##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 OR
 o
    
    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: 001-15933
 BLUE VALLEY BAN CORP.
  Kansas
    
    48-1070996(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)11935 Riley
    
    66225-6128Overland Park, Kansas(Address of principal executive offices)
    
    (Zip Code)
 (913) 338-1000
  Title of each class
    
    Name of each exchange on which registeredGuarantee with respect to the Trust Preferred
    
    American Stock ExchangeSecurities, $8.00 par value, of BVBC Capital
Trust I (None of which are currently outstanding)
  o þ
 þ o
 þ o
 þ
  o o þ
 o þ
 .
 DOCUMENTS INCORPORATED BY REFERENCE




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##### 



BLUE VALLEY BAN CORP.
 FORM 10-K INDEX
 Page No.PART I.Item 1. Business
    
    
    2Item 1A. Risk Factors
    
    
    15Item 1B. Unresolved Staff Comments
    
    
    16Item 2. Properties
    
    
    16Item 3. Legal Proceedings
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17
    


PART II.Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    18Item 6. Selected Financial Data
    
    
    19Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    21Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 8. Financial Statements and Supplementary Data
    
    
    40Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    40Item 9A. Controls and Procedures
    
    
    40Item 9B. Other Information
    
    
    40PART III.Item 10. Directors, Executive Officers and Corporate Governance
    
    
    41Item 11. Executive Compensation
    
    
    41Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    41Item 13. Certain Relationships, Related Transactions, and Director Independence
    
    
    41Item 14. Principal Accountant Fees and Services
    
    
    42PART IV.Item 15. Exhibits, Financial Statement Schedules
    
    
    42Agreement and Plan of MergerAcquisition Agreement and Plan of MergerPurchase and Assumption AgreementSubsidiaries of Blue Valley Ban Corp.Consent of BKD, LLPCertification of Chief Executive OfficerCertification of Chief Financial OfficerSection 906 Certifications of CEO and CFO
    1




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Part I
 
 Item 1: Business
 The Company and Subsidiaries
        Our Market Area
  2




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Lending Activities
 Overview
   3




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LOAN PORTFOLIO
 As of December 31, 2006Amount
    
    
    Percent(Dollars in thousands)Commercial
    
    $
    110,849
    
    
    
    20.97
    %Commercial real estate
    
    
    126,952
    
    
    
    24.02Construction
    
    
    171,709
    
    
    
    32.49Lease financing
    
    
    18,512
    
    
    
    3.50Residential real estate
    
    
    34,988
    
    
    
    6.63Consumer
    
    
    33,097
    
    
    
    6.26Home equity
    
    
    32,408
    
    
    
    6.13Total loans and leases
    
    
    528,515
    
    
    
    100.00
    %Less allowance for loan losses
    
    
    6,106Loans receivable, net
    
    $
    522,409
 Commercial loans.
    Commercial real estate loans
  4




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Construction loans.
  Lease financing.
  Residential real estate loans.
  5




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Consumer loans.
  Home equity loans.
 Investment Activities
  
    
    secure the safety of principal;
    
    provide adequate liquidity;
    
    provide securities for use in pledging for public funds or repurchase agreements; and
 6




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
    
    maximize after-tax income.
  Deposit Services
  Investment Brokerage Services
  Trust Services
  7




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Competition
   Employees
  Directors and Executive Officers of the Registrant
  8




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Name
    
    Age
    
    PositionsDirectorsRobert D. Regnier
    
    
    58
    
    
    President, Chief Executive Officer and Chairman of
the Board of Directors of Blue Valley; President,
Chief Executive Officer and Chairman of the Board
of Directors of the BankDonald H. Alexander
    
    
    68
    
    
    Director of Blue Valley and the BankMichael J. Brown
    
    
    50
    
    
    Director of Blue ValleyWayne A. Henry, Jr.
    
    
    54
    
    
    Director of Blue ValleyThomas A. McDonnell
    
    
    61
    
    
    Director of Blue ValleyRobert D. Taylor
    
    
    59
    
    
    Director of Blue ValleyAdditional Directors of the BankHarvey S. Bodker
    
    
    71
    
    
    Director of the BankSuzanne E. Dotson
    
    
    60
    
    
    Director of the BankCharles H. Hunter
    
    
    64
    
    
    Director of the BankExecutive Officers who are not DirectorsMark A. Fortino
    
    
    40
    
    
    Senior Vice President and Chief Financial Officer
of the Bank; Chief Financial Officer of Blue
ValleyRalph J. Schramp
    
    
    57
    
    
    Senior Vice President  Commercial Lending and
Business Development for the BankSheila C. Stokes
    
    
    45
    
    
    Senior Vice President  Retail Division of the Bank
 Regulation and Supervision
   Applicable Legislation
  USA PATRIOT Act.
 9




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Gramm-Leach-Bliley Act
     10




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Bank Holding Company Regulation
  Investments and Activities.
 
    
    Acquiring, directly or indirectly, ownership or control of any voting shares of
another bank or bank holding company if, after the acquisition, it would own or control
more than 5% of the shares of the bank or bank holding company (unless it already owns
or controls the majority of the shares);
    
    Acquiring all or substantially all of the assets of another bank or bank holding company; or
    
    Merging or consolidating with another bank holding company.
   
    
    Acquiring or retaining direct or indirect ownership or control of more than 5% of
the voting shares of any company that is not a bank or bank holding company; and
    
    Engaging, directly or indirectly, in any business other than that of banking,
managing and controlling banks or furnishing services to banks and their subsidiaries.
   Source of Strength.
 11




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Capital Requirements.
  Dividends.
 Bank Regulations
  Deposit Insurance.
 Capital Requirements.
 12




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
    
    Well-capitalized if the institution has a total risk-based capital ratio of 10% or
greater, a Tier 1 risk-based capital ratio of 6% or greater, and a leverage ratio of 5%
or greater, and the institution is not subject to an order, written agreement, capital
directive, or prompt corrective action directive to meet and maintain a specific
capital level for any capital measure;
    
    Adequately capitalized if the institution has a total risk-based capital ratio of
8% or greater, a Tier 1 risk-based capital ratio of 4% or greater, and a leverage ratio
of 4% or greater;
    
    Undercapitalized if the institution has a total risk-based capital ratio that is
less than 8%, a Tier 1 risk-based capital ratio that is less than 4%, or a leverage
ratio that is less than 4%;
    
    Significantly undercapitalized if the institution has a total risk-based capital
ratio that is less than 6%, a Tier 1 risk-based capital ratio that is less than 3%, or
a leverage ratio that is less than 3%; and
    
    Critically undercapitalized if the institution has a ratio of tangible equity to
total assets that is equal to or less than 2%.
  
    
    Placing limits on asset growth and restrictions on activities, including the
establishing of new branches;
    
    Requiring the institution to issue additional capital stock (including additional
voting stock) or to be acquired;
    
    Restricting transactions with affiliates;
    
    Restricting the interest rate the institution may pay on deposits;
    
    Requiring that senior executive officers or directors be dismissed;
    
    Requiring the institution to divest subsidiaries;
    
    Prohibiting the payment of principal or interest on subordinated debt; and
    
    Appointing a receiver for the institution.
   Federal Deposit Insurance Corporation Improvement Act.
 13




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Insider Transactions.
 Community Reinvestment Act Requirements.
 State Bank Activities.
 Regulations Governing Extensions of Credit .
 Reserve Requirements.
 Other Regulations
  14




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Item 1A: Risk Factors
 Our operations may be adversely affected if we are unable to maintain and increase our deposit
base and secure adequate funding.
  The loss of our key personnel could adversely affect our operations.
  Changes in interest rates may adversely affect our earnings and cost of funds.
  Because our business is concentrated in the Kansas City MSA, a downturn in the economy of the
Kansas City MSA may adversely affect our business.
  If our allowance for loan losses is insufficient to absorb losses in our loan portfolio, it will
adversely affect our financial condition and results of operations.
   15




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We may incur significant costs if we foreclose on environmentally contaminated real estate.
  If we are not able to compete effectively in the highly competitive banking industry, our business
will be adversely affected.
  
 Item 1B: Unresolved Staff Comments
  
 Item 2: Properties
 th
 Mortgage IndebtednessLocation
    
    Year Occupied
    

as of December 31, 2006
    
    OccupancyOverland Park Banking Center
11935 Riley
Overland Park, Kansas
    
    
    1994
    
    
    $2.4 Million
    
    78%
One sublease occupying 22%Olathe Banking Center
1235 E. Santa Fe
Olathe, Kansas
    
    
    2001
    
    
    None
    
    
    100
    %Shawnee Banking Center
5520 Hedge Lane Terrace
Shawnee, Kansas
    
    
    2001
    
    
    None
    
    
    100
    %Mortgage and Banking Center
7900 College Boulevard
Overland Park, Kansas
    
    
    2003
    
    
    $4.1 Million
    
    97%
One sublease occupying 3%Leawood Banking Center
13401 Mission Road
Leawood, Kansas
    
    
    2004
    
    
    None
    
    49%
Five subleases occupying 51%
 16




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Item 3: Legal Proceedings
  
 Item 4: Submission of Matters to a Vote of Security Holders
  17




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Part II
 
 Item 5:
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
 Market for Common Stock
 Yahoo.com
 2006
    
    2005Fiscal Quarter
    
    High
    
    Low
    
    High
    
    LowFirst
    
    $
    32.00
    
    
    $
    29.75
    
    
    $
    24.05
    
    
    $
    23.00Second
    
    
    31.00
    
    
    
    28.15
    
    
    
    27.00
    
    
    
    26.00Third
    
    
    33.00
    
    
    
    28.15
    
    
    
    27.75
    
    
    
    26.50Fourth
    
    
    35.00
    
    
    
    33.00
    
    
    
    30.00
    
    
    
    26.50
 Dividends
  Declaration Date
    
    Amount Per Share
    
    Record Date
    
    Pay DateDecember 16, 2002
    
    $
    0.10
    
    
    December 31, 2002
    
    January 15, 2003December 15, 2003
    
    $
    0.15
    
    
    December 31, 2003
    
    January 30, 2004December 17, 2004
    
    $
    0.20
    
    
    December 31, 2004
    
    January 31, 2005December 15, 2005
    
    $
    0.25
    
    
    December 30, 2005
    
    January 31, 2006December 21, 2006
    
    $
    0.30
    
    
    December 29, 2006
    
    January 29, 2007
   18




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##### Table of Contents



Item 6: Selected Financial Data
  As of and for theYear Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands, except share and per share data)Selected Statement of Income DataInterest income:Loans, including fees
    
    $
    44,537
    
    
    $
    37,492
    
    
    $
    29,245
    
    
    $
    28,293
    
    
    $
    26,857Federal funds sold and interest-bearing deposits
    
    
    256
    
    
    
    580
    
    
    
    157
    
    
    
    49
    
    
    
    297Securities
    
    
    4,039
    
    
    
    2,317
    
    
    
    2,301
    
    
    
    2,070
    
    
    
    3,405Total interest income
    
    
    48,832
    
    
    
    40,389
    
    
    
    31,703
    
    
    
    30,412
    
    
    
    30,559Interest expense:Interest-bearing demand deposits
    
    
    97
    
    
    
    94
    
    
    
    169
    
    
    
    165
    
    
    
    388Savings and money market deposit accounts
    
    
    4,356
    
    
    
    3,861
    
    
    
    2,932
    
    
    
    2,204
    
    
    
    2,711Other time deposits
    
    
    11,254
    
    
    
    9,171
    
    
    
    7,297
    
    
    
    6,935
    
    
    
    7,759Funds borrowed
    
    
    5,255
    
    
    
    4,867
    
    
    
    4,115
    
    
    
    4,245
    
    
    
    3,368Total interest expense
    
    
    20,962
    
    
    
    17,993
    
    
    
    14,513
    
    
    
    13,549
    
    
    
    14,226Net interest income
    
    
    27,870
    
    
    
    22,396
    
    
    
    17,190
    
    
    
    16,863
    
    
    
    16,333Provision for loan losses
    
    
    1,255
    
    
    
    230
    
    
    
    1,965
    
    
    
    1,350
    
    
    
    2,920Net interest income after provision for loan
losses
    
    
    26,615
    
    
    
    22,166
    
    
    
    15,225
    
    
    
    15,513
    
    
    
    13,413Non-interest income:Loans held for sale fee income
    
    
    5,046
    
    
    
    7,408
    
    
    
    10,358
    
    
    
    19,866
    
    
    
    16,690NSF charges & service fees
    
    
    1,244
    
    
    
    1,129
    
    
    
    1,326
    
    
    
    1,283
    
    
    
    1,026Other service charges
    
    
    1,247
    
    
    
    1,037
    
    
    
    1,115
    
    
    
    924
    
    
    
    821Realized gain on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    524
    
    
    
    
    
    
    
    193Other income
    
    
    1,344
    
    
    
    1,727
    
    
    
    617
    
    
    
    463
    
    
    
    281Total non-interest income
    
    
    8,881
    
    
    
    11,301
    
    
    
    13,940
    
    
    
    22,536
    
    
    
    19,011Non-interest expense:Salaries and employee benefits
    
    
    14,737
    
    
    
    15,986
    
    
    
    16,670
    
    
    
    19,670
    
    
    
    16,437Occupancy
    
    
    3,059
    
    
    
    3,307
    
    
    
    3,433
    
    
    
    3,137
    
    
    
    2,101General & administrative
    
    
    6,578
    
    
    
    6,841
    
    
    
    6,467
    
    
    
    6,478
    
    
    
    5,578Total non-interest expense
    
    
    24,374
    
    
    
    26,134
    
    
    
    26,570
    
    
    
    29,285
    
    
    
    24,116Income before income taxes
    
    
    11,122
    
    
    
    7,333
    
    
    
    2,595
    
    
    
    8,764
    
    
    
    8,308Income tax provision
    
    
    4,199
    
    
    
    2,764
    
    
    
    665
    
    
    
    3,130
    
    
    
    2,912Net income
    
    $
    6,923
    
    
    $
    4,569
    
    
    $
    1,930
    
    
    $
    5,634
    
    
    $
    5,396Per Share DataBasic earnings
    
    $
    2.93
    
    
    $
    1.95
    
    
    $
    0.84
    
    
    $
    2.51
    
    
    $
    2.48Diluted earnings
    
    
    2.88
    
    
    
    1.91
    
    
    
    0.82
    
    
    
    2.43
    
    
    
    2.40Dividends
    
    
    0.30
    
    
    
    0.25
    
    
    
    0.20
    
    
    
    0.15
    
    
    
    0.10Book value basic (at end of period)
    
    
    22.45
    
    
    
    19.42
    
    
    
    17.78
    
    
    
    17.64
    
    
    
    15.47Weighted average common shares outstanding:Basic
    
    
    2,365,932
    
    
    
    2,348,805
    
    
    
    2,302,564
    
    
    
    2,244,930
    
    
    
    2,178,803Diluted
    
    
    2,407,802
    
    
    
    2,388,531
    
    
    
    2,360,061
    
    
    
    2,320,840
    
    
    
    2,252,929Dividend payout ratio
    
    
    10.23
    %
    
    
    12.82
    %
    
    
    23.80
    %
    
    
    5.98
    %
    
    
    4.04
    %
 19




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As of and for theYear Ended December 31,2006
    
    2005
    
    2003
    
    2003
    
    2002(Dollars in thousands)Selected
Financial Condition Data
(at end of period):Total securities
    
    $
    87,206
    
    
    $
    99,987
    
    
    $
    66,350
    
    
    $
    106,036
    
    
    $
    61,720Total mortgage loans held for sale
    
    
    21,805
    
    
    
    13,906
    
    
    
    44,144
    
    
    
    18,297
    
    
    
    119,272Total loans
    
    
    528,515
    
    
    
    503,143
    
    
    
    507,170
    
    
    
    424,620
    
    
    
    380,082Total assets
    
    
    692,219
    
    
    
    689,589
    
    
    
    672,717
    
    
    
    627,073
    
    
    
    605,539Total deposits
    
    
    535,864
    
    
    
    529,341
    
    
    
    522,646
    
    
    
    470,495
    
    
    
    423,787Funds borrowed
    
    
    96,577
    
    
    
    104,394
    
    
    
    102,469
    
    
    
    111,741
    
    
    
    141,737Total stockholders equity
    
    
    53,820
    
    
    
    46,255
    
    
    
    41,384
    
    
    
    40,198
    
    
    
    34,344Trust assets under administration
    
    
    104,445
    
    
    
    93,988
    
    
    
    118,074
    
    
    
    90,389
    
    
    
    44,245Selected Financial Ratios and Other Data:Performance Ratios:Net interest margin (1)
    
    
    4.34
    %
    
    
    3.50
    %
    
    
    2.91
    %
    
    
    3.01
    %
    
    
    3.35
    %Non-interest income to average assets
    
    
    1.29
    
    
    
    1.63
    
    
    
    2.16
    
    
    
    3.62
    
    
    
    3.55Non-interest expense to average assets
    
    
    3.54
    
    
    
    3.77
    
    
    
    4.11
    
    
    
    4.71
    
    
    
    4.51Net overhead ratio (2)
    
    
    2.25
    
    
    
    2.14
    
    
    
    1.96
    
    
    
    1.08
    
    
    
    0.95Efficiency ratio (3)
    
    
    66.32
    
    
    
    77.56
    
    
    
    85.35
    
    
    
    74.33
    
    
    
    68.23Return on average assets (4)
    
    
    1.00
    
    
    
    0.66
    
    
    
    0.30
    
    
    
    0.91
    
    
    
    1.01Return on average equity (5)
    
    
    13.81
    
    
    
    10.44
    
    
    
    4.69
    
    
    
    14.85
    
    
    
    17.34Asset Quality Ratios:Non-performing loans to total loans
    
    
    1.31
    %
    
    
    0.87
    %
    
    
    0.86
    %
    
    
    0.72
    %
    
    
    0.29
    %Allowance for possible loan losses to:Total loans
    
    
    1.16
    
    
    
    1.33
    
    
    
    1.45
    
    
    
    1.66
    
    
    
    1.82Non-performing loans
    
    
    88.16
    
    
    
    153.27
    
    
    
    168.60
    
    
    
    230.79
    
    
    
    618.29Net charge-offs to average total loans
    
    
    0.35
    
    
    
    0.17
    
    
    
    0.36
    
    
    
    0.30
    
    
    
    0.36Non-performing loans to total assets
    
    
    1.00
    
    
    
    0.63
    
    
    
    0.65
    
    
    
    0.50
    
    
    
    0.18Balance Sheet Ratios:Loans to deposits
    
    
    98.63
    %
    
    
    95.05
    %
    
    
    97.04
    %
    
    
    90.25
    %
    
    
    89.69
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    119.12
    
    
    
    116.78
    
    
    
    114.38
    
    
    
    114.61
    
    
    
    115.64Capital Ratios:Total equity to total assets
    
    
    7.77
    %
    
    
    6.71
    %
    
    
    6.15
    %
    
    
    6.42
    %
    
    
    5.67
    %Total capital to risk-weighted assets ratio
    
    
    12.47
    
    
    
    12.04
    
    
    
    11.15
    
    
    
    12.41
    
    
    
    10.13Tier 1 capital to risk-weighted assets ratio
    
    
    11.33
    
    
    
    10.25
    
    
    
    9.00
    
    
    
    10.04
    
    
    
    8.82Tier 1 capital to average assets ratio
    
    
    10.29
    
    
    
    8.86
    
    
    
    8.45
    
    
    
    8.31
    
    
    
    7.74Average equity to average assets ratio
    
    
    7.27
    
    
    
    6.31
    
    
    
    6.37
    
    
    
    6.10
    
    
    
    5.82
 
 (1)
    
    Net interest income, on a full tax-equivalent basis, divided by average interest-earning
assets.(2)
    
    Non-interest expense less non-interest income divided by average total assets.(3)
    
    Non-interest expense divided by the sum of net interest income plus non-interest income.(4)
    
    Net income divided by average total assets.(5)
    
    Net income divided by average common equity. 20




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Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations
   Critical Accounting Policies
   
    
    analytical reviews of loan loss experience in relationship to outstanding loans and commitments;
    
    problem and non-performing loans and other loans presenting credit concerns;
    
    trends in loan growth, portfolio composition and quality;
    
    appraisals of the value of collateral; and
 
    
    managements judgment with respect to current economic conditions and their impact
on the existing loan portfolio.
  21




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Overview
         22




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Net Interest Income
  Years ended December 31, 2006 and 2005.
   Years ended December 31, 2005 and 2004.
   23




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Average Balance Sheets.
 AVERAGE BALANCES, YIELDS AND RATES
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)AssetsFederal funds sold and other short term investments
    
    $
    5,100
    
    
    $
    256
    
    
    
    5.01
    %
    
    $
    16,076
    
    
    $
    580
    
    
    
    3.61
    %
    
    $
    15,077
    
    
    $
    157
    
    
    
    1.04
    %Investment securities  taxable
    
    
    93,043
    
    
    
    4,013
    
    
    
    4.31
    
    
    
    71,695
    
    
    
    2,256
    
    
    
    3.15
    
    
    
    72,830
    
    
    
    1,926
    
    
    
    2.64Investment securities  non-taxable (1)
    
    
    565
    
    
    
    40
    
    
    
    7.03
    
    
    
    1,317
    
    
    
    92
    
    
    
    6.95
    
    
    
    8,206
    
    
    
    569
    
    
    
    6.93Mortgage loans held for sale
    
    
    18,067
    
    
    
    1,145
    
    
    
    6.34
    
    
    
    35,232
    
    
    
    1,903
    
    
    
    5.40
    
    
    
    35,219
    
    
    
    1,813
    
    
    
    5.15Loans, net of unearned discount and fees (2)
    
    
    525,471
    
    
    
    43,392
    
    
    
    8.26
    
    
    
    516,642
    
    
    
    35,589
    
    
    
    6.89
    
    
    
    463,833
    
    
    
    27,432
    
    
    
    5.91Total earning assets
    
    
    642,246
    
    
    
    48,846
    
    
    
    7.61
    
    
    
    640,962
    
    
    
    40,420
    
    
    
    6.31
    
    
    
    595,165
    
    
    
    31,897
    
    
    
    5.36Cash and due from banks  non-interest bearing
    
    
    18,545
    
    
    
    
    
    
    
    
    
    
    
    22,733
    
    
    
    
    
    
    
    
    
    
    
    21,152Allowance for possible loan losses
    
    
    (6,556
    )
    
    
    
    
    
    
    
    
    
    
    (7,067
    )
    
    
    
    
    
    
    
    
    
    
    (7,434
    )Premises and equipment, net
    
    
    18,300
    
    
    
    
    
    
    
    
    
    
    
    19,304
    
    
    
    
    
    
    
    
    
    
    
    19,613Other assets
    
    
    16,444
    
    
    
    
    
    
    
    
    
    
    
    18,119
    
    
    
    
    
    
    
    
    
    
    
    17,366Total assets
    
    $
    688,979
    
    
    
    
    
    
    
    
    
    
    $
    694,051
    
    
    
    
    
    
    
    
    
    
    $
    645,862Liabilities and Stockholders EquityDeposits-interest bearing:Interest-bearing demand accounts
    
    $
    24,979
    
    
    $
    97
    
    
    
    0.39
    %
    
    $
    25,104
    
    
    $
    94
    
    
    
    0.38
    %
    
    $
    28,268
    
    
    $
    169
    
    
    
    0.60
    %Savings and money market deposits
    
    
    147,403
    
    
    
    4,356
    
    
    
    2.95
    
    
    
    178,947
    
    
    
    3,861
    
    
    
    2.16
    
    
    
    182,468
    
    
    
    2,932
    
    
    
    1.61Time deposits
    
    
    262,199
    
    
    
    11,254
    
    
    
    4.29
    
    
    
    238,051
    
    
    
    9,171
    
    
    
    3.85
    
    
    
    202,649
    
    
    
    7,297
    
    
    
    3.60Total interest-bearing deposits
    
    
    434,581
    
    
    
    15,707
    
    
    
    3.61
    
    
    
    442,102
    
    
    
    13,126
    
    
    
    2.97
    
    
    
    413,385
    
    
    
    10,398
    
    
    
    2.52Short-term borrowings
    
    
    32,047
    
    
    
    1,365
    
    
    
    4.26
    
    
    
    24,511
    
    
    
    557
    
    
    
    2.27
    
    
    
    26,734
    
    
    
    211
    
    
    
    0.79Long-term debt
    
    
    72,530
    
    
    
    3,890
    
    
    
    5.36
    
    
    
    82,243
    
    
    
    4,310
    
    
    
    5.24
    
    
    
    80,226
    
    
    
    3,904
    
    
    
    4.87Total interest-bearing liabilities
    
    
    539,158
    
    
    
    20,962
    
    
    
    3.89
    
    
    
    548,856
    
    
    
    17,993
    
    
    
    3.28
    
    
    
    520,345
    
    
    
    14,513
    
    
    
    2.79Non-interest bearing deposits
    
    
    93,916
    
    
    
    
    
    
    
    
    
    
    
    93,447
    
    
    
    
    
    
    
    
    
    
    
    79,171Other liabilities
    
    
    5,770
    
    
    
    
    
    
    
    
    
    
    
    7,982
    
    
    
    
    
    
    
    
    
    
    
    5,202Stockholders equity
    
    
    50,135
    
    
    
    
    
    
    
    
    
    
    
    43,766
    
    
    
    
    
    
    
    
    
    
    
    41,144Total liabilities and stockholders equity
    
    $
    688,979
    
    
    
    
    
    
    
    
    
    
    $
    694,051
    
    
    
    
    
    
    
    
    
    
    $
    645,862FTE net interest income/spread
    
    
    
    
    
    $
    27,884
    
    
    
    3.72
    %
    
    
    
    
    
    $
    22,427
    
    
    
    3.03
    %
    
    
    
    
    
    $
    17,384
    
    
    
    2.57
    %FTE net interest margin
    
    
    
    
    
    
    
    
    
    
    4.34
    %
    
    
    
    
    
    
    
    
    
    
    3.50
    %
    
    
    
    
    
    
    
    
    
    
    2.91
    %
 
 (1)
    
    Presented on a fully tax-equivalent basis assuming a tax rate of 34%. For the three
years ended December 31, 2006, 2005 and 2004, the tax equivalency adjustment amounted to
$14,000, $31,000, and $194,000, respectively.(2)
    
    Includes average balances and income from loans on nonaccrual status Analysis of Changes in Net Interest Income Due to Changes in Interest Rates and Volumes.
 
    
    changes in rate, reflecting changes in rate multiplied by the prior period volume; and
 24




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##### Table of Contents




    
    changes in volume, reflecting changes in volume multiplied by the current period rate.
 CHANGES IN INTEREST INCOME AND EXPENSE VOLUME AND RATE VARIANCES
 Year Ended December 31,(Dollars in thousands)2006 Compared to 2005
    
    
    2005 Compared to 2004Change
    
    
    Change
    
    
    
    
    
    
    Change
    
    
    ChangeDue to
    
    
    Due to
    
    
    Total
    
    
    Due to
    
    
    Due to
    
    
    TotalRate
    
    
    Volume
    
    
    Change
    
    
    Rate
    
    
    Volume
    
    
    ChangeFederal funds sold
    
    $
    226
    
    
    $
    (550
    )
    
    $
    (324
    )
    
    $
    387
    
    
    $
    36
    
    
    $
    423Investment securities 
taxable
    
    
    836
    
    
    
    921
    
    
    
    1,757
    
    
    
    366
    
    
    
    (36
    )
    
    
    330Investment securities 
non-taxable (1)
    
    
    1
    
    
    
    (53
    )
    
    
    (52
    )
    
    
    2
    
    
    
    (479
    )
    
    
    (477
    )Mortgage loans held for
sale
    
    
    330
    
    
    
    (1,088
    )
    
    
    (758
    )
    
    
    89
    
    
    
    1
    
    
    
    90Loans, net of unearned
discount
    
    
    7,074
    
    
    
    729
    
    
    
    7,803
    
    
    
    4,519
    
    
    
    3,638
    
    
    
    8,157Total interest income
    
    
    8,467
    
    
    
    (41
    )
    
    
    8,426
    
    
    
    5,363
    
    
    
    3,160
    
    
    
    8,523Interest-bearing demand
accounts
    
    
    4
    
    
    
    (1
    )
    
    
    3
    
    
    
    (63
    )
    
    
    (12
    )
    
    
    (75
    )Savings and money market
deposits
    
    
    1,427
    
    
    
    (932
    )
    
    
    495
    
    
    
    1,005
    
    
    
    (76
    )
    
    
    929Time deposits
    
    
    1,047
    
    
    
    1,036
    
    
    
    2,083
    
    
    
    510
    
    
    
    1,364
    
    
    
    1,874Short-term borrowings
    
    
    487
    
    
    
    321
    
    
    
    808
    
    
    
    397
    
    
    
    (51
    )
    
    
    346Long-term debt
    
    
    101
    
    
    
    (521
    )
    
    
    (420
    )
    
    
    300
    
    
    
    106
    
    
    
    406Total interest expense
    
    
    3,066
    
    
    
    (97
    )
    
    
    2,969
    
    
    
    2,149
    
    
    
    1,331
    
    
    
    3,480Net interest income
    
    $
    5,401
    
    
    $
    56
    
    
    $
    5,457
    
    
    $
    3,214
    
    
    $
    1,829
    
    
    $
    5,043
 
 (1)
    
    Presented on a fully tax-equivalent basis assuming a tax rate of 34%. Provision for Loan Losses
      25




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##### Table of Contents



Critical Accounting Policies
 Non-interest Income
  NON-INTEREST INCOME
 Year Ended December 312006
    
    
    2005
    
    
    2004(In thousands)Loans held for sale fee income
    
    $
    5,046
    
    
    $
    7,408
    
    
    $
    10,358NSF charges and service fees
    
    
    1,244
    
    
    
    1,129
    
    
    
    1,326Other service charges
    
    
    1,247
    
    
    
    1,037
    
    
    
    1,115Realized gains on available for sale securities, net
    
    
    
    
    
    
    
    
    
    
    524Other income
    
    
    1,344
    
    
    
    1,727
    
    
    
    617Total non-interest income
    
    $
    8,881
    
    
    $
    11,301
    
    
    $
    13,940
   Non-interest Expense
  26




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##### Table of Contents



NON-INTEREST EXPENSE
 Year Ended December 312006
    
    
    2005
    
    
    2004(In thousands)Salaries and employee benefits
    
    $
    14,737
    
    
    $
    15,986
    
    
    $
    16,670Occupancy
    
    
    3,059
    
    
    
    3,307
    
    
    
    3,433General and administrative
    
    
    6,578
    
    
    
    6,841
    
    
    
    6,467Total non-interest expenses
    
    $
    24,374
    
    
    $
    26,134
    
    
    $
    26,570
   Income Taxes
  Financial Condition
 Lending Activities.
   27




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##### Table of Contents



As of December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Commercial
    
    $
    110,849
    
    
    
    20.97
    %
    
    $
    112,452
    
    
    
    22.35
    %
    
    $
    117,604
    
    
    
    23.19
    %
    
    $
    109,818
    
    
    
    25.86
    %
    
    $
    93,658
    
    
    
    24.64
    %Commercial real estate
    
    
    126,952
    
    
    
    24.02
    
    
    
    114,562
    
    
    
    22.77
    
    
    
    126,205
    
    
    
    24.88
    
    
    
    87,438
    
    
    
    20.59
    
    
    
    71,295
    
    
    
    18.76Construction
    
    
    171,709
    
    
    
    32.49
    
    
    
    139,662
    
    
    
    27.76
    
    
    
    130,631
    
    
    
    25.76
    
    
    
    123,445
    
    
    
    29.08
    
    
    
    127,071
    
    
    
    33.43Lease financing
    
    
    18,512
    
    
    
    3.50
    
    
    
    18,238
    
    
    
    3.62
    
    
    
    21,203
    
    
    
    4.18
    
    
    
    22,175
    
    
    
    5.22
    
    
    
    22,600
    
    
    
    5.95Residential real estate
    
    
    34,988
    
    
    
    6.63
    
    
    
    39,371
    
    
    
    7.83
    
    
    
    30,886
    
    
    
    6.09
    
    
    
    27,017
    
    
    
    6.37
    
    
    
    21,581
    
    
    
    5.68Consumer
    
    
    33,097
    
    
    
    6.26
    
    
    
    45,221
    
    
    
    8.99
    
    
    
    48,950
    
    
    
    9.65
    
    
    
    29,701
    
    
    
    6.99
    
    
    
    26,750
    
    
    
    7.04Home equity
    
    
    32,408
    
    
    
    6.13
    
    
    
    33,637
    
    
    
    6.68
    
    
    
    31,691
    
    
    
    6.25
    
    
    
    25,026
    
    
    
    5.89
    
    
    
    17,127
    
    
    
    4.50Total loans and
leases
    
    
    528,515
    
    
    
    100.00
    %
    
    
    503,143
    
    
    
    100.00
    %
    
    
    507,170
    
    
    
    100.00
    %
    
    
    424,620
    
    
    
    100.00
    %
    
    
    380,082
    
    
    
    100.00
    %Less allowance for loan
losses
    
    
    6,106
    
    
    
    
    
    
    
    6,704
    
    
    
    
    
    
    
    7,333
    
    
    
    
    
    
    
    7,051
    
    
    
    
    
    
    
    6,914Loans receivable, net
    
    $
    522,409
    
    
    
    
    
    
    $
    496,439
    
    
    
    
    
    
    $
    499,837
    
    
    
    
    
    
    $
    417,569
    
    
    
    
    
    
    $
    373,168
 Collateral and Concentration.
  MATURITIES AND SENSITIVITIES OF LOANS TO
CHANGES IN INTEREST RATES
 As of December 31, 2006More than One YearLess than
    
    One to
    
    Over fiveone year
    
    five years
    
    years
    
    Total
    
    Fixed
    
    Variable(In thousands)Commercial
    
    $
    53,050
    
    
    $
    51,515
    
    
    $
    6,284
    
    
    $
    110,849
    
    
    $
    22,691
    
    
    $
    35,108Commercial Real Estate
    
    
    28,534
    
    
    
    75,572
    
    
    
    22,846
    
    
    
    126,952
    
    
    
    76,612
    
    
    
    21,806Construction
    
    
    139,643
    
    
    
    29,257
    
    
    
    2,809
    
    
    
    171,709
    
    
    
    11,336
    
    
    
    20,730
 Non-performing Assets
  28




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##### Table of Contents



NON-PERFORMING ASSETS
 As of December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands)Commercial and all other loans:Past due 90 days or more
    
    $
    802
    
    
    $
    781
    
    
    $
    2,008
    
    
    $
    118
    
    
    $
    1Nonaccrual
    
    
    381
    
    
    
    769
    
    
    
    543
    
    
    
    318
    
    
    
    234Commercial real estate loans:Past due 90 days or more
    
    
    4,951
    
    
    
    598
    
    
    
    
    
    
    
    
    
    
    
    Nonaccrual
    
    
    
    
    
    
    
    
    
    
    158
    
    
    
    
    
    
    
    175Construction loans:Past due 90 days or more
    
    
    
    
    
    
    585
    
    
    
    
    
    
    
    
    
    
    
    Nonaccrual
    
    
    136
    
    
    
    452
    
    
    
    
    
    
    
    487
    
    
    
    Lease financing:Past due 90 days or more
    
    
    186
    
    
    
    5
    
    
    
    1
    
    
    
    
    
    
    
    3Nonaccrual
    
    
    
    
    
    
    119
    
    
    
    80
    
    
    
    249
    
    
    
    223Residential real estate loans:Past due 90 days or more
    
    
    
    
    
    
    
    
    
    
    153
    
    
    
    336
    
    
    
    Nonaccrual
    
    
    410
    
    
    
    1,016
    
    
    
    1,315
    
    
    
    437
    
    
    
    407Consumer loans:Past due 90 days or more
    
    
    13
    
    
    
    49
    
    
    
    17
    
    
    
    42
    
    
    
    22Nonaccrual
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13Home equity loans:Past due 90 days or more
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nonaccrual
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    1,068
    
    
    
    40Debt securities and other assets (excluding
other real estate owned and other repossessed
assets):Past due 90 days or more
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nonaccrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing loans
    
    
    6,926
    
    
    
    4,374
    
    
    
    4,350
    
    
    
    3,055
    
    
    
    1,118Foreclosed assets held for sale
    
    
    717
    
    
    
    711
    
    
    
    2,645
    
    
    
    416
    
    
    
    614Total non-performing assets
    
    $
    7,643
    
    
    $
    5,085
    
    
    $
    6,995
    
    
    $
    3,471
    
    
    $
    1,732Total non-performing loans to total loans
    
    
    1.31
    %
    
    
    0.87
    %
    
    
    0.86
    %
    
    
    0.72
    %
    
    
    0.29
    %Total non-performing loans to total assets
    
    
    1.00
    
    
    
    0.63
    
    
    
    0.65
    
    
    
    0.49
    
    
    
    0.18Allowance for loan losses to non-performing loans
    
    
    88.16
    
    
    
    153.27
    
    
    
    168.60
    
    
    
    230.79
    
    
    
    618.29Non-performing assets to loans and foreclosed
assets
held for sale
    
    
    1.44
    
    
    
    1.01
    
    
    
    1.37
    
    
    
    0.82
    
    
    
    0.46
 Non-performing assets
 Impaired Loans.
   29




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##### Table of Contents



Allowance For Loan Losses.
  SUMMARY OF LOAN LOSS EXPERIENCE
AND RELATED INFORMATION
 As of and for theYear Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands)Balance at beginning of period
    
    $
    6,704
    
    
    $
    7,333
    
    
    $
    7,051
    
    
    $
    6,914
    
    
    $
    5,267Loans charged-off:Commercial loans
    
    
    1,417
    
    
    
    949
    
    
    
    1,665
    
    
    
    802
    
    
    
    323Commercial real estate loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395
    
    
    
    323Construction loans
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lease financing
    
    
    134
    
    
    
    86
    
    
    
    220
    
    
    
    279
    
    
    
    870Residential real estate loans
    
    
    318
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    Consumer loans
    
    
    83
    
    
    
    77
    
    
    
    80
    
    
    
    68
    
    
    
    66Home equity loans
    
    
    8
    
    
    
    16
    
    
    
    
    
    
    
    10
    
    
    
    Total loans charged-off
    
    
    2,060
    
    
    
    1,128
    
    
    
    1,983
    
    
    
    1,554
    
    
    
    1,582Recoveries:Commercial loans
    
    
    117
    
    
    
    154
    
    
    
    41
    
    
    
    77
    
    
    
    123Commercial real estate loans
    
    
    
    
    
    
    3
    
    
    
    7
    
    
    
    10
    
    
    
    1Construction loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lease financing
    
    
    32
    
    
    
    76
    
    
    
    166
    
    
    
    219
    
    
    
    162Residential real estate loans
    
    
    47
    
    
    
    1
    
    
    
    48
    
    
    
    
    
    
    
    Consumer loans
    
    
    11
    
    
    
    35
    
    
    
    38
    
    
    
    35
    
    
    
    23Home equity loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total recoveries
    
    
    207
    
    
    
    269
    
    
    
    300
    
    
    
    341
    
    
    
    309Net loans charged-off
    
    
    1,853
    
    
    
    859
    
    
    
    1,683
    
    
    
    1,213
    
    
    
    1,273Provision for loan losses
    
    
    1,255
    
    
    
    230
    
    
    
    1,965
    
    
    
    1,350
    
    
    
    2,920Balance at end of period
    
    $
    6,106
    
    
    $
    6,704
    
    
    $
    7,333
    
    
    $
    7,051
    
    
    $
    6,914Loans outstanding:Average
    
    $
    525,471
    
    
    $
    516,643
    
    
    $
    463,833
    
    
    $
    410,593
    
    
    $
    349,879End of period
    
    
    528,515
    
    
    
    503,143
    
    
    
    507,170
    
    
    
    424,620
    
    
    
    380,082Ratio of allowance for loan
losses to loans outstanding:Average
    
    
    1.16
    %
    
    
    1.30
    %
    
    
    1.58
    %
    
    
    1.72
    %
    
    
    1.98
    %End of period
    
    
    1.16
    
    
    
    1.33
    
    
    
    1.45
    
    
    
    1.66
    
    
    
    1.82Ratio of net charge-offs to:Average loans
    
    
    0.35
    
    
    
    0.17
    
    
    
    0.36
    
    
    
    0.30
    
    
    
    0.36End of period loans
    
    
    0.35
    
    
    
    0.17
    
    
    
    0.33
    
    
    
    0.29
    
    
    
    0.33
 30




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##### Table of Contents



ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
 As of December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(Dollars in Thousands)% of Total
    
    
    
    
    
    % of Total
    
    
    
    
    
    % of Total
    
    
    
    
    
    % of Total
    
    
    
    % of TotalAmount
    
    Allowance
    
    Amount
    
    Allowance
    
    Amount
    
    Allowance
    
    Amount
    
    Allowance
    
    Amount
    
    AllowanceCommercial
    
    $
    1,386
    
    
    
    22.70
    %
    
    $
    1,863
    
    
    
    27.79
    %
    
    $
    3,016
    
    
    
    41.13
    %
    
    $
    2,899
    
    
    
    41.12
    %
    
    $
    3,012
    
    
    
    43.56
    %Commercial real estate
    
    
    1,674
    
    
    
    27.42
    
    
    
    1,441
    
    
    
    21.49
    
    
    
    1,432
    
    
    
    19.53
    
    
    
    1,161
    
    
    
    16.47
    
    
    
    1,008
    
    
    
    14.58Construction
    
    
    1,920
    
    
    
    31.44
    
    
    
    1,776
    
    
    
    26.51
    
    
    
    1,475
    
    
    
    20.11
    
    
    
    1,581
    
    
    
    22.42
    
    
    
    1,405
    
    
    
    20.32Lease financing
    
    
    355
    
    
    
    5.81
    
    
    
    582
    
    
    
    8.68
    
    
    
    583
    
    
    
    7.95
    
    
    
    690
    
    
    
    9.78
    
    
    
    813
    
    
    
    11.76Residential real estate
    
    
    402
    
    
    
    6.58
    
    
    
    536
    
    
    
    7.99
    
    
    
    209
    
    
    
    2.85
    
    
    
    273
    
    
    
    3.87
    
    
    
    293
    
    
    
    4.24Consumer
    
    
    172
    
    
    
    2.82
    
    
    
    294
    
    
    
    4.38
    
    
    
    404
    
    
    
    5.51
    
    
    
    288
    
    
    
    4.09
    
    
    
    256
    
    
    
    3.70Home equity
    
    
    197
    
    
    
    3.23
    
    
    
    212
    
    
    
    3.16
    
    
    
    214
    
    
    
    2.92
    
    
    
    159
    
    
    
    2.25
    
    
    
    127
    
    
    
    1.84Total
    
    $
    6,106
    
    
    
    100.00
    %
    
    $
    6,704
    
    
    
    100.00
    %
    
    $
    7,333
    
    
    
    100.00
    %
    
    $
    7,051
    
    
    
    100.00
    %
    
    $
    6,914
    
    
    
    100.00
    %
 Investment securities.
    INVESTMENT SECURITIES PORTFOLIO COMPOSITION
 At December 31,2006
    
    
    2005
    
    
    2004(In thousands)U.S. government sponsored agency securities
    
    $
    86,165
    
    
    $
    98,667
    
    
    $
    63,561State and municipal obligations
    
    
    360
    
    
    
    674
    
    
    
    2,133Equity and other
    
    
    681
    
    
    
    646
    
    
    
    656Total
    
    $
    87,206
    
    
    $
    99,987
    
    
    $
    66,350
  31




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##### Table of Contents



MATURITY OF INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES
 More Than Ten
    
    
    Total InvestmentOne Year or Less
    
    
    One to Five Years
    
    
    Five to Ten Years
    
    
    Years
    
    
    SecuritiesCarrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    AverageValue
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield(Dollars in thousands)Available-For-SaleU.S. government sponsored
agency
    
    $
    30,805
    
    
    
    3.89
    %
    
    $
    50,317
    
    
    
    4.99
    %
    
    $
    5,043
    
    
    
    5.50
    %
    
    $
    
    
    
    
    
    %
    
    $
    86,165
    
    
    
    4.79
    %State and municipal
Obligations
    
    
    150
    
    
    
    7.20
    
    
    
    210
    
    
    
    6.44
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    360
    
    
    
    6.82Equity and other securities
with no defined maturity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    681
    
    
    
    2.92Total available for sale
    
    $
    30,955
    
    
    
    3.90
    %
    
    $
    50,527
    
    
    
    4.99
    %
    
    $
    5,043
    
    
    
    5.50
    %
    
    $
    
    
    
    
    
    %
    
    $
    87,206
    
    
    
    4.78
    %
 Deposits.
  Deposits
 Year Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Percent
    
    
    Weighted
    
    
    
    
    
    
    Percent
    
    
    Weighted
    
    
    
    
    
    
    Percent
    
    
    Weightedof
    
    
    Average
    
    
    
    
    
    
    of
    
    
    Average
    
    
    
    
    
    
    Of
    
    
    AverageBalance
    
    
    Deposits
    
    
    Rate
    
    
    Balance
    
    
    Deposits
    
    
    Rate
    
    
    Balance
    
    
    Deposits
    
    
    RateDemand
    
    $
    94,823
    
    
    
    17.69
    %
    
    
    
    %
    
    $
    94,452
    
    
    
    17.85
    %
    
    
    
    %
    
    $
    84,764
    
    
    
    16.22
    %
    
    
    
    %Savings
    
    
    8,874
    
    
    
    1.66
    
    
    
    0.49
    
    
    
    9,669
    
    
    
    1.82
    
    
    
    0.49
    
    
    
    9,100
    
    
    
    1.74
    
    
    
    0.49Interest-bearing demand
    
    
    26,427
    
    
    
    4.93
    
    
    
    0.39
    
    
    
    26,560
    
    
    
    5.01
    
    
    
    0.38
    
    
    
    36,342
    
    
    
    6.95
    
    
    
    0.59Money Market
    
    
    23,071
    
    
    
    4.31
    
    
    
    1.13
    
    
    
    27,583
    
    
    
    5.21
    
    
    
    0.57
    
    
    
    30,139
    
    
    
    5.77
    
    
    
    0.42Money Management
    
    
    97,697
    
    
    
    18.23
    
    
    
    3.61
    
    
    
    121,422
    
    
    
    22.94
    
    
    
    2.60
    
    
    
    144,523
    
    
    
    27.65
    
    
    
    1.93Time Deposits
    
    
    284,972
    
    
    
    53.18
    
    
    
    3.97
    
    
    
    249,655
    
    
    
    47.17
    
    
    
    3.85
    
    
    
    217,778
    
    
    
    41.67
    
    
    
    3.60Total deposits
    
    $
    535,864
    
    
    
    100.00
    %
    
    
    
    
    
    $
    529,341
    
    
    
    100.00
    %
    
    
    
    
    
    $
    522,646
    
    
    
    100.00
    %
 32




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##### Table of Contents



AMOUNTS AND MATURITIES OF
TIME DEPOSITS OF $100,000 OR MORE
 As of December 31, 2006Weighted AverageAmount
    
    
    Rate Paid(Dollars in thousands)Three months or less
    
    $
    53,329
    
    
    
    4.96
    %Over three months through six months
    
    
    29,511
    
    
    
    4.40Over six months through twelve months
    
    
    55,959
    
    
    
    4.76Over twelve months
    
    
    26,479
    
    
    
    4.58Total
    
    $
    165,278
    
    
    
    4.73
    %
 Liquidity and Capital Resources
 Liquidity
    33




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##### Table of Contents



SHORT-TERM BORROWINGS
 Average
    
    
    
    
    
    
    Weighted
    
    
    WeightedAmount
    
    
    amount
    
    
    Maximum
    
    
    average
    
    
    Averageoutstanding
    
    
    outstanding
    
    
    Outstanding
    
    
    interest rate
    
    
    interest rateat
    
    
    during the
    
    
    At any
    
    
    during the
    
    
    at periodperiod end
    
    
    period (1)
    
    
    Month end
    
    
    period
    
    
    end(Dollars in
thousands)At or for the year ended December 31, 2006:Federal Home Loan Bank borrowings
    
    $
    
    
    
    $
    6,668
    
    
    $
    31,500
    
    
    
    5.13
    %
    
    
    
    %Federal Funds purchased
    
    
    
    
    
    
    152
    
    
    
    
    
    
    
    5.09
    
    
    
    Repurchase agreements and other
interest bearing liabilities
    
    
    28,574
    
    
    
    24,499
    
    
    
    34,052
    
    
    
    3.27
    
    
    
    4.07Total
    
    $
    28,574
    
    
    $
    31,319
    
    
    
    
    
    
    
    3.67
    
    
    
    4.07At or for the year ended December 31, 2005:Federal Home Loan Bank borrowings
    
    $
    
    
    
    $
    596
    
    
    $
    
    
    
    
    2.90
    %
    
    
    
    %Federal Funds purchased
    
    
    
    
    
    
    136
    
    
    
    
    
    
    
    3.04
    
    
    
    Repurchase agreements and other
interest bearing liabilities
    
    
    24,929
    
    
    
    23,152
    
    
    
    25,252
    
    
    
    2.22
    
    
    
    2.95Total
    
    $
    24,929
    
    
    $
    23,884
    
    
    
    
    
    
    
    2.25
    
    
    
    2.95At or for the year ended December 31, 2004:Federal Home Loan Bank borrowings
    
    $
    
    
    
    $
    510
    
    
    $
    6,000
    
    
    
    2.26
    %
    
    
    
    %Federal Funds purchased
    
    
    
    
    
    
    1,107
    
    
    
    
    
    
    
    1.96
    
    
    
    Repurchase agreements and other
interest bearing liabilities
    
    
    21,118
    
    
    
    24,100
    
    
    
    25,134
    
    
    
    0.65
    
    
    
    1.28Total
    
    $
    21,118
    
    
    $
    25,717
    
    
    
    
    
    
    
    0.73
    
    
    
    1.28
 
 (1)
    
    Calculations are based on daily averages where available and monthly averages
otherwise. Capital Resources.
  34




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##### Table of Contents



RISK-BASED CAPITAL
 December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Tier 1 capitalStockholders equity
    
    $
    53,820
    
    
    $
    46,255
    
    
    $
    41,384Intangible assets
    
    
    (671
    )
    
    
    (823
    )
    
    
    (976
    )Unrealized (appreciation)
depreciation on available-for-sale
securities and derivative instruments
    
    
    95
    
    
    
    473
    
    
    
    257Trust preferred securities (1)
    
    
    17,972
    
    
    
    15,576
    
    
    
    13,880Total Tier 1 capital
    
    
    71,216
    
    
    
    61,481
    
    
    
    54,545Tier 2 capitalQualifying allowance for loan losses
    
    
    6,106
    
    
    
    6,704
    
    
    
    7,333Trust preferred securities(1)
    
    
    1,028
    
    
    
    4,012
    
    
    
    5,708Total Tier 2 capital
    
    
    7,134
    
    
    
    10,716
    
    
    
    13,041Total risk-based capital
    
    $
    78,350
    
    
    $
    72,197
    
    
    $
    67,586Risk weighted assets
    
    $
    628,521
    
    
    $
    599,880
    
    
    $
    605,886Ratios at end of periodTotal
capital to risk-weighted assets ratio
    
    
    12.47
    %
    
    
    12.04
    %
    
    
    11.15
    %Tier 1 capital to average assets ratio
(leverage ratio)
    
    
    10.29
    %
    
    
    8.86
    %
    
    
    8.45
    %Tier 1 capital to risk-weighted assets ratio
    
    
    11.33
    %
    
    
    10.25
    %
    
    
    9.00
    %Minimum guidelinesTotal
capital to risk-weighted assets ratio
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    8.00
    %Tier 1 capital to average assets
(leverage ratio)
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    4.00
    %Tier 1 capital to risk-weighted assets
ratio
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    4.00
    %
 
 (1)
    
    Federal Reserve guidelines for calculation of Tier 1 capital limits the amount of cumulative
trust preferred securities which can be included in Tier 1 capital to 25% of total Tier 1
capital (Tier 1 capital before reduction of intangibles). Approximately $18.0 million, $15.6
million and $13.9 million of the trust preferred securities have been included as Tier 1
capital as of December 31, 2006, 2005 and 2004, respectively. The balance of the trust
preferred securities have been included as Tier 2 capital. 35




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##### Table of Contents



Contractual Obligations
  Payments due by Period (in thousands)Less than 1
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    year
    
    1-3 years
    
    3-5 years
    
    yearsLong-term Debt
Obligations
    
    $
    67,019
    
    
    $
    1,113
    
    
    $
    12,309
    
    
    $
    9,930
    
    
    $
    43,667
 Inflation
  Off-Balance Sheet Arrangements
     36




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##### Table of Contents



Recent and Future Accounting Requirements
 Accounting for Uncertainty in Income Taxes-an interpretation of FASB No. 109, Accounting for Income
Taxes
 Fair Value Measurements
 The Fair Value Option for Financial
Assets and Financial Liabilities-Including an Amendment to FASB Statement No. 115 Accounting for Certain Investments in Debt and Equity Securities
  Fair Value Measurements
 37




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##### Table of Contents



Item 7A: Qualitative and Quantitative Disclosure About Market Risk
     Net Interest
    
    Net EconomicIncome
    
    Value ofChanges in Interest Rates
    
    (next 12 months)
    
    Equity at Risk200 basis point rise
    
    
    12.52
    %
    
    
    1.71
    %Base Rate Scenario
    
    
    
    
    
    
    200 basis point decline
    
    
    (17.88
    %)
    
    
    (8.18
    %)
   38




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##### Table of Contents



INTEREST-RATE SENSITIVITY ANALYSIS
 Expected Maturity or Repricing Date(Dollars in thousands)0-90 Days
    
    
    91-365 Days
    
    
    1 year
    
    
    1 to 2 years
    
    
    2 to 5 years
    
    
    Thereafter
    
    
    TotalInterest-Earning Assets:Fixed Rate Loans
    
    $
    27,208
    
    
    $
    25,815
    
    
    $
    53,023
    
    
    $
    31,275
    
    
    $
    111,275
    
    
    $
    25,115
    
    
    $
    220,688Average Interest Rate
    
    
    7.06
    %
    
    
    7.75
    %
    
    
    7.39
    %
    
    
    7.17
    %
    
    
    7.61
    %
    
    
    6.78
    %
    
    
    7.39
    %Variable Rate Loans
    
    
    314,909
    
    
    
    4,717
    
    
    
    319,626
    
    
    
    1,233
    
    
    
    7,936
    
    
    
    732
    
    
    
    329,527Average Interest Rate
    
    
    8.69
    %
    
    
    8.09
    %
    
    
    8.68
    %
    
    
    5.64
    %
    
    
    6.34
    %
    
    
    5.84
    %
    
    
    8.61
    %Fixed Rate Investments
    
    
    2,000
    
    
    
    29,150
    
    
    
    31,150
    
    
    
    9,710
    
    
    
    40,981
    
    
    
    4,994
    
    
    
    86,835Average Interest Rate
    
    
    3.50
    %
    
    
    3.82
    %
    
    
    3.80
    %
    
    
    4.83
    %
    
    
    5.03
    %
    
    
    5.50
    %
    
    
    4.59
    %Variable Rate Investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average Interest Rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest Bearing Deposits
    
    
    356
    
    
    
    
    
    
    
    356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    356Average Interest Rate
    
    
    4.77
    %
    
    
    
    
    
    
    4.77
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.77
    %Federal Funds Sold
    
    
    5,375
    
    
    
    
    
    
    
    5,375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,375Average Interest Rate
    
    
    5.25
    %
    
    
    
    
    
    
    5.25
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.25
    %Total interest-earning assets
    
    $
    349,848
    
    
    $
    59,682
    
    
    $
    409,530
    
    
    $
    42,218
    
    
    $
    160,192
    
    
    $
    30,841
    
    
    $
    642,781Interest-Bearing Liabilities:Interest-bearing demand
    
    $
    26,427
    
    
    $
    
    
    
    $
    26,427
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    26,427Average Interest Rate
    
    
    0.38
    %
    
    
    
    
    
    
    0.38
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    038
    %Savings and money market
    
    
    129,642
    
    
    
    
    
    
    
    129,642
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129,642Average Interest Rate
    
    
    3.40
    %
    
    
    
    
    
    
    3.40
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.40
    %Time deposits
    
    
    89,540
    
    
    
    139,190
    
    
    
    228,730
    
    
    
    29,100
    
    
    
    25,654
    
    
    
    1,488
    
    
    
    284,972Average Interest Rate
    
    
    4.84
    %
    
    
    4.54
    %
    
    
    4.66
    %
    
    
    4.75
    %
    
    
    4.16
    %
    
    
    4.00
    %
    
    
    4.62
    %Funds borrowed
    
    
    56,922
    
    
    
    10,837
    
    
    
    67,759
    
    
    
    16,140
    
    
    
    8,600
    
    
    
    4,078
    
    
    
    96,577Average Interest Rate
    
    
    5.49
    %
    
    
    4.34
    %
    
    
    5.31
    %
    
    
    4.37
    %
    
    
    4.60
    %
    
    
    5.21
    %
    
    
    5.08
    %Total interest-bearing
liabilities
    
    $
    302,531
    
    
    $
    150,027
    
    
    $
    452,558
    
    
    $
    45,240
    
    
    $
    34,254
    
    
    $
    5,566
    
    
    $
    537,618Cumulative:Rate sensitive assets (RSA)
    
    $
    349,848
    
    
    $
    409,530
    
    
    $
    409,530
    
    
    $
    451,748
    
    
    $
    611,940
    
    
    $
    642,781
    
    
    $
    642,781Rate sensitive liabilities
(RSL)
    
    
    302,531
    
    
    
    452,558
    
    
    
    452,558
    
    
    
    497,798
    
    
    
    532,052
    
    
    
    537,618
    
    
    
    537,618GAP (GAP = RSA  RSL)
    
    
    47,317
    
    
    
    (43,028
    )
    
    
    (43,028
    )
    
    
    (46,050
    )
    
    
    79,888
    
    
    
    105,163
    
    
    
    105,163RSA/RSL
    
    
    115.64
    %
    
    
    90.49
    %
    
    
    90.49
    %
    
    
    90.75
    %
    
    
    115.02
    %
    
    
    119.56
    %RSA/Total assets
    
    
    50.54
    
    
    
    59.16
    
    
    
    59.16
    
    
    
    65.26
    
    
    
    88.40
    
    
    
    92.86RSL/Total assets
    
    
    43.70
    
    
    
    65.38
    
    
    
    65.38
    
    
    
    71.91
    
    
    
    76.86
    
    
    
    77.67GAP/Total assets
    
    
    6.84
    
    
    
    (6.22
    )
    
    
    (6.22
    )
    
    
    (6.65
    )
    
    
    11.54
    
    
    
    15.19GAP/RSA
    
    
    13.52
    
    
    
    (10.51
    )
    
    
    (10.51
    )
    
    
    (10.19
    )
    
    
    13.05
    
    
    
    16.36
   39




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##### Table of Contents



Item 8: Financial Statements and Supplementary Data
  
 Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A: Controls and Procedures
   
 Item 9B: Other Information
  40




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##### Table of Contents



Part III
 
 Item 10: Directors, Executive Officers and Corporate Governance
    ir@bankbv.com
 
 Item 11: Executive Compensation
  
 Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
 Item 13: Certain Relationships, Related Transactions, and Director Independence
  
    
    were made in the ordinary course of business;
    
    were made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other persons; and
    
    did not involve more than the normal risk of collectibility or present other
unfavorable features.
  41




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##### Table of Contents



Item 14: Principal Accounting Fees and Services
  
 Part IV
 
 Item 15: Exhibits, Financial Statement Schedules
 (a)
    
    The financial statements and financial statement schedules listed in the accompanying
index to consolidated financial statements and financial statement schedules are filed as part
of this Form 10-K.(b)
    
    The exhibits listed in the accompanying exhibit index are filed as part of this Form 10-K.(c)
    
    None
 42




---



##### Table of Contents



SIGNATURES
  Date: March 28, 2007
    
    By:
    
    /s/ Robert D. RegnierRobert D. Regnier, President, 
Chief Executive Officer and Director
  Date: March 28, 2007
    
    By:
    
    /s/ Robert D. RegnierRobert D. Regnier, President,Chief Executive Officer and Director(Principal Executive Officer)Date: March 28, 2007
    
    By:
    
    /s/ Mark A. FortinoMark A. Fortino, Chief Financial Officer(Principal Financial [and Accounting] Officer)Date: March 28, 2007
    
    By:
    
    /s/ Donald H. AlexanderDonald H. Alexander, DirectorDate: March 28, 2007
    
    By:
    
    /s/ Michael J. BrownMichael J. Brown, DirectorDate: March 28, 2007
    
    By:
    
    /s/ Wayne A. Henry, Jr.Wayne A. Henry, Jr., DirectorDate: March 28, 2007
    
    By:
    
    /s/ Thomas A. McDonnellThomas A. McDonnell, DirectorDate: March 28, 2007
    
    By:
    
    /s/ Robert D. TaylorRobert D. Taylor, Director
 43




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##### Table of Contents



Exhibits3.1
    
    Amended and Restated Articles of Incorporation of Blue Valley Ban Corp. *3.2
    
    Bylaws, as amended, of Blue Valley Ban Corp. *4.1
    
    1998 Equity Incentive Plan. *4.2
    
    1994 Stock Option Plan. *4.3
    
    Form of Agreement as to Expenses and Liabilities. *4.4
    
    Form of Indenture dated April 10, 2003, between Blue Valley Ban Corp. and
Wilmington Trust Company **4.5
    
    Amended and Restated Declaration of Trust dated April 10, 2003 **4.6
    
    Guarantee Agreement dated April 10, 2003 **4.7
    
    Fee Agreement dated April 10, 2003 **4.8
    
    Specimen of Floating Rate Junior Subordinated Debt Security **4.9
    
    Form of Indenture dated as of July 29, 2005 between Blue Valley Ban Corp. and
Wilmington Trust Company***4.10
    
    Amended and Restated Declaration of Trust dated July 29, 2005***4.11
    
    Guarantee Agreement dated July 29, 2005***10.1
    
    Promissory Note of Blue Valley Building dated July 15, 1994. *10.2
    
    Mortgage, Assignment of Leases and Rents and Security Agreement between Blue
Valley Building and Businessmens Assurance Company of America, dated July 15, 1994.*10.3
    
    Assignment of Leases and Rents between Blue Valley Building and Businessmens
Assurance Company of America dated July 15, 1994. *10.4
    
    Line of Credit Note with JP Morgan Chase dated June 15, 2005 ****10.5
    
    Term Note with JP Morgan Chase dated June 15, 2005 ****10.6
    
    Agreement and Plan of Merger between Unison Bancorp, Inc., BVBC Acquisition I,
Inc. and Blue Valley Ban Corp., dated as of November 2, 2006*****10.7
    
    Acquisition Agreement and Plan of Merger among Northland National Bank, Blue
Valley Ban Corp. and Western National Bank, dated as of March 2, 2007*****10.8
    
    Purchase and Assumption Agreement among Northland National Bank, Bank of Blue
Valley and Blue Valley Ban Corp., dated as of March 2, 2007*****
 44




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##### Table of Contents



Exhibits11.1
    
    Statement regarding computation of per share earnings. Please see p. F-12.21.1
    
    Subsidiaries of Blue Valley Ban Corp.23.3
    
    Consent of BKD, LLP.31.1
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)31.2
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)32.1
    
    Certification of the Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 
 *
    
    Filed with the Commission on April 10, 2000 as an Exhibit to Blue Valleys
Registration Statement on Form S-1, Amendment No. 1, File No. 333-34328. Exhibit
incorporated herein by reference.**
    
    Filed with the Commission on March 19, 2004 as an Exhibit to Blue Valleys
Annual Report on Form 10-K. Exhibit incorporated herein by reference.***
    
    Filed with the Commission on July 29, 2005 as an Exhibit to Blue Valleys
Current Report on Form 8-K. Exhibit incorporated herein by reference.****
    
    Filed with the Commission on March 24, 2005 as an Exhibit to Blue Valleys
Annual Report on Form 10-K. Exhibit incorporated herein by reference.*****
    
    Filed with the Commission on March 28, 2007 as an Exhibit to Blue Valleys Annual
Report on Form 10-K. Exhibit incorporated herein by reference. 45




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##### Table of Contents



BLUE VALLEY BAN CORP.
 DECEMBER 31, 2006, 2005 AND 2004
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
 PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    F-2CONSOLIDATED FINANCIAL STATEMENTSBalance Sheets
    
    
    F-3Statements of Income
    
    
    F-5Statements of Stockholders Equity
    
    
    F-6Statements of Cash Flows
    
    
    F-7Notes to Financial Statements
    
    
    F-8
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    /s/ BKD, LLP 
 F-2




---



##### Table of Contents



BLUE VALLEY BAN CORP.
 
 CONSOLIDATED BALANCE SHEETS
 DECEMBER 31, 2006 AND 2005
 ASSETS
 2006
    
    
    2005Cash and due from banks
    
    $
    21,499
    
    
    $
    16,493Interest bearing deposits in other financial institutions
    
    
    356
    
    
    
    12,163Federal funds sold
    
    
    5,375
    
    
    
    11,401Cash and cash equivalents
    
    
    27,230
    
    
    
    40,057Available-for-sale securities
    
    
    87,206
    
    
    
    99,987Mortgage loans held for sale
    
    
    21,805
    
    
    
    13,906Loans, net of allowance for loan losses of $6,106 and
$6,704 in 2006 and 2005, respectively
    
    
    522,409
    
    
    
    496,439Premises and equipment, net
    
    
    17,953
    
    
    
    18,593Foreclosed assets held for sale, net
    
    
    717
    
    
    
    711Interest receivable
    
    
    4,200
    
    
    
    3,372Deferred income taxes
    
    
    2,276
    
    
    
    2,564Prepaid expenses and other assets
    
    
    1,305
    
    
    
    4,647Federal Home Loan Bank stock, Federal Reserve Bank
stock, and
other securities
    
    
    6,447
    
    
    
    8,490Core deposit intangible asset, at amortized cost
    
    
    671
    
    
    
    823Total assets
    
    $
    692,219
    
    
    $
    689,589
  F-3




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##### Table of Contents



BLUE VALLEY BAN CORP.
 CONSOLIDATED BALANCE SHEETS
 DECEMBER 31, 2006 AND 2005
 LIABILITIES AND STOCKHOLDERS EQUITY
 2006
    
    
    2005LIABILITIESDepositsDemand
    
    $
    94,823
    
    
    $
    94,452Savings, NOW and money market
    
    
    156,069
    
    
    
    185,234Time
    
    
    284,972
    
    
    
    249,655Total deposits
    
    
    535,864
    
    
    
    529,341Other interest-bearing liabilities
    
    
    29,558
    
    
    
    26,288Long-term debt
    
    
    67,019
    
    
    
    78,106Interest payable and other liabilities
    
    
    5,958
    
    
    
    9,599Total liabilities
    
    
    638,399
    
    
    
    643,334STOCKHOLDERS EQUITYCapital stockCommon stock, par value $1 per share; Authorized
15,000,000 shares; issued and outstanding
2006  2,409,490 shares; 2005  2,382,046 shares
    
    
    2,409
    
    
    
    2,382Additional paid-in capital
    
    
    9,561
    
    
    
    9,212Retained earnings
    
    
    41,982
    
    
    
    35,782Unearned compensation
    
    
    
    
    
    
    (648
    )Accumulated other comprehensive loss, net of income tax
credits of $(88) in 2006 and $(315) in 2005
    
    
    (132
    )
    
    
    (473
    )Total stockholders equity
    
    
    53,820
    
    
    
    46,255Total liabilities and stockholders equity
    
    $
    692,219
    
    
    $
    689,589
  F-4




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##### Table of Contents

\

BLUE VALLEY BAN CORP.
 
 CONSOLIDATED STATEMENTS OF INCOME
 YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 2006
    
    
    2005
    
    
    2004INTEREST INCOMEInterest and fees on loans
    
    $
    44,537
    
    
    $
    37,492
    
    
    $
    29,245Federal funds sold and other short-term investments
    
    
    256
    
    
    
    580
    
    
    
    157Available-for-sale securities
    
    
    4,039
    
    
    
    2,317
    
    
    
    2,301Total interest income
    
    
    48,832
    
    
    
    40,389
    
    
    
    31,703INTEREST EXPENSEInterest-bearing demand deposits
    
    
    97
    
    
    
    94
    
    
    
    169Savings and money market deposit accounts
    
    
    4,356
    
    
    
    3,861
    
    
    
    2,932Other time deposits
    
    
    11,254
    
    
    
    9,171
    
    
    
    7,297Federal funds purchased and other interest-bearing
liabilities
    
    
    1,023
    
    
    
    540
    
    
    
    186Short-term debt
    
    
    342
    
    
    
    17
    
    
    
    25Long-term debt, net
    
    
    3,890
    
    
    
    4,310
    
    
    
    3,904Total interest expense
    
    
    20,962
    
    
    
    17,993
    
    
    
    14,513NET INTEREST INCOME
    
    
    27,870
    
    
    
    22,396
    
    
    
    17,190PROVISION FOR LOAN LOSSES
    
    
    1,255
    
    
    
    230
    
    
    
    1,965NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    26,615
    
    
    
    22,166
    
    
    
    15,225NONINTEREST INCOMELoans held for sale fee income
    
    
    5,046
    
    
    
    7,408
    
    
    
    10,358Service fees
    
    
    2,491
    
    
    
    2,166
    
    
    
    2,441Gains on available for sale securities, net
    
    
    
    
    
    
    
    
    
    
    524Other income
    
    
    1,344
    
    
    
    1,727
    
    
    
    617Total noninterest income
    
    
    8,881
    
    
    
    11,301
    
    
    
    13,940NONINTEREST EXPENSESalaries and employee benefits
    
    
    14,737
    
    
    
    15,986
    
    
    
    16,670Net occupancy expense
    
    
    3,059
    
    
    
    3,307
    
    
    
    3,433Other operating expense
    
    
    6,578
    
    
    
    6,841
    
    
    
    6,467Total noninterest expense
    
    
    24,374
    
    
    
    26,134
    
    
    
    26,570INCOME BEFORE INCOME TAXES
    
    
    11,122
    
    
    
    7,333
    
    
    
    2,595PROVISION FOR INCOME TAXES
    
    
    4,199
    
    
    
    2,764
    
    
    
    665NET INCOME
    
    $
    6,923
    
    
    $
    4,569
    
    
    $
    1,930BASIC EARNINGS PER SHARE
    
    $
    2.93
    
    
    $
    1.95
    
    
    $
    0.84DILUTED EARNINGS PER SHARE
    
    $
    2.88
    
    
    $
    1.91
    
    
    $
    0.82DIVIDENDS PER SHARE
    
    $
    0.30
    
    
    $
    0.25
    
    
    $
    0.20
  F-5




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##### Table of Contents



BLUE VALLEY BAN CORP.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    OtherComprehensive
    
    
    Common
    
    
    Paid-In
    
    
    Retained
    
    
    Unearned
    
    
    ComprehensiveIncome
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Compensation
    
    
    Income (Loss)
    
    
    TotalBALANCE, DECEMBER 31, 2003
    
    
    
    
    
    $
    2,279
    
    
    $
    7,404
    
    
    $
    30,344
    
    
    $
    (399
    )
    
    $
    570
    
    
    $
    40,198Issuance of 47,925 shares of common stock
    
    
    
    
    
    
    48
    
    
    
    695
    
    
    
    
    
    
    
    (338
    )
    
    
    
    
    
    
    405Dividends on common stock ($0.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (465
    )
    
    
    
    
    
    
    
    
    
    
    (465
    )Net income
    
    $
    1,930
    
    
    
    
    
    
    
    
    
    
    
    1,930
    
    
    
    
    
    
    
    
    
    
    
    1,930Restricted stock earned, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143
    
    
    
    
    
    
    
    143Change in unrealized depreciation on
available-for-sale securities, net of
income taxes (credit) of $(552)
    
    
    (827
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (827
    )
    
    
    (827
    )$
    1,103BALANCE, DECEMBER 31, 2004
    
    
    
    
    
    $
    2,327
    
    
    $
    8,099
    
    
    $
    31,809
    
    
    $
    (594
    )
    
    $
    (257
    )
    
    $
    41,384Issuance of 54,960 shares of common stock
    
    
    
    
    
    
    55
    
    
    
    1,113
    
    
    
    
    
    
    
    (355
    )
    
    
    
    
    
    
    813Dividends on common stock ($0.25 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (596
    )
    
    
    
    
    
    
    
    
    
    
    (596
    )Net income
    
    
    4,569
    
    
    
    
    
    
    
    
    
    
    
    4,569
    
    
    
    
    
    
    
    
    
    
    
    4,569Restricted stock earned, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    301
    
    
    
    
    
    
    
    301Change in unrealized depreciation on
available-for-sale securities, net of
income taxes (credit) of $(144)
    
    
    (216
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (216
    )
    
    
    (216
    )$
    4,353BALANCE, DECEMBER 31, 2005
    
    
    
    
    
    $
    2,382
    
    
    $
    9,212
    
    
    $
    35,782
    
    
    $
    (648
    )
    
    $
    (473
    )
    
    $
    46,255Issuance of 27,444 shares of common stock
    
    
    
    
    
    
    27
    
    
    
    512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    539Dividends on common stock ($0.30 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (723
    )
    
    
    
    
    
    
    
    
    
    
    (723
    )Net income
    
    
    6,923
    
    
    
    
    
    
    
    
    
    
    
    6,923
    
    
    
    
    
    
    
    
    
    
    
    6,923Restricted stock earned, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    485
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    485Reclassification of unearned compensation
in accordance with adoption of SFAS No.
123R
    
    
    
    
    
    
    
    
    
    
    (648
    )
    
    
    
    
    
    
    648
    
    
    
    
    
    
    
    Change in derivative financial instrument,
net of income taxes of $51
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76
    
    
    
    76Change in unrealized appreciation on
available-for-sale securities, net of
income taxes of $177
    
    
    265
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    265
    
    
    
    265$
    7,264BALANCE, DECEMBER 31, 2006
    
    
    
    
    
    $
    2,409
    
    
    $
    9,561
    
    
    $
    41,982
    
    
    $
    
    
    
    $
    (132
    )
    
    $
    53,820
  F-6




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##### Table of Contents



BLUE VALLEY BAN CORP.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 2006
    
    
    2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    6,923
    
    
    $
    4,569
    
    
    $
    1,930Adjustments to reconcile net income to net cash flow
From operating activities:Depreciation and amortization
    
    
    1,471
    
    
    
    1,857
    
    
    
    1,863Accretion of premiums on securities
    
    
    (92
    )
    
    
    (44
    )
    
    
    (28
    )Provision for loan losses
    
    
    1,255
    
    
    
    230
    
    
    
    1,965Provision for other real estate
    
    
    40
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    260
    
    
    
    149
    
    
    
    (530
    )Stock dividend on FHLB securities
    
    
    (275
    )
    
    
    (353
    )
    
    
    (240
    )Net gain on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    (524
    )Net (gain) loss on sale of foreclosed assets
    
    
    (12
    )
    
    
    34
    
    
    
    104Net (gain) loss on sale of premises and equipment
    
    
    6
    
    
    
    (344
    )
    
    
    5Restricted stock earned and forfeited
    
    
    485
    
    
    
    301
    
    
    
    143Compensation expense related to the employee stock purchase plan
    
    
    19
    
    
    
    
    
    
    
    Originations of loans held for sale
    
    
    (336,254
    )
    
    
    (675,636
    )
    
    
    (883,406
    )Proceeds from the sale of loans held for sale
    
    
    328,355
    
    
    
    705,874
    
    
    
    857,560Changes in:Interest receivable
    
    
    (828
    )
    
    
    (997
    )
    
    
    (452
    )Prepaid expenses and other assets
    
    
    3,455
    
    
    
    (1,546
    )
    
    
    (305
    )Interest payable and other liabilities
    
    
    (3,987
    )
    
    
    3,293
    
    
    
    1,114Net cash provided by (used in) operating activities
    
    
    821
    
    
    
    37,387
    
    
    
    (20,801
    )CASH FLOWS FROM INVESTING ACTIVITIESNet originations of loans
    
    
    (28,689
    )
    
    
    (4,334
    )
    
    
    (90,650
    )Proceeds from sales of loan participations
    
    
    500
    
    
    
    6,400
    
    
    
    3,635Purchase of premises and equipment
    
    
    (671
    )
    
    
    (707
    )
    
    
    (3,094
    )Proceeds from sale of premises and equipment
    
    
    
    
    
    
    993
    
    
    
    Proceeds from the sale of foreclosed assets
    
    
    930
    
    
    
    3,002
    
    
    
    448Proceeds from sales of available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    21,270Proceeds from maturities of available-for-sale securities
    
    
    36,310
    
    
    
    26,440
    
    
    
    49,564Purchases of available-for-sale securities
    
    
    (22,995
    )
    
    
    (60,393
    )
    
    
    (31,974
    )Purchases of Federal Home Loan Bank stock, Federal Reserve Bank
stock, and other securities
    
    
    
    
    
    
    (150
    )
    
    
    Proceeds from the sale of Federal Home Loan Bank stock, Federal
Reserve Bank stock, and other securities
    
    
    2,319
    
    
    
    
    
    
    
    95Net cash used in investing activities
    
    
    (12,296
    )
    
    
    (28,749
    )
    
    
    (50,706
    )CASH FLOWS FROM FINANCING ACTIVITIESNet (decrease) increase in demand deposits, money market, NOW and
savings accounts
    
    
    (28,794
    )
    
    
    (25,182
    )
    
    
    39,520Net increase in time deposits
    
    
    35,317
    
    
    
    31,877
    
    
    
    12,631Repayments of long-term debt
    
    
    (21,087
    )
    
    
    (23,269
    )
    
    
    (21,706
    )Proceeds from long-term debt
    
    
    10,000
    
    
    
    21,244
    
    
    
    13,500Net proceeds from other financing activities
    
    
    (58
    )
    
    
    348
    
    
    
    405Net increase (decrease) in federal funds purchased and other
interest-bearing liabilities
    
    
    3,270
    
    
    
    3,907
    
    
    
    (1,066
    )Net cash provided by (used in) financing activities
    
    
    (1,352
    )
    
    
    8,925
    
    
    
    43,284INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (12,827
    )
    
    
    17,563
    
    
    
    (28,223
    )CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    
    
    40,057
    
    
    
    22,494
    
    
    
    50,717CASH AND CASH EQUIVALENTS, END OF YEAR
    
    $
    27,230
    
    
    $
    40,057
    
    
    $
    22,494SUPPLEMENTAL CASH FLOWS INFORMATIONLoans transferred to foreclosed assets held for sale
    
    $
    964
    
    
    $
    1,102
    
    
    $
    2,781Restricted stock issued
    
    $
    
    
    
    $
    355
    
    
    $
    338Cash dividends declared on common stock
    
    $
    723
    
    
    $
    596
    
    
    $
    465Interest paid
    
    $
    20,587
    
    
    $
    17,742
    
    
    $
    14,511Income taxes paid (net of refunds)
    
    $
    4,035
    
    
    $
    1,289
    
    
    $
    635
  F-7




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##### Table of Contents



BLUE VALLEY BAN CORP.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations
       Operating Segment
  Use of Estimates
    F-8




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Principles of Consolidation
  Cash Equivalents
   Investment in Securities
   Other Investments
   Mortgage Loans Held for Sale
  F-9




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Loans
   Allowance for Loan Losses
    Premises and Equipment
  Foreclosed Assets Held for Sale
  F-10




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Core Deposit Intangible Assets
  Fee Income
  Reclassification
  Income Taxes
  Earnings Per Share
  2006
    
    
    2005
    
    
    2004(in thousands, except share and per share data)Net income, as reported
    
    $
    6,923
    
    
    $
    4,569
    
    
    $
    1,930Average common shares outstanding
    
    
    2,365,932
    
    
    
    2,348,805
    
    
    
    2,302,564Average common share stock options
outstanding
    
    
    41,870
    
    
    
    39,726
    
    
    
    57,497Average diluted common shares
    
    
    2,407,802
    
    
    
    2,388,531
    
    
    
    2,360,061Basic earnings per share
    
    $
    2.93
    
    
    $
    1.95
    
    
    $
    0.84Diluted earnings per share
    
    $
    2.88
    
    
    $
    1.91
    
    
    $
    0.82
 F-11




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Accounting for Stock-Based Compensation
  Recent and Future Accounting Requirements
 Accounting for Uncertainty in Income Taxes-an interpretation of FASB No. 109, Accounting for Income
Taxes
 Fair Value Measurements
 The Fair Value Option for Financial
Assets and Financial Liabilities-Including an Amendment to FASB Statement No. 115 Accounting for Certain Investments in Debt and Equity Securities
  Fair Value Measurements
 F-12




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 2: AVAILABLE-FOR-SALE SECURITIES
  December 31, 2006Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(dollars in thousands)U.S. Government sponsored
agencies
    
    $
    86,475
    
    
    $
    65
    
    
    $
    (375
    )
    
    $
    86,165State and political subdivisions
    
    
    360
    
    
    
    
    
    
    
    
    
    
    
    360Equity and other securities
    
    
    718
    
    
    
    
    
    
    
    (37
    )
    
    
    681$
    87,553
    
    
    $
    65
    
    
    $
    (412
    )
    
    $
    87,206
 December 31, 2005Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(dollars in thousands)U.S. Government sponsored
agencies
    
    $
    99,387
    
    
    $
    40
    
    
    $
    (760
    )
    
    $
    98,667State and political subdivisions
    
    
    670
    
    
    
    4
    
    
    
    
    
    
    
    674Equity and other
    
    
    718
    
    
    
    
    
    
    
    (72
    )
    
    
    646$
    100,775
    
    
    $
    44
    
    
    $
    (832
    )
    
    $
    99,987
  Amortized
    
    
    EstimatedCost
    
    
    Fair Value(dollars in thousands)Due in one year or less
    
    $
    31,150
    
    
    $
    30,955Due after one through five years
    
    
    50,691
    
    
    
    50,527Due after five years
    
    
    4,994
    
    
    
    5,043Total
    
    
    86,835
    
    
    
    86,525Equity and other securities
    
    
    718
    
    
    
    681$
    87,553
    
    
    $
    87,206
   F-13




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 2: AVAILABLE-FOR-SALE SECURITIES (Continued)
 2006
    
    2005(dollars in thousands)Balance as of December 31
    
    $
    28,574
    
    
    $
    24,929Carrying value of securities pledged to secure agreements to repurchases
at December 31
    
    $
    40,309
    
    
    $
    24,703Average balance during the year of securities sold under agreements to
repurchase
    
    $
    24,499
    
    
    $
    23,152Maximum amount outstanding at any month-end during the year
    
    $
    34,052
    
    
    $
    25,252
    December 31, 2006
(dollars in thousands)
 Less than 12 Months
    
    
    12 Months or More
    
    
    
    
    
    
    TotalDescription of
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized
    
    
    Total
    
    
    UnrealizedSecurities
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesU.S. Government sponsored
agencies
    
    $
    37,855
    
    
    $
    134
    
    
    $
    36,251
    
    
    $
    241
    
    
    $
    74,106
    
    
    $
    375State and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity and other securities
    
    
    
    
    
    
    
    
    
    
    681
    
    
    
    37
    
    
    
    681
    
    
    
    37Total temporarily impaired
securities
    
    $
    37,855
    
    
    $
    134
    
    
    $
    36,932
    
    
    $
    278
    
    
    $
    74,787
    
    
    $
    412
 December 31, 2005
(dollars in thousands)
 Less than 12 Months
    
    
    12 Months or More
    
    
    
    
    
    
    TotalDescription of
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized
    
    
    Total
    
    
    UnrealizedSecurities
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesU.S. Government sponsored
agencies
    
    $
    41,131
    
    
    $
    344
    
    
    $
    34,575
    
    
    $
    416
    
    
    $
    75,706
    
    
    $
    760State and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity and other securities
    
    
    
    
    
    
    
    
    
    
    646
    
    
    
    72
    
    
    
    646
    
    
    
    72Total temporarily impaired
securities
    
    $
    41,131
    
    
    $
    344
    
    
    $
    35,221
    
    
    $
    488
    
    
    $
    76,352
    
    
    $
    832
 F-14




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES
  2006
    
    
    2005(dollars in thousands)Commercial loans
    
    $
    110,849
    
    
    $
    112,452Commercial real estate loans
    
    
    126,952
    
    
    
    114,562Construction loans
    
    
    171,709
    
    
    
    139,662Lease financing
    
    
    18,512
    
    
    
    18,238Residential real estate loans
    
    
    34,988
    
    
    
    39,371Consumer loans
    
    
    33,097
    
    
    
    45,221Home equity loans
    
    
    32,408
    
    
    
    33,637Total loans
    
    
    528,515
    
    
    
    503,143Less: Allowance for loan losses
    
    
    6,106
    
    
    
    6,704Net loans
    
    $
    522,409
    
    
    $
    496,439
  2006
    
    
    2005
    
    
    2004(dollars in thousands)Balance, beginning of year
    
    $
    6,704
    
    
    $
    7,333
    
    
    $
    7,051Provision charged to expense
    
    
    1,255
    
    
    
    230
    
    
    
    1,965Losses charged off, net of recoveries
of $207,000, $269,000 and $300,000
for 2006, 2005 and 2004, respectively
    
    
    (1,853
    )
    
    
    (859
    )
    
    
    (1,683
    )Balance, end of year
    
    $
    6,106
    
    
    $
    6,704
    
    
    $
    7,333
   F-15




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 4: PREMISES AND EQUIPMENT
  2006
    
    
    2005(dollars in thousands)Land
    
    $
    4,185
    
    
    $
    4,185Building and improvements
    
    
    14,749
    
    
    
    14,511Furniture and equipment
    
    
    6,604
    
    
    
    6,187Land improvements, net
    
    
    285
    
    
    
    28525,823
    
    
    
    25,168Less accumulated depreciation
    
    
    7,870
    
    
    
    6,575Total premises and equipment
    
    $
    17,953
    
    
    $
    18,593
 NOTE 5: INTEREST-BEARING DEPOSITS
   (dollars in thousands)2007
    
    $
    228,7302008
    
    
    29,1002009
    
    
    10,4322010
    
    
    8,2652011
    
    
    6,9572012 and thereafter
    
    
    1,488$
    284,972
 NOTE 6: OPERATING LEASES
  (dollars in thousands)2007
    
    $
    4252008
    
    
    1752009
    
    
    1202010
    
    
    882011
    
    
    782012
    
    
    65$
    951
 F-16




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 6: OPERATING LEASES (Continued)
  NOTE 7: INCOME TAXES
  2006
    
    
    2005
    
    
    2004(dollars in thousands)Taxes currently payable
    
    $
    3,939
    
    
    $
    2,615
    
    
    $
    1,195Deferred income taxes
    
    
    260
    
    
    
    149
    
    
    
    (530
    )$
    4,199
    
    
    $
    2,764
    
    
    $
    665
  2006
    
    
    2005
    
    
    2004(dollars in thousands)Computed at the statutory rate (34%)
    
    $
    3,793
    
    
    $
    2,493
    
    
    $
    882Increase (decrease) resulting from:Tax-exempt interest
    
    
    (32
    )
    
    
    (54
    )
    
    
    (167
    )State income taxes
    
    
    251
    
    
    
    232
    
    
    
    103Other
    
    
    187
    
    
    
    93
    
    
    
    (153
    )Actual tax provision
    
    $
    4,199
    
    
    $
    2,764
    
    
    $
    665
  F-17




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 7: INCOME TAXES (Continued)
 2006
    
    
    2005(dollars in thousands)Deferred tax assets:Allowance for loan losses
    
    $
    2,343
    
    
    $
    2,547Accrued compensated absences
    
    
    22
    
    
    
    22Accumulated depreciation on available-for-
sale securities
    
    
    139
    
    
    
    315Mark to
market  Mortgage loans held for sale
    
    
    26
    
    
    
    39Uninvested deferred compensation
    
    
    41
    
    
    
    119Offering costs
    
    
    241
    
    
    
    251Other
    
    
    645
    
    
    
    1433,457
    
    
    
    3,436Deferred tax liabilities:Accumulated depreciation
    
    
    (503
    )
    
    
    (600
    )FHLBank stock basis
    
    
    (380
    )
    
    
    (272
    )Other
    
    
    (298
    )
    
    
    (1,181
    )
    
    
    (872
    )Net deferred tax asset
    
    $
    2,276
    
    
    $
    2,564
 NOTE 8: SHORT TERM DEBT
  NOTE 9: LONG TERM DEBT
  2006
    
    
    2005(dollars in thousands)Note payable  Ban Corp (A)
    
    $
    3,381
    
    
    $
    3,981Note payable  Blue Valley Building Corp. (B)
    
    
    6,550
    
    
    
    7,037Federal Home Loan Bank advances (C)
    
    
    37,500
    
    
    
    47,500Subordinated Debentures  BVBC Capital Trust II (D)
    
    
    7,732
    
    
    
    7,732Subordinated Debentures  BVBC Capital Trust III (E)
    
    
    11,856
    
    
    
    11,856Total long-term debt
    
    $
    67,019
    
    
    $
    78,106
 F-18




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 9: LONG TERM DEBT (Continued)
 
 (A)
    
    Due in December 2012, payable in quarterly installments of principal plus
interest at the Federal Funds Rate plus 1.63%; collateralized by common stock
of the Companys subsidiary bank. The interest rate on this note has been
fixed at 5.45% by the use of a swap agreement (see Note 10).(B)
    
    Two notes due in 2017; payable in monthly installments totaling $70,084
including interest at 5.19%; collateralized by land, buildings, and assignment
of future rents. This debt is guaranteed by the Company(C)
    
    Due in 2008, 2011, 2013, 2015 and 2016; collateralized by various assets
including mortgage-backed loans. The interest rates on the advances range from
2.62% to 5.682%. Federal Home Loan Bank advance availability is determined
quarterly and at December 31, 2006, approximately $78,205,000 was available.(D)
    
    Due in 2033; interest only at LIBOR + 3.25% due quarterly; fully and
unconditionally guaranteed by the Company on a subordinated basis to the extent
that the funds are held by the Trust. The Company may prepay the subordinated
debentures beginning in 2008, in whole or in part, at their face value plus
accrued interest.(E)
    
    Due in 2035; interest only at LIBOR + 1.60% due quarterly; fully and
unconditionally guaranteed by the Company on a subordinated basis to the extent
that the funds are held by the Trust. Subordinated to the trust preferred
securities (D) due in 2033. The Company may prepay the subordinated debentures
beginning in 2010, in whole or in part, at their face value plus accrued
interest.  (dollars in thousands)2007
    
    $
    1,1132008
    
    
    11,1402009
    
    
    1,1692010
    
    
    1,1992011
    
    
    8,731Thereafter
    
    
    43,667$
    67,019
 NOTE 10: DERIVATIVE FINANCIAL INSTRUMENTS
   F-19




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 11: REGULATORY MATTERS
     To Be Well CapitalizedUnder PromptFor Capital
    
    
    CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(dollars in thousands)As of December 31, 2006:Total Capital(to Risk Weighted Assets)Consolidated
    
    $
    78,350
    
    
    
    12.47
    %
    
    $
    50,194
    
    
    
    8.00
    %
    
    
    N/ABank Only
    
    $
    73,225
    
    
    
    11.95
    %
    
    $
    49,007
    
    
    
    8.00
    %
    
    $
    61,259
    
    
    
    10.00
    %Tier 1 Capital(to Risk Weighted Assets)Consolidated
    
    $
    71,216
    
    
    
    11.33
    %
    
    $
    25,097
    
    
    
    4.00
    %
    
    
    N/ABank Only
    
    $
    67,119
    
    
    
    10.96
    %
    
    $
    24,503
    
    
    
    4.00
    %
    
    $
    36,755
    
    
    
    6.00
    %Tier 1 Capital(to Average Assets)Consolidated
    
    $
    71,216
    
    
    
    10.29
    %
    
    $
    27,559
    
    
    
    4.00
    %
    
    
    N/ABank Only
    
    $
    67,119
    
    
    
    9.91
    %
    
    $
    27,081
    
    
    
    4.00
    %
    
    $
    33,851
    
    
    
    5.00
    %
 F-20




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 11: REGULATORY MATTERS (Continued)
 To Be Well CapitalizedUnder PromptFor Capital
    
    
    CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(dollars in thousands)As of December 31, 2005:Total Capital(to Risk Weighted Assets)Consolidated
    
    $
    72,197
    
    
    
    12.04
    %
    
    $
    47,990
    
    
    
    8.00
    %
    
    
    N/ABank Only
    
    $
    67,637
    
    
    
    11.63
    %
    
    $
    46,511
    
    
    
    8.00
    %
    
    $
    58,138
    
    
    
    10.00
    %Tier 1 Capital(to Risk Weighted Assets)Consolidated
    
    $
    61,481
    
    
    
    10.25
    %
    
    $
    23,995
    
    
    
    4.00
    %
    
    
    N/ABank Only
    
    $
    60,934
    
    
    
    10.48
    %
    
    $
    23,255
    
    
    
    4.00
    %
    
    $
    34,883
    
    
    
    6.00
    %Tier 1 Capital(to Average Assets)Consolidated
    
    $
    61,481
    
    
    
    8.86
    %
    
    $
    27,762
    
    
    
    4.00
    %
    
    
    N/ABank Only
    
    $
    60,934
    
    
    
    8.91
    %
    
    $
    27,358
    
    
    
    4.00
    %
    
    $
    34,198
    
    
    
    5.00
    %
  NOTE 12: TRANSACTIONS WITH RELATED PARTIES
  2006
    
    
    2005(dollars in thousands)Balance, beginning of year
    
    $
    12,258
    
    
    $
    14,195New loans
    
    
    2,580
    
    
    
    2,416Repayments and reclassifications
    
    
    (5,276
    )
    
    
    (4,353
    )Balance, end of year
    
    $
    9,562
    
    
    $
    12,258
  F-21




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 13: PROFIT SHARING AND 401(K) PLANS
  NOTE 14: EQUITY INCENTIVE COMPENSATION
     2006
    
    2005
    
    2004Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding, beginning of year
    
    
    111,400
    
    
    $
    18.38
    
    
    
    155,000
    
    
    $
    17.80
    
    
    
    188,300
    
    
    $
    16.70Exercised
    
    
    (27,100
    )
    
    
    16.12
    
    
    
    (41,425
    )
    
    
    16.00
    
    
    
    (31,825
    )
    
    
    10.96Forfeited
    
    
    
    
    
    
    
    
    
    
    (2,175
    )
    
    
    22.47
    
    
    
    (1,475
    )
    
    
    25.00Outstanding, end of year
    
    
    84,300
    
    
    $
    19.11
    
    
    
    111,400
    
    
    $
    18.38
    
    
    
    155,000
    
    
    $
    17.80Options exercisable, end of year
    
    
    84,300
    
    
    $
    19.11
    
    
    
    111,400
    
    
    $
    18.38
    
    
    
    155,000
    
    
    $
    17.80
 F-22




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 14: EQUITY INCENTIVE COMPENSATION (Continued)
  Options Outstanding and ExercisableExercise
    
    
    
    Number Outstanding and
    
    Weighted Average
    
    Weighted AveragePrices
    
    
    
    Exercisable at 12/31/06
    
    Remaining Contractual Life
    
    Exercise Price$
    7.50
    
    
    
    
    
    4,000
    
    
    1 year
    
    $
    7.5011.25
    
    
    
    
    
    5,600
    
    
    2 years
    
    
    11.2514.38
    
    
    
    
    
    7,700
    
    
    3 years
    
    
    14.3816.50
    
    
    
    
    
    15,050
    
    
    4 years
    
    
    16.5019.50
    
    
    
    
    
    25,500
    
    
    5 years
    
    
    19.5025.00
    
    
    
    
    
    26,450
    
    
    6 years
    
    
    25.0084,300
 NOTE 15: EMPLOYEE STOCK PURCHASE PLAN
  Employee Stock Purchase Plan ActivityPlan year ending January
    
    Shares purchased
    
    Purchase Price2006
    
    4,073
    
    $19.552005
    
    4,060
    
    $19.55
 NOTE 16: OTHER INCOME/EXPENSE
  2006
    
    
    2005
    
    
    2004(dollars in thousands)Rental income
    
    $
    425
    
    
    $
    351
    
    
    $
    192Other income
    
    
    919
    
    
    
    1,376
    
    
    
    425Total
    
    $
    1,344
    
    
    $
    1,727
    
    
    $
    617
 F-23




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 16: OTHER INCOME/EXPENSE (Continued)
  2006
    
    
    2005
    
    
    2004(dollars in thousands)Advertising
    
    $
    1,080
    
    
    $
    1,413
    
    
    $
    1,315Loan processing fees
    
    
    904
    
    
    
    232
    
    
    
    295Data processing
    
    
    889
    
    
    
    863
    
    
    
    712Professional fees
    
    
    631
    
    
    
    790
    
    
    
    815Other expense
    
    
    3,074
    
    
    
    3,543
    
    
    
    3,330Total
    
    $
    6,578
    
    
    $
    6,841
    
    
    $
    6,467
 NOTE 17: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
  Cash and Cash Equivalents
  Available-for-Sale Securities
  Mortgage Loans Held for Sale
  Loans
  Federal Home Loan Bank Stock, Federal Reserve Bank Stock, and other securities
  Deposits
  F-24




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 17: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
 Securities Sold Under Agreement to Repurchase and Other Interest-Bearing Liabilities
  Short-Term and Long-Term Debt
  Commitments to Extend Credit, Letters of Credit and Lines of Credit
   F-25




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 17: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
 2006
    
    2005Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    Value(dollars in thousands)Financial assets:Cash and cash equivalents
    
    $
    27,230
    
    
    $
    27,230
    
    
    $
    40,057
    
    
    $
    40,057Available-for-sale securities
    
    
    87,206
    
    
    
    87,206
    
    
    
    99,987
    
    
    
    99,987Mortgage loans held for sale
    
    
    21,805
    
    
    
    21,805
    
    
    
    13,906
    
    
    
    13,906Interest receivable
    
    
    4,200
    
    
    
    4,200
    
    
    
    3,372
    
    
    
    3,372Loans, net of allowance for loan losses
    
    
    522,409
    
    
    
    516,011
    
    
    
    496,439
    
    
    
    492,320Federal Home Loan Bank stock, Federal
Reserve Bank
stock, and other securities
    
    
    6,447
    
    
    
    6,447
    
    
    
    8,490
    
    
    
    8,490Financial liabilities:Deposits
    
    
    535,864
    
    
    
    535,643
    
    
    
    529,341
    
    
    
    530,326Securities Sold Under Agreement to
Repurchase and Other Interest-Bearing
Liabilities
    
    
    29,558
    
    
    
    29,558
    
    
    
    26,288
    
    
    
    26,288Long-term debt
    
    
    67,019
    
    
    
    64,702
    
    
    
    78,106
    
    
    
    77,326Interest payable
    
    
    2,053
    
    
    
    2,053
    
    
    
    1,678
    
    
    
    1,678Unrecognized financial instruments (net of amortization):Commitments to extend credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lines of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forward commitments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 NOTE 18: COMMITMENTS AND CREDIT RISKS
     F-26




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 18: COMMITMENTS AND CREDIT RISKS (Continued)
        F-27




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 19: SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
  2006
    
    
    2005Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    FirstQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(Dollars in thousands, except per share data)Interest income
    
    $
    12,827
    
    
    $
    12,647
    
    
    $
    12,031
    
    
    $
    11,327
    
    
    $
    10,992
    
    
    $
    10,532
    
    
    $
    9,711
    
    
    $
    9,154Interest expense
    
    
    5,660
    
    
    
    5,381
    
    
    
    5,194
    
    
    
    4,727
    
    
    
    4,671
    
    
    
    4,674
    
    
    
    4,489
    
    
    
    4,159Net interest income
    
    
    7,167
    
    
    
    7,266
    
    
    
    6,837
    
    
    
    6,600
    
    
    
    6,321
    
    
    
    5,858
    
    
    
    5,222
    
    
    
    4,995Provision for loan losses
    
    
    50
    
    
    
    540
    
    
    
    590
    
    
    
    75
    
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    155Net interest income after provision
for loan losses
    
    $
    7,117
    
    
    $
    6,726
    
    
    $
    6,247
    
    
    $
    6,525
    
    
    $
    6,246
    
    
    $
    5,858
    
    
    $
    5,222
    
    
    $
    4,840Noninterest income
    
    
    2,346
    
    
    
    2,364
    
    
    
    2,139
    
    
    
    2,032
    
    
    
    2,497
    
    
    
    3,328
    
    
    
    2,669
    
    
    
    2,807Noninterest expense
    
    
    6,094
    
    
    
    5,880
    
    
    
    5,954
    
    
    
    6,446
    
    
    
    6,551
    
    
    
    6,628
    
    
    
    6,594
    
    
    
    6,361Income before income taxes
    
    
    3,369
    
    
    
    3,210
    
    
    
    2,432
    
    
    
    2,111
    
    
    
    2,192
    
    
    
    2,558
    
    
    
    1,297
    
    
    
    1,286Income taxes
    
    
    1,270
    
    
    
    1,219
    
    
    
    916
    
    
    
    794
    
    
    
    816
    
    
    
    964
    
    
    
    494
    
    
    
    490Net income
    
    $
    2,099
    
    
    $
    1,991
    
    
    $
    1,516
    
    
    $
    1,317
    
    
    $
    1,376
    
    
    $
    1,594
    
    
    $
    803
    
    
    $
    796Net Income per Share DataBasic
    
    $
    0.89
    
    
    $
    0.84
    
    
    $
    0.64
    
    
    $
    0.56
    
    
    $
    0.58
    
    
    $
    0.68
    
    
    $
    0.34
    
    
    $
    0.34Diluted
    
    $
    0.87
    
    
    $
    0.83
    
    
    $
    0.63
    
    
    $
    0.55
    
    
    $
    0.57
    
    
    $
    0.67
    
    
    $
    0.34
    
    
    $
    0.34Balance SheetTotal assets
    
    $
    692,219
    
    
    $
    684,935
    
    
    $
    675,186
    
    
    $
    705,682
    
    
    $
    689,589
    
    
    $
    707,188
    
    
    $
    693,858
    
    
    $
    684,643Total loans, net
    
    
    522,409
    
    
    
    527,864
    
    
    
    515,922
    
    
    
    522,492
    
    
    
    496,439
    
    
    
    507,018
    
    
    
    505,243
    
    
    
    513,616Stockholders equity
    
    
    53,820
    
    
    
    52,195
    
    
    
    49,437
    
    
    
    47,742
    
    
    
    46,255
    
    
    
    45,124
    
    
    
    43,343
    
    
    
    42,179
  NOTE 20: SUBSEQUENT ACQUISITION
 th
 F-28




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 21: FDIC ONE-TIME ASSESSMENT CREDIT
   NOTE 22: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
 Condensed Balance Sheets
December 31, 2006 and 2005
 2006
    
    
    2005(In thousands)ASSETSCash and cash equivalents
    
    $
    922
    
    
    $
    964Investments in subsidiaries:Bank of Blue Valley
    
    
    67,619
    
    
    
    61,284Blue Valley Building Corp.
    
    
    8,141
    
    
    
    7,918Blue Valley Insurance Services, Inc.
    
    
    
    
    
    
    16BVBC Capital Trust II
    
    
    232
    
    
    
    232BVBC Capital Trust III
    
    
    356
    
    
    
    356Other assets
    
    
    704
    
    
    
    3,461Total Assets
    
    $
    77,974
    
    
    $
    74,231LIABILITIESLong-term debt
    
    $
    3,381
    
    
    $
    3,981Subordinated debentures
    
    
    19,588
    
    
    
    19,588Other liabilities
    
    
    1,185
    
    
    
    4,407Total Liabilities
    
    
    24,154
    
    
    
    27,976STOCKHOLDERS EQUITYCommon stock
    
    
    2,409
    
    
    
    2,382Additional paid-in capital
    
    
    9,561
    
    
    
    9,212Retained earnings
    
    
    41,982
    
    
    
    35,782Unearned compensation
    
    
    
    
    
    
    (648
    )Accumulated other comprehensive loss, net of income
tax credits of $(88) and $(315) at 2006 and 2005,
respectively
    
    
    (132
    )
    
    
    (473
    )Total Stockholders Equity
    
    
    53,820
    
    
    
    46,255Total Liabilities and Stockholders Equity
    
    $
    77,974
    
    
    $
    74,231
 F-29




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 22: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY) (Continued)
 Condensed Statements of Income
Years Ended December 31, 2006, 2005 and 2004
 2006
    
    
    2005
    
    
    2004(In thousands)IncomeDividends from subsidiaries
    
    $
    2,104
    
    
    $
    52
    
    
    $
    11,328Other income
    
    
    65
    
    
    
    64
    
    
    
    72,169
    
    
    
    116
    
    
    
    11,335Expenses
    
    
    2,252
    
    
    
    2,572
    
    
    
    2,514Income (loss) before income taxes and
equity in undistributed net income of
subsidiaries
    
    
    (83
    )
    
    
    (2,456
    )
    
    
    8,821Credit for income taxes
    
    
    (729
    )
    
    
    (835
    )
    
    
    (1,086
    )Income (loss) before equity in
undistributed net income of subsidiaries
    
    
    646
    
    
    
    (1,621
    )
    
    
    9,907Equity in undistributed (distributions in
excess of) net income of subsidiaries
    
    
    6,277
    
    
    
    6,190
    
    
    
    (7,977
    )Net income
    
    $
    6,923
    
    
    $
    4,569
    
    
    $
    1,930
 F-30




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##### Table of Contents



BLUE VALLEY BAN CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006, 2005 AND 2004
 NOTE 22: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY) (Continued)
 Condensed Statements of Cash Flows
Years Ended December 31, 2006, 2005 and 2004
 2006
    
    
    2005
    
    
    2004(In thousands)CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    6,923
    
    
    $
    4,569
    
    
    $
    1,930Items not requiring (providing) cash:Deferred income taxes
    
    
    (2,982
    )
    
    
    835
    
    
    
    836Equity in undistributed income of subsidiaries
    
    
    (6,277
    )
    
    
    (6,190
    )
    
    
    7,977Restricted stock earned
    
    
    485
    
    
    
    301
    
    
    
    143Changes in:Other assets
    
    
    5,866
    
    
    
    (1,515
    )
    
    
    (1,338
    )Other liabilities
    
    
    (3,996
    )
    
    
    624
    
    
    
    451Net cash provided by (used in)
operating activities
    
    
    19
    
    
    
    (1,376
    )
    
    
    9,999CASH FLOW FROM INVESTING ACTIVITIESCapital contributed to subsidiary
    
    
    
    
    
    
    (12
    )
    
    
    (8,727
    )Net cash used in investing activities
    
    
    
    
    
    
    (12
    )
    
    
    (8,727
    )CASH FLOWS FROM FINANCING ACTIVITIESRepayments of long-term debt
    
    
    (600
    )
    
    
    (12,375
    )
    
    
    (425
    )Proceeds from long-term debt
    
    
    
    
    
    
    11,856
    
    
    
    Proceeds from sale of common stock
    
    
    539
    
    
    
    813
    
    
    
    405Net cash provided by (used in)
financing activities
    
    
    (61
    )
    
    
    294
    
    
    
    (20
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (42
    )
    
    
    (1,094
    )
    
    
    1,252CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
    
    
    964
    
    
    
    2,058
    
    
    
    806CASH AND CASH EQUIVALENTS,
END OF YEAR
    
    $
    922
    
    
    $
    964
    
    
    $
    2,058
 F-31