                              $ 3,179          $  7,728        $ 6,414
   ============================================================================================
</TABLE>

The scheduled maturities of time deposits at December 31, 2008 and 2007 are
summarized as follows:

<TABLE>
<CAPTION>
                                                      2008                       2007
                                           -----------------------------------------------------
                                                            Percent                   Percent
   (In thousands)                             Amount       of Total      Amount      of Total
   ---------------------------------------------------------------------------------------------
   <S>                                       <C>             <C>        <C>             <C>
   Due within:
        One year                             $65,410         93.9%      $79,472         96.2%
        Two years                              2,592          3.7%        1,171          1.4%
        Three years                              436           .6%        1,363          1.6%
        Four years                               699          1.1%           60           .1%
        Five years                               511           .7%          560           .7%
   ---------------------------------------------------------------------------------------------
   Total                                     $69,648        100.0%      $82,626        100.0%
   =============================================================================================
</TABLE>

Note 10
Subordinated Convertible Debentures and Unused Available Lines of Credit

On August 24, 2004, the Company issued $3,700,000 of 5.33% subordinated
convertible debentures in partial consideration for the acquisition of the
assets of PROFITLAB, Inc. Interest is payable annually on the anniversary date
of the acquisition. The holders of the debentures can convert up to 20% of the
principal amount into fully paid and non-assessable shares of the common stock
of the Company at a rate per share of $19.47 after the third anniversary of the
issuance date. After the fourth anniversary date an additional 30% can be
converted under the same terms. After the fifth anniversary date, 100% can be
converted under the same terms. The securities mature 10 years after the date of
issuance. The debentures may be called by the Company without penalty after
August 24, 2010. During 2008, several debtholders converted $697,000 of the
principal balance into 35,808 shares of the Company's common stock in accordance
with the conversion provisions, resulting in an ending principal balance of
$2,991,000. In December, 2007, one debtholder converted $12,000 of the principal
balance into 532 shares of the Company's common stock, resulting in an ending
principal balance of $3,688,000.

The Bank has unsecured lines of credit at correspondent banks to purchase
federal funds up to a maximum of $46,000,000. Additionally, the Bank maintains
lines of credit at unaffiliated financial institutions in the maximum amount of
$81,643,000 collateralized by U.S. Treasury securities and commercial mortgage
loans. There were no outstanding borrowings under these arrangements at December
31, 2008 or 2007.

Note 11
Common Stock and Earnings Per Share

The table below shows activity in the outstanding shares of the Company's common
stock during 2008.

<TABLE>
<CAPTION>
   -------------------------------------------------------------------------
   <S>                                                           <C>
   Shares outstanding at January 1, 2008                         9,208,682
   Issuance of common stock:
       Issued under stock-based compensation plan                   31,924
       Stock options exercised                                      17,622
       Subordinated debt conversion                                 35,808
       Stock repurchased                                          (120,000)
   -------------------------------------------------------------------------
   Shares outstanding at December 31, 2008                       9,174,036
   =========================================================================
</TABLE>

Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding. Diluted earnings per share is
computed by dividing net income, adjusted for the net income effect of the
interest expense on the outstanding convertible debentures, by the sum of the
weighted average number of common shares outstanding and the weighted average
number of potential common shares outstanding. Under the treasury stock method,
outstanding stock options and SAR's are dilutive when the average market price
of the Company's common stock, combined with the effect of any unamortized
compensation expense, exceeds the option price during a period. In addition,
proceeds from the assumed exercise of dilutive options along with the related
tax benefit are

                                       40
<PAGE>

assumed to be used to repurchase common shares at the average market price of
such stock during the period. Anti-dilutive shares are those option shares with
exercise prices in excess of the current market value.

The calculations of basic and diluted earnings per share for the periods ended
December 31, 2008, 2007 and 2006 are as follows:

<TABLE>
<CAPTION>
    (Dollars in thousands, except share and per share data)                2008          2007          2006
    -----------------------------------------------------------------------------------------------------------
    <S>                                                                 <C>           <C>           <C>
    Basic
        Net income from continuing operations                           $   19,006    $   17,795    $   15,461
        Net loss from discontinued operations                                    -             -          (395)
    -----------------------------------------------------------------------------------------------------------
        Net income                                                      $   19,006    $   17,795    $   15,066
    -----------------------------------------------------------------------------------------------------------
        Weighted average common shares outstanding                       9,150,342     9,145,499     9,141,188
    -----------------------------------------------------------------------------------------------------------

        Basic earnings per share from continuing operations             $     2.08    $     1.95    $     1.69
        Basic loss per share from discontinued operations                        -             -          (.04)
    -----------------------------------------------------------------------------------------------------------
        Basic earnings per share                                        $     2.08    $     1.95    $     1.65
    -----------------------------------------------------------------------------------------------------------

    Diluted
        Net income from continuing operations                           $   19,006    $   17,795    $   15,461
        Net income effect of 5.33% convertible debentures                       96           109           109
    -----------------------------------------------------------------------------------------------------------
        Net income, assuming dilution, from continuing operations           19,102        17,904        15,570
        Net loss from discontinued operations                                    -             -          (395)
    -----------------------------------------------------------------------------------------------------------
        Net income                                                      $   19,102    $   17,904    $   15,175
    -----------------------------------------------------------------------------------------------------------

        Weighted average common shares outstanding                       9,150,342     9,145,499     9,141,188
        Effect of dilutive stock options and awards                        106,851       111,119        74,613
        Effect of 5.33% convertible debentures                             174,557       189,940       189,989
    -----------------------------------------------------------------------------------------------------------
        Weighted average common shares outstanding assuming dilution     9,431,750     9,446,558     9,405,790
    -----------------------------------------------------------------------------------------------------------

        Diluted earnings per share from continuing operations           $     2.03    $     1.90    $     1.65
        Diluted earnings per share from discontinued operations                  -             -          (.04)
    -----------------------------------------------------------------------------------------------------------
        Diluted earnings per share                                      $     2.03    $     1.90    $     1.61
    -----------------------------------------------------------------------------------------------------------
</TABLE>

Share and per share data in the schedule above have been restated for the 10%
stock dividend on December 17, 2007 and the 50% stock dividend on September 15,
2006.

Note 12
Employee Benefit Plans

The Company has a noncontributory defined-benefit pension plan (the "Plan"),
which covers most of its employees. The Company accrues and makes contributions
designed to fund normal service costs on a current basis using the projected
unit credit with service proration method to amortize prior service costs
arising from improvements in pension benefits and qualifying service prior to
the establishment of the plan over a period of approximately 30 years.

A summary of the activity in the Plan's projected benefit obligation, assets,
funded status and amounts recognized in the Company's consolidated balance
sheets at December 31, 2008 and 2007 is as follows:

<TABLE>
<CAPTION>
    (In thousands)                                                         2008           2007
    ---------------------------------------------------------------------------------------------
    <S>                                                                 <C>           <C>
    Projected benefit obligation:
         Balance, January 1                                             $   30,211    $   28,977
         Service cost                                                        1,523         1,622
         Interest cost                                                       1,947         1,771
         Actuarial loss                                                        (34)       (1,493)
         Benefits paid                                                        (824)         (666)
    ---------------------------------------------------------------------------------------------
    Balance, December 31                                                $   32,823    $   30,211
    ---------------------------------------------------------------------------------------------
    Plan assets:
         Fair value, January 1                                          $   28,690    $   25,193
         Actual return                                                      (8,170)          963
         Employer contribution                                               5,900         3,200
         Benefits paid                                                        (824)         (666)
    ---------------------------------------------------------------------------------------------
    Fair value, December 31                                             $   25,596    $   28,690
    ---------------------------------------------------------------------------------------------
    Funded status:
         Accrued pension liability                                      $   (7,227)   $   (1,521)
                                                                        ==========    ==========
</TABLE>

                                           41
<PAGE>

The following represent the major assumptions used to determine the projected
benefit obligation of the Plan. For 2008 the Plan's expected benefit cash flows
are discounted using the Citibank Above Median Curve. Previously, the discount
rate was based on the Citigroup Pension Liability Curve.

<TABLE>
<CAPTION>
                                                       2008       2007       2006
-----------------------------------------------------------------------------------
<S>                                                     <C>        <C>        <C>
    Weighted average discount rate                      6.50%      6.50%      6.00%
    Rate of increase in compensation levels             4.00%      4.25%      4.00%
</TABLE>

The accumulated benefit obligation was $26,304,000 and $23,898,000 as of
December 31, 2008 and 2007, respectively. The Company expects to contribute
approximately $1,800,000 to the Plan in 2009. The following pension benefit
payments, which reflect expected future service, as appropriate, are expected to
be paid by the Plan:

<TABLE>
<S>                <C>             <C>
                   2009            $1,075,000
                   2010             1,163,000
                   2011             1,170,000
                   2012             1,298,000
                   2013             1,342,000
                   2014-2018        9,726,000
</TABLE>

The Plan's pension cost for 2008, 2007 and 2006 was $1,428,000, $1,725,000 and
$1,786,000, respectively, and included the following components:

<TABLE>
<CAPTION>
    (In thousands)                                     2008       2007       2006
    -------------------------------------------------------------------------------
<S>                                                   <C>        <C>        <C>
    Service cost - benefits earned during the year    $1,523     $1,622     $1,554
    Interest cost on projected benefit obligations     1,947      1,771      1,565
    Expected return on plan assets                    (2,108)    (1,865)    (1,603)
    Net amortization and deferral                         66        197        270
    -------------------------------------------------------------------------------
    Net periodic pension cost                         $1,428     $1,725     $1,786
    ==============================================================================
</TABLE>

The following represent the major assumptions used to determine the net pension
cost of the Plan:

<TABLE>
<CAPTION>
                                                       2008       2007       2006
    -------------------------------------------------------------------------------
<S>                                                     <C>        <C>        <C>
    Weighted average discount rate                      6.50%      6.00%      5.75%
    Rate of increase in compensation levels             4.25%      4.25%      4.00%
    Expected long-term rate of return on assets         7.25%      7.25%      7.50%
</TABLE>

The asset allocation for the Plan as of the measurement date, by asset category,
is as follows:

<TABLE>
<CAPTION>
                                                                   Percentage of
                                                                    Plan Assets
    ------------------------------------------------------------------------------
    Asset Class                                                    2008     2007
    ------------------------------------------------------------------------------
<S>                                                                <C>       <C>
    Equity securities                                              50.2%     45.0%
    Debt securities                                                49.1%     54.6%
    Cash and cash equivalents                                        .7%       .4%
    ------------------------------------------------------------------------------
         Total                                                    100.0%    100.0%
    ==============================================================================
</TABLE>

The investment objective for the Plan is to maximize total return with a
tolerance for average risk. Asset allocation is a balance between fixed income
equity investments, with a target allocation of approximately 50% fixed income,
34% US equity and 16% Non-US equities. Due to volatility in the market, this
target allocation is not always desirable and asset allocations can fluctuate
between acceptable ranges. The fixed income component is invested in pooled
investment grade securities. The equity components are invested in pooled large
cap, small/mid cap and Non-US stocks. The assumed long-term rate of return on
assets, which falls within the expected range, is 7.25% as derived below:

<TABLE>
<CAPTION>
                     Expected Long-Term                            Contribution to
    Asset Class        Return on Class     X    Allocation    =      Assumption
    ------------------------------------------------------------------------------
<S>                        <C> <C>                  <C>              <C>    <C>
    Fixed Income           4 - 6%                   50%              2.0% - 3.0%
    US Equity              6 - 10%                  34%              2.0% - 3.4%
    Non-US Equity          6 - 11%                  16%              1.0% - 1.8%
    ------------------------------------------------------------------------------
                                                                     5.0% - 8.2%
    ==============================================================================
</TABLE>

The Company also has an unfunded supplemental executive retirement plan ("SERP")
which covers key executives of the Company. The SERP is a noncontributory plan
in which the Company's subsidiaries make accruals designed to fund normal
service costs on a current basis using the same method and criteria as the Plan.

                                       42
<PAGE>

A summary of the activity in the SERP's projected benefit obligation, funded
status and amounts recognized in the Company's consolidated balance sheets at
December 31, 2008 and 2007 is as follows:

<TABLE>
<CAPTION>
    (In thousands)                                             2008         2007
    ------------------------------------------------------------------------------
<S>                                                          <C>          <C>
    Benefit obligation:
         Balance, January 1                                  $  4,263     $ 2,745
         Service cost (benefit)                                    59          44
         Interest cost                                            267         233
         Benefits paid                                            (33)        (32)
         Actuarial loss (gain)                                   (346)      1,273
    ------------------------------------------------------------------------------
    Balance, December 31                                     $  4,210     $ 4,263
    ==============================================================================
</TABLE>

The SERP's pension cost for 2008, 2007 and 2006 was $496,000, $526,000, and
$304,000, respectively, and included the following components:

<TABLE>
<CAPTION>
    (In thousands)                                            2008     2007   2006
    ------------------------------------------------------------------------------
<S>                                                          <C>      <C>     <C>
    Service cost - benefits earned during the year           $  59    $  44   $ 43
    Interest cost on projected benefit obligations             267      233    150
    Net amortization and deferral                              170      249    111
    ------------------------------------------------------------------------------
    Net periodic pension cost                                $ 496    $ 526   $304
    ==============================================================================
</TABLE>

The accumulated benefit obligation was $3,378,000 and $3,147,000 as of December
31, 2008 and 2007, respectively. Since this is an unfunded plan there are no
plan assets. Benefits paid were $33,000 in 2008, $32,000 in 2007 and $32,000 in
2006. Expected future benefits payable by the Company over the next 10 years are
as follows:

<TABLE>
<S>                <C>                      <C>
                   2009                     $ 270,000
                   2010                       270,000
                   2011                       270,000
                   2012                       269,000
                   2013                       268,000
                   2014 - 2018              1,349,000
</TABLE>

The following represent the major assumptions used to determine the projected
benefit obligation of the Plan. The Plan's expected benefit cash flows are
discounted using the Citigroup Above Median Curve. Previously, the discount rate
was based on the Citigroup Pension Liability Curve.

<TABLE>
<CAPTION>
                                                             2008    2007    2006
    ------------------------------------------------------------------------------
<S>                                                          <C>     <C>     <C>
    Weighted average discount rate                           7.00%   6.50%   6.00%
    Rate of increase in compensation levels                  4.00%   4.25%   4.00%
</TABLE>

The pre-tax amounts in accumulated other comprehensive loss as of December 31
were as follows:

<TABLE>
<CAPTION>
                                                 The Plan               SERP
                                             -----------------    ----------------
                                              2008       2007      2008      2007
                                             -------    ------    ------    ------
<S>                                          <C>        <C>       <C>       <C>
    (In thousands)
    Prior service cost                       $    49    $   57    $  152    $  202
    Net actuarial loss                        13,651     3,465     1,363     1,829
                                             -------    ------    ------    ------
      Total                                  $13,700    $3,522    $1,515    $2,031
                                             =======    ======    ======    ======
</TABLE>

The estimated pre-tax prior service cost and net actuarial loss in accumulated
other comprehensive loss at December 31, 2008 expected to be recognized as
components of net periodic benefit cost in 2009 for the Plan were $880,000 and
$39,000 respectively. The estimated pre-tax prior service cost and net actuarial
loss in accumulated other comprehensive loss at December 31, 2008, expected to
be recognized as components of net periodic benefit cost in 2009 for SERP are
$82,000 and $184,000 respectively.

The Company also maintains a noncontributory profit sharing plan, which covers
most of its employees. Employer contributions are calculated based upon formulas
which relate to current operating results and other factors. Profit sharing
expense recognized in the consolidated statements of income in 2008, 2007 and
2006 was $4,339,000, $4,097,000 and $3,524,000, respectively.

                                       43
<PAGE>

The Company also sponsors a defined contribution 401(k) plan to provide
additional retirement benefits to substantially all employees. Contributions
under the 401(k) plan for 2008, 2007 and 2006 were $444,000, $430,000 and
$349,000, respectively.

Note 13
Stock-based Compensation

On January 16, 2007, the Board approved, and on April 16, 2007, the Company's
shareholders approved, the 2007 Omnibus Incentive Stock Plan ("the Omnibus
Plan") to provide incentive opportunities for key employees and non-employee
directors and to align the personal financial interests of such individuals with
those of the Company's shareholders. The Omnibus Plan permits the issuance of up
to 880,000 shares of the Company's common stock in the form of stock options,
stock appreciation rights, restricted stock, restricted stock units and
performance awards.

The Company also continues to maintain its other stock-based incentive plans for
the restricted common stock previously awarded and the options previously issued
and outstanding. Restricted shares are amortized to expense over the three-year
vesting period. Options currently vest and expire over a period not to exceed
seven years. The plans authorize the grant of awards in the form of options
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code, options that do not qualify (non-statutory stock options) and
grants of restricted shares of common stock. The Company issues shares out of
treasury stock for restricted shares and option exercises. These plans have been
superseded by the Omnibus Plan and accordingly, all remaining unissued shares
under these plans have been cancelled.

Restricted Stock
Changes in restricted shares outstanding for the year ended December 31, 2008
were as follows:

<TABLE>
<CAPTION>
                                                            Year Ended December 31
                                                            ----------------------
                                                              Shares    Fair Value
    ==============================================================================
<S>                                                           <C>           <C>
    Balance at December 31, 2007                              60,349        $31.28
    Granted                                                   32,254         29.18
    Vested                                                   (23,709)        26.17
    Forfeited                                                   (330)        27.22
    ------------------------------------------------------------------------------
    Balance at December 31, 2008                              68,564        $30.72
    ------------------------------------------------------------------------------
</TABLE>

During 2007 and 2006, 47,432 shares and 16,511 shares, respectively, were
granted with weighted average per share market values at date of grant of $33.66
in 2007 and $24.16 in 2006. The fair value of such shares, which is based on the
market price on the date of grant, is amortized to expense over the three-year
vesting period. Amortization of the restricted stock bonus awards totaled
$942,000 for 2008, $648,000 for 2007 and $197,000 for 2006. As of December 31,
2008, the total unrecognized compensation expense related to non-vested
restricted stock awards was $1,267,000 and the related weighted average period
over which it is expected to be recognized is approximately .8 years.

Stock Options
Changes in options outstanding were as follows:

<TABLE>
<CAPTION>
                                                                       Weighted Average
                                                              Shares    Exercise Price
    -----------------------------------------------------------------------------------
<S>                                                          <C>            <C>
    Balance at December 31, 2005                             230,836        $ 9.70
    Granted                                                   27,750         20.66
    Exercised                                               (154,252)         8.83
    Forfeited                                                 (7,749)        13.25
    -----------------------------------------------------------------------------------
    Balance at December 31, 2006                              96,585         14.00
    -----------------------------------------------------------------------------------
    Granted                                                       --            --
    Exercised                                                 (1,256)        15.03
    Forfeited                                                     --            --
    -----------------------------------------------------------------------------------
    Balance at December 31, 2007                              95,329         13.99
    -----------------------------------------------------------------------------------
    Granted                                                       --            --
    Exercised                                                (25,793)        10.54
    Forfeited                                                     --            --
    -----------------------------------------------------------------------------------
    Balance at December 31, 2008                              69,536        $15.24
    ===================================================================================
    Exercisable at December 31, 2008                          13,016        $11.33
    ===================================================================================
</TABLE>

The total intrinsic value of options exercised during 2008 was $542,000. The
total intrinsic value of options exercised during 2007 was $21,000. The average
remaining contractual term for options outstanding as of December 31, 2008 was
2.6 years and the aggregate intrinsic value was $1,058,000. The average
remaining contractual term for options exercisable as of December 31, 2008 was
1.6 years and the aggregate intrinsic value was $250,000.

                                       44
<PAGE>

A summary of the activity of the non-vested options during 2008 is shown below.

<TABLE>
<CAPTION>
                                                   Weighted
                                                   Average
                                                  Grant Date
                                       Shares     Fair Value
    --------------------------------------------------------
<S>                                     <C>         <C>
    Non-vested at December 31, 2007     77,076      $2.29
    Granted                                 --         --
    Vested                             (20,556)      1.80
    Forfeited                               --         --
    --------------------------------------------------------
    Non-vested at December 31, 2008     56,520      $2.46
    ========================================================
</TABLE>

As of December 31, 2008, the total unrecognized compensation expense related to
non-vested stock options was $71,000 and the related weighted average period
over which it is expected to be recognized is approximately 3.5 years. For the
year ended December 31, 2008, there were no non-qualified options exercised that
generated a tax benefit and there were 25,793 incentive stock options exercised
that did not generate any excess tax benefit for the Company. During 2008, the
Company recognized stock option expense of $31,000.

Stock Appreciation Rights (SAR's)
There were 109,755 SAR's granted during the year ended December 31, 2008. The
Company uses the Black-Scholes option-pricing model to determine the fair value
of the SAR's at the date of grant. Following are the assumptions used to
estimate the $7.65 per share fair value.

<TABLE>
<CAPTION>
                                                  Year Ended
                                              December 31, 2008
    -----------------------------------------------------------
<S>                                                 <C>
    Risk-free interest rate                         3.01%
    Expected life                                  7 yrs.
    Expected volatility                            26.00%
    Expected dividend yield                         1.69%
    -----------------------------------------------------------
</TABLE>

During 2008, the Company recognized SAR's expense of $110,000. As of December
31, 2008, the total unrecognized compensation expense related to stock
appreciation rights was $730,000, and the related weighted average period over
which it is expected to be recognized is 6.1 years.

The risk-free interest rate is based on the zero-coupon U.S. Treasury yield for
the period equal to the expected life of the options at the time of the grant.
The expected life was derived using the historical exercise activity. The
Company uses historical volatility for a period equal to the expected life of
the options using average monthly closing market prices of the Company's stock.
The expected dividend yield is determined based on the Company's current rate of
annual dividends.

Note 14
Other Operating Expense

Details of other operating expense for 2008, 2007 and 2006 are as follows:

<TABLE>
<CAPTION>
    (In thousands)                                   2008        2007        2006
    ------------------------------------------------------------------------------
<S>                                                <C>         <C>         <C>
    Postage and supplies                           $  2,579    $  2,830    $ 2,502
    Promotional Expense                               1,587       1,629      1,552
    Professional fees                                 1,876       2,018      1,997
    Outside service fees                              1,520       1,432      2,088
    Data processing services                            352         272        232
    Telecommunications                                  592         585        578
    Other                                             1,496       1,266      1,519
    ------------------------------------------------------------------------------
    Total other operating expense                  $ 10,002    $ 10,032    $10,468
    ==============================================================================
</TABLE>

                                       45
<PAGE>

Note 15
Income Taxes

The components of income tax expense (benefit) from continuing operations for
2008, 2007 and 2006 are as follows:

<TABLE>
<CAPTION>
    (In thousands)                                2008        2007       2006
    ---------------------------------------------------------------------------
<S>                                             <C>        <C>         <C>
    Current:
         Federal                                $ 4,279    $  5,258    $ 7,196
         State                                    1,306       1,481      1,460
    Deferred:
         Federal                                  1,446       1,294       (265)
         State                                      129         115        (24)
    ---------------------------------------------------------------------------
    Total income tax expense                    $ 7,160    $  8,148    $ 8,367
    ===========================================================================
</TABLE>

A reconciliation of expected income tax expense (benefit), computed by applying
the effective federal statutory rate of 35% for 2008, 2007 and 2006 to income
from continuing operations before income tax expense, to reported income tax
expense is as follows:

<TABLE>
<CAPTION>
    (In thousands)                                2008        2007       2006
    ---------------------------------------------------------------------------
<S>                                             <C>        <C>         <C>
    Expected income tax expense:                $ 9,158    $  9,080    $ 8,340
    (Reductions) increases resulting from
         Tax-exempt income                       (2,924)     (1,952)    (1,151)
         State taxes, net of federal benefit        849         963        949
    Other, net                                       77          57        229
    ---------------------------------------------------------------------------
    Total income tax expense                    $ 7,160    $  8,148    $ 8,367
    ===========================================================================
</TABLE>

The tax effects of temporary differences which give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2008 and
2007, are presented below:

<TABLE>
<CAPTION>
    (In thousands)                                                          2008        2007
    -------------------------------------------------------------------------------------------
<S>                                                                        <C>         <C>
    Deferred tax assets:
         Allowance for loan losses                                         $ 2,459     $ 2,394
         SFAS No. 158 pension funding liability                              5,728       2,057
         Net operating loss carry forward(1)                                   498         540
         Deferred revenue                                                       36          37
         Stock compensation                                                    318         230
         Supplemental executive retirement plan accrual                        277          91
         Other                                                                  81          68
         --------------------------------------------------------------------------------------
           Total deferred tax assets                                       $ 9,397     $ 5,417
    -------------------------------------------------------------------------------------------
    Deferred tax liabilities:
         Premises and equipment                                               (147)        (13)
         Pension                                                            (1,705)         --
         Intangible/assets                                                    (526)       (477)
         Unrealized gain on investment in securities available-for-sale     (1,116)       (842)
         Other                                                                (143)       (147)
         --------------------------------------------------------------------------------------
           Total deferred tax liabilities                                   (3,637)     (1,479)
    -------------------------------------------------------------------------------------------
    Net deferred tax assets                                                $ 5,760     $ 3,938
    ===========================================================================================
</TABLE>

    1.    As of December 31, 2008, the Company had approximately $1,465,000 of
          net operating loss carryforwards as a result of the acquisition of
          Franklin Bancorp. The utilization of the net operating loss
          carryforward is subject to Section 382 of the Internal Revenue Code
          and limits the Company's use to approximately $122,000 per year during
          the carryforward period, which expires in 2020.

A valuation allowance would be provided on deferred tax assets when it is more
likely than not that some portion of the assets will not be realized. The
Company has not established a valuation allowance at December 31, 2008 or 2007,
due to management's belief that all criteria for recognition have been met,
including the existence of a history of taxes paid sufficient to support the
realization of deferred tax assets.

There was no income (loss) from discontinued operations in 2008 and 2007. The
income tax benefit from discontinued operations was $(280,000) with an effective
rate of 41% for 2006.

The Company adopted FASB Interpretation No. 48 ("FIN 48"), "Accounting for
Uncertainty in Income Taxes" effective January 1, 2007. FIN 48 clarifies the
accounting for uncertainty in income taxes in financial statements and
prescribes a recognition threshold and measurement attribute for financial
statement recognition and measurement of a tax position taken or expected to be
taken. The implementation of FIN 48 resulted in the recognition of a cumulative

                                       46
<PAGE>

effect of change in accounting principle of $87,000, which was recorded as an
increase to retained earnings as of January 1, 2007.

The following table presents a reconciliation of the total beginning and ending
amounts of unrecognized tax benefits (in thousands):

<TABLE>
<CAPTION>
                                                                                    2008       2007
                                                                                   ------     ------
<S>                                                                                <C>        <C>
Balance at January 1                                                               $1,033     $  655
Changes in unrecognized  tax benefits as a result of tax positions taken during
a prior year                                                                           75        (55)
Changes in  unrecognized  tax benefits as a result of tax position taken during
the current year                                                                      346        465
Reductions  to  unrecognized  tax  benefits  as a  result  of a  lapse  of  the
applicable statute of limitations                                                     (55)       (32)
                                                                                   ------     ------
Balance at December 31                                                             $1,399     $1,033
                                                                                   ======     ======
</TABLE>

The total amount of federal and state unrecognized tax benefits at December 31,
2008 that, if recognized, would affect the effective tax rate was $1,170,000,
net of federal tax benefit.

The Company expects a reduction of $155,000 in unrecognized tax benefits during
the following year ending December 31, 2009 as a result of the lapse of federal
and state statutes of limitations. The unrecognized tax benefits relate
primarily to apportionment of taxable income among various state tax
jurisdictions.

The Company's policy is to record interest and penalties related to unrecognized
tax benefits as a component of income tax expense. The amount of interest
recorded during the years ended December 31, 2008 and 2007 was $60,000 and
$36,000 respectively. The amount of interest recognized for all tax years
subject to examination was $114,000 and $54,000 for years ended December 31,
2008 and 2007, respectively. There were no penalties for unrecognized tax
benefits accrued at December 31, 2008 or January 1, 2008, nor did the Company
recognize any expense for penalties during 2008.

The Company is subject to income tax in the U. S. federal jurisdiction and
numerous state jurisdictions. The Company's federal income tax returns for 2004
and 2005 have been examined by the Internal Revenue Service. U.S. federal income
tax returns for tax year 2006 and 2007 remain subject to examination by the
Internal Revenue Service ("IRS"). In addition, the Company is subject to state
tax examinations for the tax years 2004 through 2007.

Note 16
Contingencies

The Company and its subsidiaries are involved in various pending legal actions
and proceedings in which claims for damages are asserted. Management, after
discussion with legal counsel, believes the ultimate resolution of these legal
actions and proceedings will not have a material effect upon the Company's
consolidated financial position or results of operations.

Note 17
Disclosures About Financial Instruments

The Company is party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit, commercial letters
of credit and standby letters of credit. The Company's maximum potential
exposure to credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to extend credit, commercial letters of
credit and standby letters of credit is represented by the contractual amounts
of those instruments. At December 31, 2008, no amounts have been accrued for any
estimated losses for these instruments.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commercial
and standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. These off-balance
sheet financial instruments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. The approximate remaining
terms of commercial and standby letters of credit range from less than one to
five years. Since these financial instruments may expire without being drawn
upon, the total amounts do not necessarily represent future cash requirements.
Commitments to extend credit and letters of credit are subject to the same
underwriting standards as those financial instruments included on the
consolidated balance sheets. The Company evaluates each customer's
credit-worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary upon extension of the credit, is based on management's credit
evaluation of the borrower. Collateral held varies, but is generally accounts
receivable, inventory, residential or income-producing commercial

                                       47
<PAGE>

property or equipment. In the event of nonperformance, the Company may obtain
and liquidate the collateral to recover amounts paid under its guarantees on
these financial instruments.

The following table shows conditional commitments to extend credit, standby
letters of credit and commercial letters at December 31, 2008 and 2007:

<TABLE>
<CAPTION>
    (In thousands)                                                              2008       2007
    ---------------------------------------------------------------------------------------------
<S>                                                                            <C>        <C>
    Conditional commitments to extend credit                                   $33,525    $29,036
    Standby letters of credit                                                    7,585      5,999
    Commercial letters of credit                                                 3,185      4,147
    ---------------------------------------------------------------------------------------------
</TABLE>

Following is a summary of the carrying amounts and fair values of the Company's
financial instruments at December 31, 2008 and 2007:

<TABLE>
<CAPTION>
                                                             2008                    2007
                                                     --------------------------------------------
                                                     Carrying      Fair      Carrying     Fair
    (In thousands)                                    Amount       Value      Amount      Value
    ---------------------------------------------------------------------------------------------
<S>                                                  <C>         <C>         <C>         <C>
    Balance sheet assets:
         Cash and cash equivalents                   $ 29,485    $ 29,485    $176,070    $176,070
         Investment in debt and equity securities     193,865     193,865     171,706     171,706
         Loans, net                                   585,525     588,991     492,175     495,335
         Accrued interest receivable                    4,836       4,836       4,710       4,710
    ---------------------------------------------------------------------------------------------
    Total                                            $813,711    $817,177    $844,661    $847,821
    =============================================================================================
    Balance sheet liabilities:
         Deposits                                    $277,541    $277,541    $273,596    $273,596
         Accounts and drafts payable                  479,025     479,025     513,734     513,734
         Short-term borrowings                            305         305         219         219
         Subordinated convertible debentures            2,991       3,116       3,688       3,786
         Accrued interest payable                         302         302         588         588
    ---------------------------------------------------------------------------------------------
    Total                                            $760,164    $760,289    $791,825    $791,923
    =============================================================================================
</TABLE>

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

Cash and Other Short-term Instruments For cash and cash equivalents, accrued
interest receivable, accounts and drafts payable, short-term borrowings and
accrued interest payable, the carrying amount is a reasonable estimate of fair
value because of the demand nature or short maturities of these instruments.

Investment in Debt and Equity Securities Fair values are based on quoted market
prices or dealer quotes.

Loans The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.

Deposits The fair value of demand deposits, savings deposits and certain money
market deposits is the amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit is estimated using the rates
currently offered for deposits of similar remaining maturities. The fair value
estimates above do not include the benefit that results from the low-cost
funding provided by the deposit liabilities compared to the cost of borrowing
funds in the market nor the benefit derived from the customer relationship
inherent in existing deposits.

Subordinated Convertible Debentures The fair value of convertible subordinated
debentures is estimated by discounting the projected future cash flows using
estimated current rates for similar borrowings.

Commitments to Extend Credit and Standby Letters of Credit The fair value of
commitments to extend credit and standby letters of credit is estimated using
the fees currently charged to enter into similar agreements, taking into account
the remaining terms of the agreements, the likelihood of the counterparties
drawing on such financial instruments and the present credit-worthiness of such
counterparties. The Company believes such commitments have been made at terms
which are competitive in the markets in which it operates; however, no premium
or discount is offered thereon.

Limitations Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Other significant assets or liabilities that are not
considered financial assets or liabilities include premises and equipment and
the benefit that results from the low-cost funding provided by the deposit
liabilities compared to the cost of borrowing funds in the market (core deposit
intangible). In addition, tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in any of the estimates.

                                       48
<PAGE>

Because no market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on management's judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

Note 18
Industry Segment Information

The services provided by the Company are classified into two reportable
segments: Information Services and Banking Services. Each of these segments
provides distinct services that are marketed through different channels. They
are managed separately due to their unique service, processing and capital
requirements.

The Information Services segment provides freight, utility and telecommunication
invoice processing and payment services to large corporations. The Banking
Services segment provides banking services primarily to privately held
businesses and churches.

The Company's accounting policies for segments are the same as those described
in Note 1 of this report. Management evaluates segment performance based on net
income after allocations for corporate expenses and income taxes. Transactions
between segments are accounted for at what management believes to be fair value.

All revenue originates from and all long-lived assets are located within the
United States and no revenue from any customer of any segment exceeds 10% of the
Company's consolidated revenue.

Summarized information about the Company's operations in each industry segment
for the years ended December 31, 2008, 2007 and 2006, is as follows:

<TABLE>
<CAPTION>
                                                                                           Corporate
                                                                Information    Banking       and
(In thousands)                                                    Services     Services  Eliminations     Total
=================================================================================================================
<S>                                                               <C>          <C>         <C>           <C>
2008
Fee revenue and other income:
       Income from customers                                      $ 76,569     $ 15,161    $     --      $ 91,730
       Intersegment income (expense)                                 5,880          925      (6,805)           --
Net interest income (expense) after provision for loan losses:
       Interest from customers                                      24,732       13,828          --        38,560
       Intersegment interest                                           904         (904)         --            --
Depreciation and amortization                                        2,256          407          10         2,673
Income taxes                                                         5,126        2,034          --         7,160
Net income from continuing operations                               15,858        3,148          --        19,006
Goodwill                                                             7,335          136          --         7,471
Other intangible assets, net                                           597           --          --           597
Total assets                                                      $564,687     $382,982    $(62,441)     $885,228
-----------------------------------------------------------------------------------------------------------------
2007
Fee revenue and other income:
       Income from customers                                      $ 46,498     $  1,702    $     --      $ 48,200
       Intersegment income (expense)                                 5,155        1,752      (6,907)           --
Net interest income (expense) after provision for loan losses:
       Interest from customers                                      27,103       13,379          --        40,482
       Intersegment interest                                           278         (278)         --            --
Depreciation and amortization                                        2,118          385          16         2,519
Income taxes                                                         5,852        2,296          --         8,148
Net income from continuing operations                               14,363        3,432          --        17,795
Goodwill                                                             7,335          136          --         7,471
Other intangible assets, net                                           877           --          --           877
Total assets                                                      $588,408     $345,750    $(31,118)     $903,040
-----------------------------------------------------------------------------------------------------------------
</TABLE>

                                       49
<PAGE>

<TABLE>
<S>                                                               <C>          <C>         <C>           <C>
2006
Fee revenue and other income:
       Income from customers                                      $ 41,180     $  1,641    $     --      $ 42,821
       Intersegment income (expense)                                 1,487        1,741      (3,228)           --
Net interest income (expense) after provision for loan losses:
       Interest from customers                                      25,500       13,784          --        39,284
       Intersegment interest                                           349         (349)         --            --
Depreciation and amortization                                        1,889          379          --         2,268
Income taxes                                                         5,431        2,936          --         8,367
Net income from continuing operations                               11,151        4,310          --        15,461
Goodwill                                                             7,335          136          --         7,471
Other intangible assets, net                                         1,156           --          --         1,156
Total assets                                                      $527,227     $333,454    $ (2,210)     $858,471
-----------------------------------------------------------------------------------------------------------------
</TABLE>

Note 19
Condensed Financial Information of Parent Company

Following are the condensed balance sheets of the Company (parent company only)
as of December 31, 2008 and 2007, and the related condensed statements of income
and cash flows for each of the years in the three-year period ended December 31,
2008.

<TABLE>
<CAPTION>
                                                                     Condensed Balance Sheets
                                                                           December 31,
                                                                     ========================
(In thousands)                                                           2008        2007
=============================================================================================
<S>                                                                    <C>         <C>
Assets:
     Cash and due from banks                                           $ 11,822    $ 15,895
     Short-term investments                                              60,799     101,886
     Securities available for sale,
         at fair value                                                  192,917     168,978
     Loans, net                                                         231,175     245,898
     Investment in subsidiary                                            39,918      37,963
     Premises and equipment, net                                         10,672      11,480
     Other assets                                                        57,302      44,270
---------------------------------------------------------------------------------------------
Total assets                                                           $604,605    $626,370
=============================================================================================
Liabilities and Shareholders' Equity:
     Accounts and drafts payable                                       $479,025    $513,734
     Subordinated convertible debentures                                  2,991       3,688
     Other liabilities                                                   16,348       9,496
---------------------------------------------------------------------------------------------
Total liabilities                                                       498,364     526,918
Total shareholders' equity                                              106,241      99,452
---------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                             $604,605    $626,370
=============================================================================================
</TABLE>

                                       50
<PAGE>

<TABLE>
<CAPTION>
                                                                  Condensed Statements of Income
                                                                 For the Years Ended December 31,
                                                                =================================
(In thousands)                                                    2008         2007        2006
--------------------------------------------------------------------------------------------------
<S>                                                             <C>         <C>          <C>
Income from subsidiary:
     Dividends                                                  $  1,192    $  4,117     $  3,655
     Interest                                                        939         347          422
     Management fees                                               1,828       1,722        1,487
--------------------------------------------------------------------------------------------------
              Income from subsidiary                               3,959       6,186        5,564
Information services revenue                                      50,721      45,642       40,343
Net interest income after provision                               23,389      25,711       23,401
Gains on sales of investment securities                              552           -            -
Other income                                                         564         857          838
-------------------------------------------------------------------------------------------------
              Total income                                      $ 79,185    $ 78,396     $ 70,146
--------------------------------------------------------------------------------------------------
Expenses:
     Salaries and employee benefits                             $ 44,768    $ 41,845     $ 37,479
     Other expenses                                               12,240      12,219       12,430
--------------------------------------------------------------------------------------------------
              Total expenses                                    $ 57,008    $ 54,064     $ 49,909
--------------------------------------------------------------------------------------------------
Income before income tax and equity in
     undistributed income of subsidiary                           22,177      24,332       20,237
Income tax expense                                                 5,126       5,852        5,431
--------------------------------------------------------------------------------------------------
Income before undistributed income
     of subsidiary                                                17,051      18,480       14,806
(Excess of dividends over) equity in undistributed
     income of subsidiary                                          1,955        (685)         260
--------------------------------------------------------------------------------------------------
Net income                                                      $ 19,006    $ 17,795     $15,066
==================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                               Condensed Statements of Cash Flows
                                                                 For the Years Ended December 31,
                                                               ==================================
(In thousands)                                                    2008        2007         2006
--------------------------------------------------------------------------------------------------
<S>                                                             <C>         <C>          <C>
Cash flows from operating activities:
     Net income                                                 $ 19,006    $ 17,795     $ 15,066
     Adjustments to reconcile net income to
       net cash provided by operating activities:
       Equity in undistributed income
         of subsidiary                                            (1,955)        685         (260)
       Net change in other assets                                (11,118)       (514)      (6,288)
       Net change in other liabilities                            (2,378)       (322)       2,457
       Amortization of stock-based awards                            933         648          196
       Other, net                                                  2,316       2,073        1,889
--------------------------------------------------------------------------------------------------
         Net cash provided by
             operating activities                                  6,804      20,365       13,060
--------------------------------------------------------------------------------------------------
Cash flows from investing activities:
     Net increase in securities                                  (22,605)    (68,648)      (8,065)
     Net decrease (increase) in loans                             14,723     (11,180)      35,861
     Payment for business acquisitions, net of
       cash acquired                                                  --          --       (3,172)
     Purchases of premises and equipment, net                     (1,178)     (1,904)      (2,188)
--------------------------------------------------------------------------------------------------
         Net cash (used in) provided by investing activities      (9,060)    (81,732)      22,436
--------------------------------------------------------------------------------------------------
Cash flows from financing activities:
     Net (decrease) increase in accounts
       and drafts payable                                        (34,709)     45,341       22,582
     Cash dividends paid                                          (4,499)     (4,118)      (3,666)
     Purchases of common shares for treasury                      (3,984)         --         (870)
     Other financing activities                                      288          34          325
--------------------------------------------------------------------------------------------------
       Net cash provided by
        financing activities                                     (42,904)     41,257       18,371
--------------------------------------------------------------------------------------------------
     Net (decrease) increase in cash and
       cash equivalents                                          (45,160)    (20,110)      53,867
Cash and cash equivalents at beginning of year                   117,781     137,891       84,024
--------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                        $ 72,621    $117,781     $137,891
==================================================================================================
</TABLE>

                                       51
<PAGE>

Note 20
SUPPLEMENTARY FINANCIAL INFORMATION
(Unaudited)

<TABLE>
<CAPTION>
                                          First     Second       Third      Fourth
(In thousands, except per share data)    Quarter    Quarter     Quarter     Quarter      YTD
-----------------------------------------------------------------------------------------------
<S>                                      <C>        <C>         <C>         <C>        <C>
2008
Fee revenue and other income             $12,611    $ 13,304    $ 13,893    $13,362    $ 53,170
Interest income                           11,000      10,777      11,215     11,146      44,138
Interest expense                           1,237         713         692        736       3,378
-----------------------------------------------------------------------------------------------
   Net interest income                     9,763      10,064      10,523     10,410      40,760
Provision for loan losses                    450         650         500        600       2,200
Operating expenses                        16,360      16,508      16,479     16,217      65,564
Income tax expense                         1,545       1,644       2,209      1,762       7,160
-----------------------------------------------------------------------------------------------
Net income                               $ 4,019    $  4,566    $  5,228    $ 5,193    $ 19,006
===============================================================================================
Net income per share:
   Basic earnings per share                  .44         .50         .57        .57        2.08
   Diluted earnings per share                .43         .48         .56        .56        2.03

2007
Fee revenue and other income             $11,863    $ 12,051    $ 12,070    $12,216    $ 48,200
Interest income                           11,996      12,282      12,718     12,350      49,346
Interest expense                           2,011       2,037       2,043      1,873       7,964
-----------------------------------------------------------------------------------------------
   Net interest income                     9,985      10,245      10,675     10,477      41,382
Provision for loan losses                    225         225         225        225         900
Operating expense                         15,333      15,932      15,664     15,810      62,739
Income tax expense                         2,104       1,947       2,179      1,918       8,148
-----------------------------------------------------------------------------------------------
Net income                               $ 4,186    $  4,192    $  4,677    $ 4,740    $ 17,795
===============================================================================================
Net income per share:
   Basic earnings per share                  .45         .46         .51        .53        1.95
   Diluted earnings per share                .45         .45         .50        .50        1.90
</TABLE>

                                       52
<PAGE>

Report of Independent Registered Public Accounting Firm

The Board of Directors
Cass Information Systems, Inc.:

We have audited the accompanying consolidated balance sheets of Cass Information
Systems, Inc. and subsidiaries (the Company) as of December 31, 2008 and 2007,
and the related consolidated statements of income, shareholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2008. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2008 and 2007, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 2008, in
conformity with U.S. generally accepted accounting principles.

As discussed in notes 1 and 12 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standard No. 158, Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans, as of
December 31, 2006.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Company's internal control over
financial reporting as of December 31, 2008 based on criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March 11,
2009 expressed an unqualified opinion on the effectiveness of the Company's
internal control over financial reporting.

/s/KPMG LLP

St. Louis, Missouri
March 11, 2009

                                       53
<PAGE>

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

NONE

ITEM 9A.  CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as of December 31, 2008. Based on this evaluation,
our principal executive officer and our principal financial officer concluded
that our disclosure controls and procedures were effective as of December 31,
2008.

There have not been changes in our internal control over financial reporting
that occurred during our fourth fiscal quarter that have materially affected or
are reasonably likely to materially affect our internal control over financial
reporting.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules
13a-15(f) and 15d-15(f). All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even those systems determined to
be effective can provide only reasonable assurance with respect to financial
statement preparation and presentations.

Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting
based on the framework in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on our
evaluation under this framework, our management concluded that our internal
control over financial reporting was effective as of December 31, 2008.

The effectiveness of our internal control over financial reporting as of
December 31, 2008 has been audited by KPMG LLP, our independent registered
public accounting firm. KPMG LLP's report, which expresses an unqualified
opinion on the effectiveness of our internal control over financial reporting as
of December 31, 2008, is included below.

                                       54
<PAGE>

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Cass Information Systems, Inc.:

We have audited Cass Information Systems, Inc.'s (the Company) internal control
over financial reporting as of December 31, 2008, based on criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the
Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2008, based on
criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
the Company as of December 31, 2008 and 2007, and the related consolidated
statements of income, shareholders' equity and comprehensive income, and cash
flows for each of the years in the three-year period ended December 31, 2008,
and our report dated March 11, 2009 expressed an unqualified opinion on those
consolidated financial statements.

/s/KPMG LLP

St. Louis, Missouri
March 11, 2009

                                       55
<PAGE>

ITEM 9B.  OTHER INFORMATION

NONE
                                    PART III.

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information required by this Item 10 is incorporated herein by reference from
the following sections of the Company's definitive Proxy Statement for its 2009
Annual Meeting of Shareholders ("2009 Proxy Statement"), a copy of which will be
filed with the SEC no later than 120 days after the close of the fiscal year:
"Election of Directors" and "Executive Officers" (please note that "Section
16(a) Beneficial Ownership Reporting Compliance" is within the "Executive
Officers" section).

The Company has adopted a Code of Conduct and Business Ethics policy, applicable
to all Company directors, executive officers and employees. The policy is
publicly available and can be viewed on the Company's website at
www.cassinfo.com. The Company intends to satisfy the disclosure requirement
under Item 5.05 of Form 8-K regarding the amendment to, or a waiver of, a
provision of this policy that applies to the Company's principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions and that relates to any
element of the code of ethics definition enumerated in Item 406(b) of Regulation
S-K by posting such information on its website.

There have been no material changes to the procedures by which stockholders may
recommend nominees to the Board.

ITEM 11.  EXECUTIVE COMPENSATION

Information required pursuant to this Item 11 is incorporated herein by
reference from the sections entitled "Executive Officers" and "Election of
Directors" of the Company's 2009 Proxy Statement, a copy of which will be filed
with the SEC no later than 120 days after the close of the fiscal year.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

Information required pursuant to this Item 12 is incorporated herein by
reference from the section entitled "Executive Officers" of the Company's 2009
Proxy Statement, a copy of which will be filed with the SEC no later than 120
days after the close of the fiscal year.

Securities Authorized for Issuance under Equity Compensation Plans
The following information is as of December 31, 2008:

<TABLE>
<CAPTION>
                                                                                      Number of securities
                                                                                    remaining available for
                                Number of securities to      Weighted-average        future issuance under
                                be issued upon exercise      exercise price of     equity compensation plans
                                of outstanding options,    outstanding options,      (excluding securities
                                  warrants and rights       warrants and rights    reflected in column (a))
       Plan Category                     (a)                       (b)                         (c)
----------------------------    -----------------------    --------------------    -------------------------
<S>                                     <C>                        <C>                            <C>
Equity compensation plans               138,100(1)                 $22.93                       --(1)
approved by security holders            142,009(2)                  28.41                  737,991(2)

Equity compensation plans not                 _                         _                        _
approved by security holders
Total                                   280,109                    $25.71                  737,991
</TABLE>

(1) Amount disclosed relates to the Company's 1995 Performance-Based Stock
Option Plan and 1995 Restricted Stock Bonus Plan. There will be no more shares
or options granted under these plans.
(2) Amount disclosed relates to the 2007 Omnibus Incentive Stock Plan.

Refer to Note 12 to the consolidated financial statements for information
concerning stock options and bonus plans.

                                       56
<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
          INDEPENDENCE

Information required by this Item 13 is incorporated herein by reference from
the section entitled "Election of Directors" of the Company's 2009 Proxy
Statement, a copy of which will be filed with the SEC no later than 120 days
after the close of the fiscal year.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information concerning our principal accountant's fees and services is
incorporated herein by reference from the section "Ratification of Appointment
of Independent Registered Public Accounting Firm" of the Company's 2009 Proxy
Statement, a copy of which will be filed with the SEC no later than 120 days
after the close of the fiscal year.

                                    PART IV.

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a)  The following documents are incorporated by reference in or filed as
          an exhibit to this Report:

          (1)  and  (2)  Financial Statements and Financial Statement Schedules
                         Included in Item 8 of this report.

                    (3)  Exhibits listed under (b) of this Item 15.

     (b)  Exhibits

          3.1  Restated Articles of Incorporation of Registrant, incorporated by
               reference to Exhibit 4.1 to Form S-8 Registration Statement No.
               333-44499, filed with the SEC on January 20, 1998.

          3.2  Articles of Merger of Cass Commercial Corporation, incorporated
               by reference to Exhibit 3.1 to the quarterly report on Form 10-Q
               for the quarter ended September 30, 2006 (File No. 333 - 44497).

          3.3  Second Amended and Restated Bylaws of Registrant, incorporated by
               reference to Exhibit 3.1 to the current report on Form 8-K, filed
               with the SEC on April 18, 2007 (File No. 333 - 44497).

          10.1 1995 Restricted Stock Bonus Plan, as amended to January 19, 1999,
               including form of Restriction Agreement, incorporated by
               reference to Exhibit 4.3 to Post-Effective Amendment No. 2 to
               Form S-8 Registration Statement No. 33-91456, filed with the SEC
               on February 16, 1999.

          10.2 1995 Performance-Based Stock Option Plan, as amended to January
               19, 1999, including forms of Option Agreements, incorporated by
               reference to Exhibit 4.3 to Post-Effective Amendment No. 2 to
               Form S-8 Registration Statement No. 33-91568, filed with the SEC
               on February 16, 1999.

          10.3 Form of Directors' Indemnification Agreement, incorporated by
               reference to Exhibit 10.1 to the quarterly report on Form 10-Q
               for the quarter ended March 31, 2003 (File No 333 - 44497).

          10.4 Amended and Restated 2007 Omnibus Incentive Stock Plan,
               incorporated by reference to Exhibit 10.1 to the quarterly report
               on Form 10-Q for the quarter ended September 30, 2007 (File No.
               333-44497).

          10.5 Amendment and Restatement of the Supplemental Executive
               Retirement Plan, incorporated by reference to Exhibit 10.2 to the
               quarterly report on Form 10-Q for the quarter ended September 30,
               2007 (File No 333 - 44497).

          10.6 Form of Restricted Stock Agreement Award Agreement, incorporated
               by reference to Exhibit 10.3 to the quarterly report on Form 10-Q
               for the quarter ended September 30, 2007 (File No 333 - 44497).

                                       57
<PAGE>

          10.7 Form of Stock Appreciation Rights Award Agreement, incorporated
               by reference to Exhibit 10.4 to the quarterly report on Form 10-Q
               for the quarter ended September 30, 2007 (File No 333 - 44497).

          10.8 Memo of Understanding between Lawrence A. Collett and Cass
               Information Systems, Inc. incorporated by reference to Exhibit
               10.1 to the Form 8-K filed with the SEC on July 17, 2008.

          21   Subsidiaries of registrant.

          23   Consent of Independent Registered Public Accounting Firm.

          31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
               of 2002.

          31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
               of 2002.

          32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
               Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

          32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
               Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(c) None.

                                       58
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                           CASS INFORMATION SYSTEMS, INC.

Date:  March 11, 2009           By           /s/ Eric H. Brunngraber
                                    --------------------------------------------
                                                 Eric H. Brunngraber
                                        President and Chief Executive Officer
                                             (Principal Executive Officer)

Date:  March 11, 2009           By          /s/ P. Stephen Appelbaum
                                    --------------------------------------------
                                                P. Stephen Appelbaum
                                               Chief Financial Officer
                                    (Principal Financial and Accounting Officer)

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on the dates indicated by the following persons on
behalf of the Company and in their capacity as a member of the Board of
Directors of the Company.

Date:  March 11, 2009           By             /s/ K. Dane Brooksher
                                    --------------------------------------------
                                                   K. Dane Brooksher

Date:  March 11, 2009           By             /s/ Eric H. Brunngraber
                                    --------------------------------------------
                                                   Eric H. Brunngraber

Date:  March 11, 2009           By             /s/ Bryan S. Chapell
                                    --------------------------------------------
                                                   Bryan S. Chapell

Date:  March 11, 2009           By             /s/ Lawrence A. Collett
                                    --------------------------------------------
                                                   Lawrence A. Collett

Date:  March 11, 2009           By             /s/ Robert A. Ebel
                                    --------------------------------------------
                                                   Robert A. Ebel

Date:  March 11, 2009           By             /s/ Benjamin F. Edwards, IV
                                    --------------------------------------------
                                                   Benjamin F. Edwards, IV

Date:  March 11, 2009           By             /s/ John L. Gillis, Jr.
                                    --------------------------------------------
                                                   John L. Gillis, Jr.

Date:  March 11, 2009           By             /s/ Wayne J. Grace
                                    --------------------------------------------
                                                   Wayne J. Grace

Date:  March 11, 2009           By             /s/ James J. Lindemann
                                    --------------------------------------------
                                                   James J. Lindemann

Date:  March 11, 2009           By             /s/ A. J. Signorelli
                                    --------------------------------------------
                                                   A. J. Signorelli

Date:  March 11, 2009           By             /s/ Franklin D. Wicks, Jr.
                                    --------------------------------------------
                                                   Franklin D. Wicks, Jr.

                                       59