Exhibit 13
 SELECTED PORTIONS OF THE ANNUAL REPORT TO SHAREHOLDERS
 
 Forward-looking Statements
  Formation of Holding Company




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##### 



Executive Summary
 U.S. Banker th
   Earnings Highlights
  Earning Assets




---



##### 



Net Interest Income
   .




---



##### 



Interest Rate Sensitivity
    Loans




---



##### 



Allowance for Loan Losses
    Critical Accounting Policies




---



##### 



Asset Quality
   Securities Available for Sale and Investment Securities




---



##### 



Deposits
  Liquidity




---



##### 



Off Balance Sheet Arrangements
  Contractual Obligations
   Risk-Based Capital/Stockholders Equity




---



##### 



Non-Interest Income
   Non-Interest Expense
   Income Taxes




---



##### 



TABLE 1
COMPARATIVE AVERAGE BALANCES  YIELDS AND RATES
  2009
    
    
    2008
    
    
    2007Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Assets
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateInterest-earning assets:Loans, net of unearned
income
    
    $
    208,928
    
    
    $
    14,101
    
    
    
    6.75
    %
    
    $
    199,239
    
    
    $
    14,723
    
    
    
    7.39
    %
    
    $
    203,397
    
    
    $
    16,028
    
    
    
    7.88
    %Securities held to maturity:Taxable
    
    
    104,730
    
    
    
    4,212
    
    
    
    4.02
    %
    
    
    155,437
    
    
    
    7,422
    
    
    
    4.77
    %
    
    
    136,853
    
    
    
    6,839
    
    
    
    5.00
    %Exempt from Federal
income tax
    
    
    13,747
    
    
    
    432
    
    
    
    3.14
    %
    
    
    8,347
    
    
    
    293
    
    
    
    3.51
    %
    
    
    9,923
    
    
    
    325
    
    
    
    3.28
    %Securities available
for sale:Taxable
    
    
    49,359
    
    
    
    1,394
    
    
    
    2.82
    %
    
    
    23,561
    
    
    
    802
    
    
    
    3.40
    %
    
    
    68,908
    
    
    
    3,558
    
    
    
    5.16
    %Federal funds sold
and securities purchased under agreements to resell
    
    
    30,758
    
    
    
    53
    
    
    
    0.17
    %
    
    
    26,248
    
    
    
    617
    
    
    
    2.35
    %
    
    
    22,404
    
    
    
    1,141
    
    
    
    5.09
    %Total interest-earning
assets
    
    $
    407,522
    
    
    
    20,192
    
    
    
    4.95
    %
    
    $
    412,832
    
    
    
    23,857
    
    
    
    5.78
    %
    
    $
    441,485
    
    
    
    27,891
    
    
    
    6.32
    %Non interest-earning assets:Cash and due from
banks
    
    
    16,673
    
    
    
    
    
    
    
    
    
    
    
    24,677
    
    
    
    
    
    
    
    
    
    
    
    30,573Bank premises and
equipment
    
    
    17,423
    
    
    
    
    
    
    
    
    
    
    
    16,074
    
    
    
    
    
    
    
    
    
    
    
    14,129Other assets
    
    
    14,807
    
    
    
    
    
    
    
    
    
    
    
    14,947
    
    
    
    
    
    
    
    
    
    
    
    14,058Allowance for possible
loan losses
    
    
    (3,056
    )
    
    
    
    
    
    
    
    
    
    
    (2,784
    )
    
    
    
    
    
    
    
    
    
    
    (3,090
    )Total assets
    
    $
    453,369
    
    
    
    
    
    
    
    
    
    
    $
    465,746
    
    
    
    
    
    
    
    
    
    
    $
    497,155




---



##### 



TABLE 1 (continued)
COMPARATIVE AVERAGE BALANCES  YIELDS AND RATES (continued)
 2009
    
    
    2008
    
    
    2007Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Liabilities
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateInterest-bearing liabilities:INT DDAs, MMF & Savings
    
    $
    139,557
    
    
    
    1,947
    
    
    
    1.40
    %
    
    $
    177,198
    
    
    
    2,804
    
    
    
    1.58
    %
    
    $
    196,453
    
    
    
    4,007
    
    
    
    2.04
    %Time Deposits
    
    
    105,666
    
    
    
    3,010
    
    
    
    2.85
    %
    
    
    106,594
    
    
    
    4,008
    
    
    
    3.76
    %
    
    
    101,451
    
    
    
    4,544
    
    
    
    4.48
    %Federal funds purchased,
securities sold under
agreements to repurchase and other shortterm borrowings
    
    
    12,153
    
    
    
    40
    
    
    
    0.33
    %
    
    
    18,766
    
    
    
    325
    
    
    
    1.73
    %
    
    
    19,242
    
    
    
    669
    
    
    
    3.48
    %Total interest-bearing
liabilities
    
    $
    257,376
    
    
    
    4,997
    
    
    
    1.94
    %
    
    $
    302,558
    
    
    
    7,137
    
    
    
    2.36
    %
    
    $
    317,146
    
    
    
    9,220
    
    
    
    2.91
    %Noninterest-bearing
liabilities:Deposits
    
    
    137,296
    
    
    
    
    
    
    
    
    
    
    
    105,603
    
    
    
    
    
    
    
    
    
    
    
    128,005Other liabilities
    
    
    9,028
    
    
    
    
    
    
    
    
    
    
    
    7,480
    
    
    
    
    
    
    
    
    
    
    
    6,339Total liabilities
    
    
    403,700
    
    
    
    
    
    
    
    
    
    
    
    415,641
    
    
    
    
    
    
    
    
    
    
    
    451,490Stockholders
equity
    
    
    49,669
    
    
    
    
    
    
    
    
    
    
    
    50,105
    
    
    
    
    
    
    
    
    
    
    
    45,665Total liabilities and
stockholders
equity
    
    $
    453,369
    
    
    
    
    
    
    
    
    
    
    $
    465,746
    
    
    
    
    
    
    
    
    
    
    $
    497,155Net interest income/
margin-tax
equivalent
    
    
    
    
    
    $
    15,195
    
    
    
    3.35
    %
    
    
    
    
    
    $
    16,720
    
    
    
    3.59
    %
    
    
    
    
    
    $
    18,671
    
    
    
    3.76
    %Tax equivalent
adjustment:Loans
    
    
    
    
    
    
    185
    
    
    
    
    
    
    
    
    
    
    
    211
    
    
    
    
    
    
    
    
    
    
    
    236Investment
securities
    
    
    
    
    
    
    432
    
    
    
    
    
    
    
    
    
    
    
    293
    
    
    
    
    
    
    
    
    
    
    
    325Securities available
for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherTotal tax equivalent
adjustment
    
    
    
    
    
    
    617
    
    
    
    
    
    
    
    
    
    
    
    504
    
    
    
    
    
    
    
    
    
    
    
    561Net interest
income
    
    
    
    
    
    $
    15,812
    
    
    
    
    
    
    
    
    
    
    $
    17,224
    
    
    
    
    
    
    
    
    
    
    $
    19,232




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##### 



TABLE 2
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS
  Year ended December, 20092009 Compared to 2008
    
    
    2008 Compared to 2007Increase(Decrease) Due To
    
    
    Increase(Decrease) Due ToVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    NetInterest income on:Loans
    
    $
    9,689
    
    
    $
    (622
    )
    
    $
    9,067
    
    
    $
    (4,158
    )
    
    $
    (1,305
    )
    
    $
    (5,463
    )Investment securities:Taxable
    
    
    (50,707
    )
    
    
    (3,210
    )
    
    
    (53,917
    )
    
    
    18,584
    
    
    
    583
    
    
    
    19,167Exempt from Federal
income tax
    
    
    5,400
    
    
    
    139
    
    
    
    5,539
    
    
    
    (1,576
    )
    
    
    (32
    )
    
    
    (1,608
    )Securities available for sale:Taxable
    
    
    25,798
    
    
    
    592
    
    
    
    26,390
    
    
    
    (45,347
    )
    
    
    (2,756
    )
    
    
    (48,103
    )Federal funds sold and
securities purchased
under agreements to
resell
    
    
    4,510
    
    
    
    (564
    )
    
    
    3,946
    
    
    
    3,844
    
    
    
    (524
    )
    
    
    3,320Total
    
    $
    (5,310
    )
    
    $
    (3,665
    )
    
    $
    (8,975
    )
    
    $
    (28,653
    )
    
    $
    (4,034
    )
    
    $
    (32,687
    )Interest expense on:DDA & Savings
    
    $
    (49,193
    )
    
    $
    (776
    )
    
    $
    (49,969
    )
    
    $
    (6,693
    )
    
    $
    (710
    )
    
    $
    (7,403
    )Public Funds
    
    
    11,552
    
    
    
    (81
    )
    
    
    11,471
    
    
    
    (12,562
    )
    
    
    (493
    )
    
    
    (13,055
    )CDs < 100M
    
    
    (83
    )
    
    
    (433
    )
    
    
    (516
    )
    
    
    4,490
    
    
    
    (125
    )
    
    
    4,365CDs > 100M
    
    
    (845
    )
    
    
    (565
    )
    
    
    (1,410
    )
    
    
    653
    
    
    
    (411
    )
    
    
    242Federal funds purchased,
and securities sold
under agreements to
repurchase
    
    
    (6,613
    )
    
    
    (285
    )
    
    
    (6,898
    )
    
    
    (476
    )
    
    
    (344
    )
    
    
    (820
    )Total
    
    $
    (45,182
    )
    
    $
    (2,140
    )
    
    $
    (47,322
    )
    
    $
    (14,588
    )
    
    $
    (2,083
    )
    
    $
    (16,671
    )Changes in net interest
income-tax equivalent
    
    $
    39,872
    
    
    $
    (1,525
    )
    
    $
    38,347
    
    
    $
    (14,065
    )
    
    $
    (1,951
    )
    
    $
    (16,016
    )




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##### 



TABLE 3
SECURITIES AVAILABLE FOR SALE AND PORTFOLIO SECURITIES
  DECEMBER 31,2009
    
    
    2008
    
    
    2007Securities available for saleU. S. Treasury and other U. S. Government agencies
    
    $
    33,178
    
    
    $
    30,239
    
    
    $
    38,975Obligations of states and political subdivisions
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    Other securities
    
    
    148
    
    
    
    
    
    
    
    Total securities available for sale
    
    $
    33,326
    
    
    $
    30,239
    
    
    $
    38,975Investment securitiesU. S. Treasury and other U. S. Government agencies
    
    $
    123,670
    
    
    $
    137,196
    
    
    $
    134,485Obligations of states and political subdivisions
    
    
    20,288
    
    
    
    9,313
    
    
    
    9,307Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    Other securities
    
    
    900
    
    
    
    600
    
    
    
    600Total investment securities
    
    
    144,858
    
    
    
    147,109
    
    
    
    144,392Total securities available for sale and investment securities
    
    $
    178,184
    
    
    $
    177,348
    
    
    $
    183,367




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##### 



TABLE 4
MATURITY DISTRIBUTION AND YIELDS OF SECURITIES AVAILABLE FOR SALE AND
INVESTMENT SECURITIES
  MaturingAfter
    
    
    
    
    
    
    After 5 Yrs.Within
    
    
    
    
    
    
    1 Yr. But
    
    
    
    
    
    
    But Within
    
    
    
    
    
    
    After 10 Yrs.1 Year
    
    
    
    
    
    

Within 5 Yrs.
    
    
    
    
    
    

10 Yrs.
    
    
    
    
    
    
    
    
    
    
    
    
    
    CarryingAmount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    AmountSecurities
available for saleU.S. Treasury
and other U.S.
Government
agencies
    
    $
    11,070
    
    
    
    1.24
    %
    
    $
    18,187
    
    
    
    2.52
    %
    
    $
    3,921
    
    
    
    4.31
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    33,178Other securities
    
    
    148Total securities
available
for sale
    
    $
    11,218
    
    
    
    1.24
    %
    
    $
    18,187
    
    
    
    2.52
    %
    
    $
    3,921
    
    
    
    4.96
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    33,326Investment securitiesU.S. Treasury
and other U.S.
Government
agencies
    
    $
    2,995
    
    
    
    4.96
    %
    
    $
    92,472
    
    
    
    3.52
    %
    
    $
    22,488
    
    
    
    3.84
    %
    
    $
    5,715
    
    
    
    2.65
    %
    
    $
    123,670Obligations of states
and political
subdivisions
    
    
    424
    
    
    
    4.86
    %
    
    
    10,503
    
    
    
    4.17
    %
    
    
    7,841
    
    
    
    4.49
    %
    
    
    1,520
    
    
    
    5.91
    %
    
    
    20,288Other securities
    
    
    900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    900Total investment
securities
    
    $
    4,319
    
    
    
    4.27
    %
    
    $
    102,975
    
    
    
    4.64
    %
    
    $
    30,329
    
    
    
    4.85
    %
    
    $
    7,235
    
    
    
    0.00
    %
    
    $
    144,858Total securities
available for sale
and investment
securities
    
    $
    15,537
    
    
    
    3.27
    %
    
    $
    121,162
    
    
    
    4.22
    %
    
    $
    34,250
    
    
    
    4.86
    %
    
    $
    7,235
    
    
    
    0.00
    %
    
    $
    178,184




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##### 



Table 5
SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY
 SECURITIES AVAILABLE-FOR-SALE
    
    
    SECURITIES HELD-TO-MATURITYDECEMBER 31, 2009
    
    
    DECEMBER 31, 2009GROSS
    
    
    GROSS
    
    
    
    
    
    
    
    
    
    
    GROSS
    
    
    GROSSUNREALIZED
    
    
    UNREALIZED
    
    
    
    
    
    
    AMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZEDAMORTIZED COST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUE
    
    
    COST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUEU S GOVERNMENT AND
AGENCY
SECURITIES
    
    $
    32,927,000
    
    
    $
    279,000
    
    
    $
    (28,000
    )
    
    $
    33,178,000
    
    
    $
    123,670,000
    
    
    $
    1,043,000
    
    
    $
    (240,000
    )
    
    $
    124,473,000STATE AND MUNICIPAL
SECURITIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,288,000
    
    
    
    826,000
    
    
    
    (41,000
    )
    
    
    21,073,000OTHER SECURITIES
    
    
    72,000
    
    
    
    76,000
    
    
    
    
    
    
    
    148,000
    
    
    
    900,000
    
    
    
    
    
    
    
    
    
    
    
    900,000TOTAL
    
    $
    32,999,000
    
    
    $
    355,000
    
    
    $
    (28,000
    )
    
    $
    33,326,000
    
    
    $
    144,858,000
    
    
    $
    1,869,000
    
    
    $
    (281,000
    )
    
    $
    146,446,000
 SECURITIES AVAILABLE-FOR-SALE
    
    
    SECURITIES HELD-TO-MATURITYDECEMBER 31, 2008
    
    
    DECEMBER 31, 2008GROSS
    
    
    GROSS
    
    
    
    
    
    
    
    
    
    
    GROSS
    
    
    GROSSUNREALIZED
    
    
    UNREALIZED
    
    
    
    
    
    
    AMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZEDAMORTIZED COST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUE
    
    
    COST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUEU S GOVERNMENT AND
AGENCY
SECURITIES
    
    $
    29,841,000
    
    
    $
    310,000
    
    
    $
    
    
    
    $
    30,151,000
    
    
    $
    137,196,000
    
    
    $
    2,431,000
    
    
    $
    
    
    
    $
    139,627,000STATE AND MUNICIPAL
SECURITIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,314,000
    
    
    
    196,000
    
    
    
    (12,000
    )
    
    
    9,498,000OTHER SECURITIES
    
    
    72,000
    
    
    
    16,000
    
    
    
    
    
    
    
    88,000
    
    
    
    600,000
    
    
    
    
    
    
    
    
    
    
    
    600,000TOTAL
    
    $
    29,913,000
    
    
    $
    326,000
    
    
    $
    
    
    
    $
    30,239,000
    
    
    $
    147,110,000
    
    
    $
    2,627,000
    
    
    $
    (12,000
    )
    
    $
    149,725,000
 SECURITIES AVAILABLE-FOR-SALE
    
    
    SECURITIES HELD-TO-MATURITYDECEMBER 31, 2007
    
    
    DECEMBER 31, 2007GROSS
    
    
    GROSS
    
    
    
    
    
    
    
    
    
    
    GROSS
    
    
    GROSSUNREALIZED
    
    
    UNREALIZED
    
    
    
    
    
    
    AMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZEDAMORTIZED COST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUE
    
    
    COST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUEU S GOVERNMENT AND
AGENCY
SECURITIES
    
    $
    38,930,000
    
    
    $
    45,000
    
    
    $
    
    
    
    $
    38,975,000
    
    
    $
    134,485,000
    
    
    $
    1,552,000
    
    
    $
    (26,000
    )
    
    $
    136,011,000STATE AND MUNICIPAL
SECURITIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,307,000
    
    
    
    45,000
    
    
    
    (20,000
    )
    
    
    9,332,000OTHER SECURITIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    600,000
    
    
    
    
    
    
    
    
    
    
    
    600,000TOTAL
    
    $
    38,930,000
    
    
    $
    45,000
    
    
    $
    
    
    
    $
    38,975,000
    
    
    $
    144,392,000
    
    
    $
    1,597,000
    
    
    $
    (46,000
    )
    
    $
    145,943,000




---



##### 



TABLE 6
LOAN PORTFOLIO
  2009
    
    
    2008
    
    
    2007Commercial, Industrial & Governmental
    
    $
    31,325
    
    
    $
    29,800
    
    
    $
    46,711Real Estate
    
    
    142,787
    
    
    
    133,001
    
    
    
    124,015Consumer Loans
    
    
    35,492
    
    
    
    37,780
    
    
    
    32,388Other Loans
    
    
    599
    
    
    
    894
    
    
    
    788Total Loans
    
    $
    210,203
    
    
    $
    201,475
    
    
    $
    203,902
 TABLE 7
LOAN MATURITIES & INTEREST RATE SENSITIVITY
  Remaining Maturity Fixed Rate3 months or less
    
    $
    19,839Over 3 months through 12 months
    
    
    32,166Over 1 year through 5 years
    
    
    150,464Over 5 years
    
    
    6,826Total Loans
    
    $
    209,295




---



##### 



TABLE 8
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
  Year ended December 31,2009
    
    
    2008
    
    
    2007Beginning Balance
    
    $
    3,100
    
    
    $
    3,100
    
    
    $
    3,100Charge Offs:Commercial & Industrial
    
    
    83
    
    
    
    78
    
    
    
    59Real Estate
    
    
    296
    
    
    
    68
    
    
    
    149Consumer
    
    
    739
    
    
    
    681
    
    
    
    629OtherTotal Charge Offs
    
    
    1,118
    
    
    
    827
    
    
    
    837Recoveries:Commercial & Industrial
    
    
    54
    
    
    
    44
    
    
    
    63Real Estate
    
    
    
    
    
    
    6
    
    
    
    Consumer
    
    
    283
    
    
    
    214
    
    
    
    214OtherTotal Recoveries
    
    
    337
    
    
    
    264
    
    
    
    277Net Charge Offs
    
    
    781
    
    
    
    563
    
    
    
    560Provision for Possible Losses
    
    
    781
    
    
    
    563
    
    
    
    560Ending Balance
    
    $
    3,100
    
    
    $
    3,100
    
    
    $
    3,100Total Loans Outstanding
    
    $
    210,203
    
    
    $
    201,475
    
    
    $
    203,902Average daily loans
    
    $
    208,928
    
    
    $
    199,239
    
    
    $
    203,397
 2009
    
    
    2008
    
    
    2007Percentages:Allowance
for loan losses to end of quarter total loans
    
    
    1.5
    %
    
    
    1.5
    %
    
    
    1.5
    %Allowance for loan losses to average loans
    
    
    1.5
    %
    
    
    1.6
    %
    
    
    1.5
    %Allowance for loan losses to nonperforming assets
    
    
    98.5
    %
    
    
    370.4
    %
    
    
    277.3
    %Net charge offs to average loans
    
    
    0.4
    %
    
    
    0.3
    %
    
    
    0.3
    %




---



##### 



TABLE 9
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
  December 31,2009
    
    
    2008
    
    
    2007% Gross
    
    
    Loan Loss
    
    
    % Gross
    
    
    Loan Loss
    
    
    % Gross
    
    
    Loan LossLoans
    
    
    Allowance
    
    
    Loans
    
    
    Allowance
    
    
    Loans
    
    
    AllowanceOutstanding
    
    
    Allocation
    
    
    Outstanding
    
    
    Allocation
    
    
    Outstanding
    
    
    AllocationCommercial & Industrial
    
    
    7.09
    
    
    $
    220
    
    
    
    4.95
    
    
    $
    153
    
    
    
    7.65
    
    
    $
    237Real Estate
    
    
    61.39
    
    
    
    1,903
    
    
    
    13.38
    
    
    
    415
    
    
    
    28.35
    
    
    
    879Consumer
    
    
    23.20
    
    
    
    719
    
    
    
    43.87
    
    
    
    1,360
    
    
    
    22.40
    
    
    
    694Other
    
    
    7.99
    
    
    
    248
    
    
    
    2.04
    
    
    
    63
    
    
    
    24.38
    
    
    
    756Unallocated
    
    
    0.33
    
    
    
    10
    
    
    
    35.76
    
    
    
    1,109
    
    
    
    17.22
    
    
    
    534100.00
    
    
    $
    3,100
    
    
    
    100.00
    
    
    $
    3,100
    
    
    
    100.00
    
    
    $
    3,100
 TABLE 10
NONPERFORMING ASSETS
  December 31,2009
    
    
    2008
    
    
    2007Non-accrual Loans & Accruing Loans Past Due 90
Days or more
    
    $
    951
    
    
    $
    601
    
    
    $
    712Other Real Estate
    
    
    2,195
    
    
    
    236
    
    
    
    406$
    3,146
    
    
    $
    837
    
    
    $
    1,118Nonperforming Assets as % of Total Loans
    
    
    1.5
    %
    
    
    0.4
    %
    
    
    0.5
    %Non-accrual Loans & Loans Past Due 90 Days or More
as % of Total Loans
    
    
    0.5
    %
    
    
    0.3
    %
    
    
    0.3
    %




---



##### 



TABLE 11
AVERAGE DEPOSITS
  YEAR ENDED DECEMBER 31,2009
    
    
    2008
    
    
    2007Non-interest bearing deposits
    
    $
    77,927
    
    
    $
    105,603
    
    
    $
    128,005Interest-bearing deposits
    
    
    199,147
    
    
    
    177,198
    
    
    
    196,453Interest-bearing time deposits
    
    
    106,107
    
    
    
    106,594
    
    
    
    101,451Total
    
    $
    383,181
    
    
    $
    389,395
    
    
    $
    425,909
 TABLE 12
TIME DEPOSITS OF $100,000 OR MORE, MATURITY DISTRIBUTION
  Time remaining until maturity3 months or less
    
    $
    15,764Over 3 through 12 months
    
    
    38,670Over 12 months
    
    
    4,974Total
    
    $
    59,408




---



##### 



TABLE 13
SHORT-TERM BORROWINGS
  Daily
    
    
    Average
    
    
    MaximumDecember
    
    
    Average
    
    
    Interest
    
    
    Month-EndBalance
    
    
    Balance
    
    
    Rate*
    
    
    Balance2009Federal funds purchased and
securities sold under
agreements to repurchase
    
    $
    8,434
    
    
    $
    12,153
    
    
    
    0.33
    %
    
    $
    8,4342008Federal funds purchased and
securities sold under
agreements to repurchase
    
    $
    10,917
    
    
    $
    18,766
    
    
    
    1.73
    %
    
    $
    10,9172007Federal funds purchased and
securities sold under
agreements to repurchase
    
    $
    21,018
    
    
    $
    19,242
    
    
    
    3.48
    %
    
    $
    21,018
 *
    
    On daily average balance




---



##### 



TABLE 14
INTEREST SENSITIVITY
  0-3
    
    
    4-12
    
    
    1-5
    
    
    Over 5Months
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    TotalAssetsInterest-earning assets:Loans, net of unearned income
    
    $
    20,747
    
    
    $
    32,166
    
    
    $
    150,464
    
    
    $
    6,826
    
    
    $
    210,203Investment securities
    
    
    
    
    
    
    4,319
    
    
    
    102,975
    
    
    
    37,564
    
    
    
    144,858Securities available for sale
    
    
    4,151
    
    
    
    7,067
    
    
    
    18,187
    
    
    
    3,921
    
    
    
    33,326Federal funds sold and securities
purchased under agreements to
resell
    
    
    16,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,450Total interest-earning assets
    
    
    41,348
    
    
    
    43,552
    
    
    
    271,626
    
    
    
    48,311
    
    
    
    404,837Noninterest-earning assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,637
    
    
    
    45,637Total assets
    
    $
    41,348
    
    
    $
    43,552
    
    
    $
    271,626
    
    
    $
    93,948
    
    
    $
    450,474Liabilities and stockholders equityInterest-bearing liabilities:Int DDAs, MMF, Savings deposits
    
    $
    18,335
    
    
    $
    56,463
    
    
    $
    124,349
    
    
    $
    
    
    
    $
    199,147Time deposits
    
    
    28,307
    
    
    
    64,089
    
    
    
    13,711
    
    
    
    
    
    
    
    106,107Federal funds purchased, and securities
sold under agreements to repurchase
    
    
    8,434
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,434Total interest-bearing liabilities
    
    
    55,076
    
    
    
    120,552
    
    
    
    138,060
    
    
    
    
    
    
    
    313,688Noninterest-bearing deposits
    
    
    13,248
    
    
    
    38,964
    
    
    
    25,715
    
    
    
    
    
    
    
    77,927Other liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,253
    
    
    
    8,253Stockholders equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,606
    
    
    
    50,606Total liabilities and
stockholders equity
    
    $
    68,324
    
    
    $
    159,516
    
    
    $
    163,775
    
    
    $
    58,859
    
    
    $
    450,474Interest sensitive gap
    
    $
    (26,976
    )
    
    $
    (115,964
    )
    
    $
    107,851
    
    
    $
    35,089Cumulative interest sensitive gap
    
    $
    (26,976
    )
    
    $
    (142,940
    )
    
    $
    (35,089
    )
    
    $
    Cumulative interest sensitive gap
as a percent of total assets
    
    
    -5.99
    %
    
    
    -31.73
    %
    
    
    -7.79
    %
    
    
    0.00
    %




---



##### 



TABLE 15
CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES, AND
OFF-BALANCE SHEET ARRANGEMENTS
  PAYMENTS DUE INONE TOONE YEAR
    
    
    THREE
    
    
    THREE TO
    
    
    OVER FIVEOR LESS
    
    
    YEARS
    
    
    FIVE YEARS
    
    
    YEARS
    
    
    TOTALDeposits without a
stated maturity
    
    $
    127,010
    
    
    $
    76,417
    
    
    $
    73,647
    
    
    $
    
    
    
    $
    277,074Consumer certificates
of deposit
    
    
    92,396
    
    
    
    9,388
    
    
    
    4,323
    
    
    
    
    
    
    
    106,107Federal funds borrowed
& repurchase agreements
    
    
    8,434
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,434Operating leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 COMMITMENTS
  ONE TOONE YEAR
    
    
    THREE
    
    
    THREE TO
    
    
    OVER FIVEOR LESS
    
    
    YEARS
    
    
    FIVE YEARS
    
    
    YEARS
    
    
    TOTALCommitments to extend
credit:Commercial
    
    $
    6,346
    
    
    $
    823
    
    
    $
    
    
    
    $
    
    
    
    $
    7,169Residential real estate
    
    
    2,823
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,823Revolving home equity
and credit card lines
    
    
    2
    
    
    
    938
    
    
    
    
    
    
    
    
    
    
    
    940Other
    
    
    16,584
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,584Standby letters of credit
    
    $
    257
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    257
 PENSION EXPENSE (Net Periodic Pension Cost)
 2009
    
    
    2009
    
    
    2008
    
    
    2008Annual
    
    
    Quarterly
    
    
    Annual
    
    
    Quarterly(1) Service cost
    
    $
    320,583
    
    
    $
    80,146
    
    
    $
    279,047
    
    
    $
    69,762(2) Interest cost
    
    
    587,119
    
    
    
    146,780
    
    
    
    541,892
    
    
    
    135,473(3) Expected return on assets
    
    
    (548,938
    )
    
    
    (137,235
    )
    
    
    (747,483
    )
    
    
    (186,871
    )(4) Amortization of transition
(asset) or liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5) Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6) Amortization of (gain) or loss
    
    
    335,659
    
    
    
    83,915
    
    
    
    
    
    
    
    (7) Total
    
    $
    694,423
    
    
    $
    173,606
    
    
    $
    73,456
    
    
    $
    18,364




---



##### 



First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(all amounts in thousands, except per share data)For the year ended December 31, 2009:Interest income
    
    $
    5,212
    
    
    
    4,940
    
    
    
    4,988
    
    
    
    5,023Interest expense
    
    
    1,352
    
    
    
    1,328
    
    
    
    1,226
    
    
    
    1,091Net interest income
    
    
    3,860
    
    
    
    3,612
    
    
    
    3,762
    
    
    
    3,932Provision for loan losses
    
    
    74
    
    
    
    60
    
    
    
    304
    
    
    
    343Net interest income after provision for loan losses
    
    
    3,786
    
    
    
    3,552
    
    
    
    3,458
    
    
    
    3,589Non-interest income
    
    
    1,420
    
    
    
    1,653
    
    
    
    1,629
    
    
    
    1,423Non-interest expense
    
    
    4,101
    
    
    
    3,892
    
    
    
    3,951
    
    
    
    3,820Income before income taxes
    
    
    1,105
    
    
    
    1,313
    
    
    
    1,136
    
    
    
    1,192Income taxes
    
    
    336
    
    
    
    500
    
    
    
    270
    
    
    
    329Net income
    
    $
    769
    
    
    
    813
    
    
    
    866
    
    
    
    863Net income per common share
    
    $
    0.58
    
    
    
    0.61
    
    
    
    0.65
    
    
    
    0.65For the year ended December 31, 2008:Interest income
    
    $
    6,264
    
    
    
    6,029
    
    
    
    5,836
    
    
    
    5,735Interest expense
    
    
    2,064
    
    
    
    1,800
    
    
    
    1,659
    
    
    
    1,614Net interest income
    
    
    4,200
    
    
    
    4,229
    
    
    
    4,177
    
    
    
    4,121Provision for loan losses
    
    
    (51
    )
    
    
    124
    
    
    
    173
    
    
    
    317Net interest income after provision for loan losses
    
    
    4,251
    
    
    
    4,105
    
    
    
    4,004
    
    
    
    3,804Non-interest income
    
    
    1,676
    
    
    
    1,891
    
    
    
    1,649
    
    
    
    1,777Non-interest expense
    
    
    4,016
    
    
    
    4,283
    
    
    
    4,146
    
    
    
    3,754Income before income taxes
    
    
    1,911
    
    
    
    1,713
    
    
    
    1,507
    
    
    
    1,827Income taxes
    
    
    492
    
    
    
    659
    
    
    
    477
    
    
    
    600Net income
    
    $
    1,419
    
    
    
    1,054
    
    
    
    1,030
    
    
    
    1,227Net income per common share
    
    $
    1.07
    
    
    
    0.79
    
    
    
    0.77
    
    
    
    0.93




---



##### 



2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Interest income
    
    $
    20,163,187
    
    
    
    23,864,224
    
    
    
    27,890,994
    
    
    
    25,198,321
    
    
    
    17,360,066Interest expense
    
    
    4,997,092
    
    
    
    7,137,225
    
    
    
    9,219,867
    
    
    
    7,014,461
    
    
    
    3,761,872Net interest income
    
    
    15,166,095
    
    
    
    16,726,999
    
    
    
    18,671,127
    
    
    
    18,183,860
    
    
    
    13,598,194Provision for loan losses
    
    
    780,890
    
    
    
    563,178
    
    
    
    560,590
    
    
    
    318,120
    
    
    
    1,149,096Net interest income after
provision for loan losses
    
    
    14,385,205
    
    
    
    16,163,821
    
    
    
    18,110,537
    
    
    
    17,865,740
    
    
    
    12,449,098Non-interest income
    
    
    6,124,791
    
    
    
    6,992,953
    
    
    
    6,130,556
    
    
    
    5,613,823
    
    
    
    5,156,216Non-interest expense
    
    
    15,763,755
    
    
    
    16,199,124
    
    
    
    14,246,174
    
    
    
    13,436,503
    
    
    
    12,455,940Income before income taxes
    
    
    4,746,241
    
    
    
    6,957,650
    
    
    
    9,994,919
    
    
    
    10,043,060
    
    
    
    5,149,374Income taxes
    
    
    1,435,000
    
    
    
    2,228,000
    
    
    
    3,272,000
    
    
    
    3,187,000
    
    
    
    1,564,000Net income
    
    $
    3,311,241
    
    
    
    4,729,650
    
    
    
    6,722,919
    
    
    
    6,856,060
    
    
    
    3,585,374Net income per common share
    
    $
    2.49
    
    
    
    3.56
    
    
    
    5.05
    
    
    
    5.15
    
    
    
    2.70Dividends per common share
    
    $
    1.35
    
    
    
    1.35
    
    
    
    1.35
    
    
    
    1.25
    
    
    
    1.15
  2




---



##### 



IN THOUSANDSAS OF DECEMBER 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005BALANCE SHEET:Total assets end of year
    
    $
    450,474
    
    
    
    436,283
    
    
    
    459,533
    
    
    
    487,719
    
    
    
    485,590Loans, net
    
    
    207,113
    
    
    
    198,383
    
    
    
    200,812
    
    
    
    196,024
    
    
    
    168,977Securities
    
    
    178,183
    
    
    
    177,350
    
    
    
    183,367
    
    
    
    203,608
    
    
    
    222,551Deposits
    
    
    382,868
    
    
    
    367,245
    
    
    
    383,423
    
    
    
    426,071
    
    
    
    420,080Stockholders equity
    
    
    50,985
    
    
    
    49,061
    
    
    
    48,441
    
    
    
    42,980
    
    
    
    38,594INCOME STATEMENT:Interest income
    
    
    20,163
    
    
    
    23,864
    
    
    
    27,891
    
    
    
    25,198
    
    
    
    17,360Interest expense
    
    
    4,997
    
    
    
    7,137
    
    
    
    9,220
    
    
    
    7,014
    
    
    
    3,762Net interest income
    
    
    15,166
    
    
    
    16,727
    
    
    
    18,671
    
    
    
    18,184
    
    
    
    13,598Provision for possible loan losses
    
    
    781
    
    
    
    563
    
    
    
    561
    
    
    
    318
    
    
    
    1,149Net interest income after provision
for possible loan losses
    
    
    14,385
    
    
    
    16,164
    
    
    
    18,110
    
    
    
    17,866
    
    
    
    12,449Non-interest income
    
    
    6,125
    
    
    
    6,993
    
    
    
    6,131
    
    
    
    5,614
    
    
    
    5,156Non-interest expense
    
    
    15,764
    
    
    
    16,199
    
    
    
    14,246
    
    
    
    13,437
    
    
    
    12,456Net income
    
    
    3,311
    
    
    
    4,730
    
    
    
    6,723
    
    
    
    6,856
    
    
    
    3,585Cash dividends declared
    
    
    1,796
    
    
    
    1,796
    
    
    
    1,796
    
    
    
    1,663
    
    
    
    1,530PER SHARE DATA:Net income
    
    
    2.49
    
    
    
    3.56
    
    
    
    5.05
    
    
    
    5.15
    
    
    
    2.70Cash dividends
    
    
    1.35
    
    
    
    1.35
    
    
    
    1.35
    
    
    
    1.25
    
    
    
    1.15Book value
    
    
    38.32
    
    
    
    36.88
    
    
    
    36.41
    
    
    
    32.31
    
    
    
    29.01RATIOS:Return on average equity
    
    
    6.67
    
    
    
    9.44
    
    
    
    14.73
    
    
    
    16.60
    
    
    
    9.54Return on average assets
    
    
    0.72
    
    
    
    1.01
    
    
    
    1.35
    
    
    
    1.38
    
    
    
    1.08Capital to assets
    
    
    11.32
    
    
    
    11.25
    
    
    
    10.47
    
    
    
    8.81
    
    
    
    7.95Dividends declared as percentage
of income
    
    
    54.24
    
    
    
    37.97
    
    
    
    26.71
    
    
    
    24.25
    
    
    
    42.68
  3




---



##### 



MERCHANTS & MARINE BANCORP, INC.
FINANCIAL STATEMENTS
Pascagoula, Mississippi
Years Ended December 31, 2009 and 2008TABLE OF CONTENTS
 Independent Registered Public Accounting Firms Report
    
    
    2Statements of Condition
    
    
    3Statements of Income
    
    
    4Statements of Comprehensive Income
    
    
    5Statements of Changes in Stockholders Equity
    
    
    6Statements of Cash Flows
    
    
    7Notes to Financial Statements
    
    
    8




---



##### 



(WOLFE MCDUFF OPPIE LOGO)
    
    Jack A. Oppie, CPA
C. Scott Rankin, CPA
Lindsey M. Henley, CPA
Jesse J. Wolfe, CPA(Retired)
Grover B. McDuff, CPA(Retired)
    
  
    
 Membership in:     




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 2009
    
    
    2008ASSETSCash and due from banks
    
    $
    14,451,113
    
    
    
    18,065,881Federal funds sold
    
    
    16,450,000
    
    
    
    11,039,000Securities:Available-for-sale at market value
    
    
    33,325,635
    
    
    
    30,239,874Held-to-maturity at amortized cost
    
    
    143,957,199
    
    
    
    146,509,925Non-marketable equity securities
    
    
    900,060
    
    
    
    600,060Loans
    
    
    210,256,672
    
    
    
    201,525,438Less:Allowance for loan losses
    
    
    3,100,000
    
    
    
    3,100,000Unearned income
    
    
    43,449
    
    
    
    42,852Loans, net
    
    
    207,113,223
    
    
    
    198,382,586Property and equipment, net
    
    
    16,778,718
    
    
    
    17,750,116Other real estate owned
    
    
    2,194,611
    
    
    
    235,659Accrued income
    
    
    2,499,639
    
    
    
    3,086,533Goodwill, net
    
    
    880,398
    
    
    
    880,398Other assets
    
    
    11,923,289
    
    
    
    9,493,088Total assets
    
    $
    450,473,885
    
    
    
    436,283,120LIABILITIESDeposits:Non-interest bearing demand
    
    $
    77,614,260
    
    
    
    80,738,441Interest bearing savings, demand and other time deposits
    
    
    305,253,753
    
    
    
    286,506,672Total deposits
    
    
    382,868,013
    
    
    
    367,245,113Securities sold under agreements to repurchase
    
    
    8,433,632
    
    
    
    10,916,967Accrued expense and other liabilities
    
    
    8,187,322
    
    
    
    9,060,161Total liabilities
    
    
    399,488,967
    
    
    
    387,222,241STOCKHOLDERS EQUITYCommon stock  $2.50 par value per share, 1,330,560 shares
authorized, 1,330,338 shares issued and outstanding
    
    
    3,325,845
    
    
    
    3,325,845Surplus
    
    
    14,500,000
    
    
    
    14,500,000Retained earnings
    
    
    35,560,524
    
    
    
    34,045,240Accumulated other comprehensive income (loss)
    
    
    (2,401,451
    )
    
    
    (2,810,206
    )Total stockholders equity
    
    
    50,984,918
    
    
    
    49,060,879Total liabilities and stockholders equity
    
    $
    450,473,885
    
    
    
    436,283,120
   3




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 2009
    
    
    2008
    
    
    2007Interest incomeInterest and fees on loans
    
    $
    14,100,737
    
    
    
    14,722,605
    
    
    
    16,027,911Interest on investment securities:Taxable
    
    
    5,575,643
    
    
    
    8,223,847
    
    
    
    10,442,700Exempt from federal and state income tax
    
    
    431,597
    
    
    
    293,049
    
    
    
    278,908Interest on federal funds sold
    
    
    53,167
    
    
    
    617,070
    
    
    
    1,141,475Other interest income
    
    
    2,043
    
    
    
    7,653
    
    
    
    Total interest income
    
    
    20,163,187
    
    
    
    23,864,224
    
    
    
    27,890,994Interest expenseInterest on deposits
    
    
    4,957,500
    
    
    
    6,812,012
    
    
    
    8,550,628Interest on federal funds purchased and securities
sold under agreements to repurchase
    
    
    39,592
    
    
    
    325,213
    
    
    
    669,239Total interest expense
    
    
    4,997,092
    
    
    
    7,137,225
    
    
    
    9,219,867Net interest income
    
    
    15,166,095
    
    
    
    16,726,999
    
    
    
    18,671,127Provision for loan losses
    
    
    780,890
    
    
    
    563,178
    
    
    
    560,590Net interest income after provision for loan losses
    
    
    14,385,205
    
    
    
    16,163,821
    
    
    
    18,110,537Non-interest incomeService charges on deposit accounts
    
    
    4,155,103
    
    
    
    4,331,617
    
    
    
    4,293,946Other service charges, commissions and fees
    
    
    1,044,066
    
    
    
    1,032,825
    
    
    
    927,847Other
    
    
    925,622
    
    
    
    1,628,511
    
    
    
    908,763Total non-interest income
    
    
    6,124,791
    
    
    
    6,992,953
    
    
    
    6,130,556Non-interest expenseSalaries and employee benefits
    
    
    7,654,312
    
    
    
    6,806,340
    
    
    
    6,377,824Occupancy expense
    
    
    3,205,066
    
    
    
    2,737,432
    
    
    
    2,434,926Other
    
    
    4,904,377
    
    
    
    6,655,352
    
    
    
    5,433,424Total non-interest expense
    
    
    15,763,755
    
    
    
    16,199,124
    
    
    
    14,246,174Income before income taxes
    
    
    4,746,241
    
    
    
    6,957,650
    
    
    
    9,994,919Income taxes
    
    
    1,435,000
    
    
    
    2,228,000
    
    
    
    3,272,000Net income
    
    $
    3,311,241
    
    
    
    4,729,650
    
    
    
    6,722,919Net income per common share
    
    $
    2.49
    
    
    
    3.56
    
    
    
    5.05
   4




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 2009
    
    
    2008
    
    
    2007Net income
    
    $
    3,311,241
    
    
    
    4,729,650
    
    
    
    6,722,919Other comprehensive income, net of tax:Unrealized gain (loss) on securities available-for-sale
    
    
    (327
    )
    
    
    185,862
    
    
    
    56,849Unrealized gain (loss) on pension plan assets
    
    
    409,082
    
    
    
    (2,499,326
    )
    
    
    476,402Comprehensive income
    
    $
    3,719,996
    
    
    
    2,416,186
    
    
    
    7,256,170
   5




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 AccumulatedCommon Stock
    
    
    
    
    
    
    
    
    
    
    OtherShares
    
    
    
    
    
    
    
    
    
    
    Retained
    
    
    ComprehensiveIssued
    
    
    Amount
    
    
    Surplus
    
    
    Earnings
    
    
    Income (Loss)Balance January 1, 2007
    
    
    1,330,338
    
    
    $
    3,325,845
    
    
    
    14,500,000
    
    
    
    26,196,827
    
    
    
    (1,042,236
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,722,919
    
    
    
    Cash dividends, $1.35 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,795,957
    )
    
    
    Change in unrealized gain (loss) on securities
available-for-sale, net of taxes of $29,286
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,849Change in unrealized gain (loss) on pension plan assets,
net of taxes of $245,419
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    476,402Balance, December 31, 2007, as originally reported
    
    
    1,330,338
    
    
    
    3,325,845
    
    
    
    14,500,000
    
    
    
    31,123,789
    
    
    
    (508,985
    )Prior period adjustment, net of taxes of $6,307 see Note 17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,243
    )
    
    
    12,243Balance, December 31, 2007, as restated
    
    
    1,330,338
    
    
    
    3,325,845
    
    
    
    14,500,000
    
    
    
    31,111,546
    
    
    
    (496,742
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,729,650
    
    
    
    Cash dividends, $1.35 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,795,956
    )
    
    
    Change in unrealized gain (loss) on securities
available-for-sale, net of taxes of $95,747
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185,862Change in unrealized gain (loss) on pension plan assets,
net of taxes of ($1,287,532)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,499,326
    )Balance, December 31, 2008
    
    
    1,330,338
    
    
    
    3,325,845
    
    
    
    14,500,000
    
    
    
    34,045,240
    
    
    
    (2,810,206
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,311,241
    
    
    
    Cash dividends, $1.35 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,795,957
    )
    
    
    Change in unrealized gain (loss) on securities
available-for-sale, net of taxes of ($168)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (327
    )Change in unrealized gain (loss) on pension plan assets,
net of taxes of $210,739
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    409,082Balance, December 31, 2009
    
    
    1,330,338
    
    
    $
    3,325,845
    
    
    
    14,500,000
    
    
    
    35,560,524
    
    
    
    (2,401,451
    )
   6




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 2009
    
    
    2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    3,311,241
    
    
    
    4,729,650
    
    
    
    6,722,919Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    1,446,905
    
    
    
    1,214,757
    
    
    
    985,111Provision for loan losses
    
    
    780,890
    
    
    
    561,127
    
    
    
    556,604Writedowns on real estate owned
    
    
    80
    
    
    
    55,947
    
    
    
    55,947Pension expense
    
    
    
    
    
    
    
    
    
    
    96,593(Accretion) amortization of securities premium/discount
    
    
    2,053
    
    
    
    69,178
    
    
    
    (200,283
    )(Gain) loss on sale of assets
    
    
    (47,279
    )
    
    
    (356,283
    )
    
    
    20,605(Gain) on sale of securities
    
    
    
    
    
    
    (117,392
    )
    
    
    Noncash charitable donation
    
    
    
    
    
    
    310,000
    
    
    
    Decrease in accrued income
    
    
    586,894
    
    
    
    235,989
    
    
    
    64,598Reinvested earnings on securities
    
    
    
    
    
    
    (61,649
    )
    
    
    (873,951
    )Decrease in interest payable
    
    
    (413,805
    )
    
    
    (140,185
    )
    
    
    (807,947
    )Other, net
    
    
    (2,479,986
    )
    
    
    (344,723
    )
    
    
    794,279Net cash provided by operating activities
    
    
    3,186,993
    
    
    
    6,156,416
    
    
    
    7,414,475CASH FLOWS FROM INVESTING ACTIVITIES:Net (increase) decrease in federal funds sold and securities
purchased under agreements to resell
    
    
    (5,411,000
    )
    
    
    15,438,000
    
    
    
    2,548,000Proceeds from sales and maturities of securities available-for-sale
    
    
    51,065,000
    
    
    
    43,045,413
    
    
    
    139,500,000Purchase of securities available-for-sale
    
    
    (54,156,709
    )
    
    
    (33,919,423
    )
    
    
    (91,994,215
    )Proceeds from maturities of securities held to maturity
    
    
    126,792,593
    
    
    
    91,075,741
    
    
    
    71,935,000Purchase of securities held-to-maturity
    
    
    (124,236,466
    )
    
    
    (93,792,767
    )
    
    
    (98,039,679
    )Purchase of non-marketable equity securities
    
    
    (300,000
    )
    
    
    
    
    
    
    Net (increase) decrease in loans
    
    
    (11,644,680
    )
    
    
    1,983,719
    
    
    
    (5,585,232
    )Purchase of property and equipment
    
    
    (475,507
    )
    
    
    (4,168,409
    )
    
    
    (3,176,080
    )Proceeds from sale of assets
    
    
    221,400
    
    
    
    140,000
    
    
    
    31,500Net cash provided (used) by investing activities
    
    
    (18,145,369
    )
    
    
    19,802,274
    
    
    
    15,219,294CASH FLOWS FROM FINANCING ACTIVITIES:Net increase (decrease) in deposits
    
    
    15,622,900
    
    
    
    (16,263,799
    )
    
    
    (42,648,611
    )Net increase (decrease) in federal funds purchased and securities
sold under agreements to repurchase
    
    
    (2,483,335
    )
    
    
    (10,101,519
    )
    
    
    8,812,991Dividends paid
    
    
    (1,795,957
    )
    
    
    (1,795,956
    )
    
    
    (1,795,957
    )Net cash provided (used) by financing activities
    
    
    11,343,608
    
    
    
    (28,161,274
    )
    
    
    (35,631,577
    )Net decrease in cash and due from banks
    
    
    (3,614,768
    )
    
    
    (2,202,584
    )
    
    
    (12,997,808
    )Cash and due from banks, beginning
    
    
    18,065,881
    
    
    
    20,268,465
    
    
    
    33,266,273Cash and due from banks, ending
    
    $
    14,451,113
    
    
    
    18,065,881
    
    
    
    20,268,465Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    5,410,897
    
    
    
    7,277,410
    
    
    
    8,924,814Income taxes
    
    
    1,680,000
    
    
    
    2,525,000
    
    
    
    2,835,000
   7




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations:
   Basis of Consolidation:
  Use of Estimates:
      8




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Cash and Cash Equivalents:
  Securities:
    Loans:
    9




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Loans (continued):
  Allowance for Loan Losses:
      10




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Comprehensive Income:
  Property and Equipment:
  Other Real Estate Owned:
  Income Taxes:
  Goodwill:
   11




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Advertising Costs:
  Fair Value Measurements:
  
    
    Level 1 inputs are unadjusted quoted prices in active markets for identical securities.
 
    
    Level 2 inputs include quoted prices for similar securities in active markets, quoted
prices from those willing to trade in markets that are not active, or other inputs that are
observable or can be corroborated by market data for the term of the investments. Such inputs
include market interest rates, volatilities and yield curves.
 
    
    Level 3 inputs are unobservable (supported by little or no market activity) and significant
to the fair value measurement including the reporting entitys own assumptions in determining
the fair value of the investment.
 NOTE 2. SECURITIES
  December 31, 2009
    
    
    December 31, 2008Gross
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-saleUS Treasury securities
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    999
    
    
    
    12
    
    
    
    
    
    
    
    1,011US Government
Agency Funds
    
    
    32,927
    
    
    
    278
    
    
    
    (27
    )
    
    
    33,178
    
    
    
    28,842
    
    
    
    298
    
    
    
    
    
    
    
    29,140Equity securities
    
    
    72
    
    
    
    76
    
    
    
    
    
    
    
    148
    
    
    
    72
    
    
    
    17
    
    
    
    
    
    
    
    89Total
    
    $
    32,999
    
    
    
    354
    
    
    
    (27
    )
    
    
    33,326
    
    
    
    29,913
    
    
    
    327
    
    
    
    
    
    
    
    30,240Held-to-maturityUS Government
Agency Funds
    
    $
    123,670
    
    
    
    1,043
    
    
    
    (240
    )
    
    
    124,473
    
    
    
    137,196
    
    
    
    2,432
    
    
    
    
    
    
    
    139,628State, county and
municipal securities
    
    
    20,287
    
    
    
    630
    
    
    
    (64
    )
    
    
    20,853
    
    
    
    9,314
    
    
    
    196
    
    
    
    (12
    )
    
    
    9,498Other securities
    
    
    900
    
    
    
    
    
    
    
    
    
    
    
    900
    
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    600Total
    
    $
    144,857
    
    
    
    1,673
    
    
    
    (304
    )
    
    
    146,226
    
    
    
    147,110
    
    
    
    2,628
    
    
    
    (12
    )
    
    
    149,726
  12




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 2. SECURITIES (continued)
  Available-For-Sale
    
    
    Held-To-MaturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueAmounts maturing in:One year or less
    
    $
    11,076
    
    
    
    11,217
    
    
    
    3,419
    
    
    
    3,553After one year through five years
    
    
    18,038
    
    
    
    18,186
    
    
    
    102,976
    
    
    
    104,236After five years through ten years
    
    
    3,885
    
    
    
    3,923
    
    
    
    37,562
    
    
    
    37,537$
    32,999
    
    
    
    33,326
    
    
    
    143,957
    
    
    
    145,326
      Less Than 12 Months
    
    
    12 Months or Greater
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesDecember 31, 2009:US Government Agency
Funds
    
    $
    16,368
    
    
    
    (247
    )
    
    
    979
    
    
    
    (20
    )
    
    
    17,347
    
    
    
    (267
    )State, county and
municipal securities
    
    
    2,065
    
    
    
    (64
    )
    
    
    
    
    
    
    
    
    
    
    2,065
    
    
    
    (64
    )Total
    
    $
    18,433
    
    
    
    (311
    )
    
    
    979
    
    
    
    (20
    )
    
    
    19,412
    
    
    
    (331
    )
  13




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 2. SECURITIES (continued)
 Less Than 12 Months
    
    
    12 Months or Greater
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesDecember 31, 2008:State, county and
municipal securities
    
    
    241
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    241
    
    
    
    (12
    )Total
    
    $
    241
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    241
    
    
    
    (12
    )
  %
   2009
    
    
    2008Beginning balance
    
    $
    600,060
    
    
    
    600,060Purchases of non-marketable
equity securities
    
    
    300,000
    
    
    
    Ending balance
    
    $
    900,060
    
    
    
    600,060
  14




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 3. LOANS
  2009
    
    
    2008Loans secured by real estate:Construction
    
    $
    26,933
    
    
    
    29,186Farmland
    
    
    1,517
    
    
    
    629Revolving, open-end secured
by 1-4 family residential property
    
    
    1,381
    
    
    
    3431-4 family residential properties
    
    
    42,352
    
    
    
    37,756Multifamily (5 or more) residential
properties
    
    
    77
    
    
    
    491Nonfarm nonresidential properties
    
    
    70,527
    
    
    
    64,596Commercial and industrial
    
    
    26,743
    
    
    
    23,709Loans to individuals for household, family
and other personal expenditures
    
    
    35,535
    
    
    
    37,823Municipal and government
    
    
    4,582
    
    
    
    6,088Other
    
    
    610
    
    
    
    904$
    210,257
    
    
    
    201,525
  2009
    
    
    2008
    
    
    2007Balance, January 1,
    
    $
    3,100
    
    
    
    3,100
    
    
    
    3,100Recoveries
    
    
    337
    
    
    
    264
    
    
    
    276Loans charged off
    
    
    (1,118
    )
    
    
    (827
    )
    
    
    (837
    )Provision charged to operating expense
    
    
    781
    
    
    
    563
    
    
    
    561Balance, December 31,
    
    $
    3,100
    
    
    
    3,100
    
    
    
    3,100
      15




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 4. PROPERTY AND EQUIPMENT
  2009
    
    
    2008Land and buildings
    
    $
    19,148
    
    
    
    18,226Furniture and equipment
    
    
    5,104
    
    
    
    4,90624,252
    
    
    
    23,132Accumulated depreciation
    
    
    (7,473
    )
    
    
    (6,028
    )Net property and equipment
    
    
    16,779
    
    
    
    17,104Construction in progress
    
    
    
    
    
    
    646$
    16,779
    
    
    
    17,750
 NOTE 5. INCOME TAXES
  2009
    
    
    2008Deferred tax assets:Provision for loan losses not currently deductible
    
    $
    862
    
    
    
    862Write-down of other real estate not currently deductible
    
    
    113
    
    
    
    113Deferred compensation
    
    
    1,592
    
    
    
    1,675Loan origination costs not currently deductible
    
    
    329
    
    
    
    388Accrued interest on non-accrual loans
    
    
    281
    
    
    
    252Underfunded pension
    
    
    649
    
    
    
    623Losses on defined benefit plan assets
    
    
    1,348
    
    
    
    1,5595,174
    
    
    
    5,472Deferred tax liabilities:Book basis of fixed assets greater than tax
    
    
    (2,847
    )
    
    
    (2,433
    )Discount accretion
    
    
    (16
    )
    
    
    (14
    )Unrealized gains on securities available-for-sale
    
    
    (111
    )
    
    
    (111
    )(2,974
    )
    
    
    (2,558
    )Net deferred tax asset
    
    $
    2,200
    
    
    
    2,914
  16




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 5. INCOME TAXES (continued)
  2009
    
    
    2008
    
    
    2007Currently payable
    
    $
    1,519
    
    
    
    2,334
    
    
    
    2,373Deferred
    
    
    (84
    )
    
    
    (106
    )
    
    
    899$
    1,435
    
    
    
    2,228
    
    
    
    3,272
  2009
    
    
    2008
    
    
    2007Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Taxes computed at statutory rate
    
    $
    1,614
    
    
    
    34.0
    
    
    
    2,366
    
    
    
    34.0
    
    
    
    3,398
    
    
    
    34.0Increase (decrease) in taxes resulting from:Tax exempt life insurance income (net
of expense)
    
    
    (61
    )
    
    
    (1.3
    )
    
    
    (61
    )
    
    
    (0.9
    )
    
    
    (51
    )
    
    
    (0.5
    )Tax exempt interest income
    
    
    (141
    )
    
    
    (3.0
    )
    
    
    (99
    )
    
    
    (1.4
    )
    
    
    (86
    )
    
    
    (0.9
    )Miscellaneous
    
    
    23
    
    
    
    0.5
    
    
    
    22
    
    
    
    0.3
    
    
    
    11
    
    
    
    0.1$
    1,435
    
    
    
    30.2
    
    
    
    2,228
    
    
    
    32.0
    
    
    
    3,272
    
    
    
    32.7
     17




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 6. DEPOSITS
  2009
    
    
    2008Non-interest bearing
    
    $
    77,614
    
    
    
    80,738Interest bearing demand
    
    
    155,140
    
    
    
    134,341Savings
    
    
    44,007
    
    
    
    41,272Certificates of deposit
    
    
    106,107
    
    
    
    110,894$
    382,868
    
    
    
    367,245
  2010
    
    $
    78,0432011
    
    
    10,0932012
    
    
    3,0742013
    
    
    1,2572014
    
    
    8,780Thereafter
    
    
    4,860$
    106,107
   NOTE 7. LINES OF CREDIT
   18




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 8. EMPLOYEE BENEFIT PLANS
  December 31,2009
    
    
    2008
    
    
    2007Reconciliation of benefit obligation:Projected benefit obligation at beginning of
period
    
    $
    9,662
    
    
    
    8,865
    
    
    
    8,789Service cost
    
    
    320
    *
    
    
    326
    *
    
    
    267Interest cost
    
    
    587
    *
    
    
    632
    *
    
    
    471Actuarial (gain) loss
    
    
    439
    
    
    
    426
    
    
    
    (240
    )Distributions
    
    
    (348)
    *
    
    
    (587)
    *
    
    
    (422
    )Projected benefit obligation at end of period
    
    
    10,660
    
    
    
    9,662
    
    
    
    8,865Accumulated benefit obligation at end of period
    
    
    9,750
    
    
    
    8,599
    
    
    
    7,908Reconciliation of plan assets:Fair value of plan assets at beginning of plan
year
    
    
    7,830
    
    
    
    10,887
    
    
    
    10,185Actual return (loss) on plan assets
    
    
    1,355
    *
    
    
    (2,369)
    *
    
    
    1,227Benefit payments
    
    
    (348)
    *
    
    
    (587)
    *
    
    
    (421
    )Expenses
    
    
    (84
    )
    
    
    (101
    )
    
    
    (104
    )Fair value of plan assets at end of measurement
year
    
    
    8,753
    
    
    
    7,830
    
    
    
    10,887Funded status, included in other assets
    
    
    (1,907
    )
    
    
    (1,832
    )
    
    
    2,022Unrecognized net loss
    
    
    3,965
    
    
    
    4,585
    
    
    
    816Prepaid pension cost
    
    $
    2,058
    
    
    
    2,753
    
    
    
    2,838
 *
    
    Includes adjustments for transition of measurement date from November 1 to December 31, see
note 17.  19




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 8. EMPLOYEE BENEFIT PLANS (continued)
 December 31,2009
    
    
    2008
    
    
    2007Net periodic pension expense:Service cost
    
    $
    320
    
    
    
    279
    
    
    
    267Interest cost
    
    
    587
    
    
    
    542
    
    
    
    471Actual (gain) loss on plan assets
    
    
    (549
    )
    
    
    (747
    )
    
    
    (698
    )Amortization of (gain) loss
    
    
    336
    
    
    
    
    
    
    
    56Net periodic pension cost
    
    $
    694
    
    
    
    74
    
    
    
    96
  2009
    
    
    2008
    
    
    2007Rate assumptions:Discount rate
    
    
    5.77
    %
    
    
    6.23
    %
    
    
    6.26
    %Long term rate of investment return
    
    
    7.75
    %
    
    
    7.00
    %
    
    
    7.00
    %Rate of compensation increase
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    4.00
    %
   Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Asset category:Cash and cash equivalents
    
    $
    105,660
    
    
    
    105,660
    
    
    
    
    
    
    
    Equity securities:US Companies
    
    
    3,290,409
    
    
    
    3,170,649
    
    
    
    119,760
    
    
    
    International companies
    
    
    136,833
    
    
    
    136,833
    
    
    
    
    
    
    
    Fixed income securities:US Government securities
    
    
    54,482
    
    
    
    
    
    
    
    54,482
    
    
    
    Corporate bonds
    
    
    94,213
    
    
    
    
    
    
    
    94,213
    
    
    
    Mutual funds
    
    
    5,071,667
    
    
    
    5,071,667
    
    
    
    
    
    
    
    Total pension plan assets
    
    $
    8,753,264
    
    
    
    8,484,809
    
    
    
    268,455
    
    
    
    
   20




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 8. EMPLOYEE BENEFIT PLANS (continued)
  2010
    
    $
    479,3262011
    
    
    509,9702012
    
    
    535,6412013
    
    
    631,8872014
    
    
    653,2032015-2019
    
    
    4,099,155
  NOTE 9. REGULATORY CAPITAL
      21




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 9. REGULATORY CAPITAL (continued)
  To be WellCapitalized Under theFor Capital
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioDecember 31, 2009:Total Capital (to Risk-weighted Assets)
    
    $
    50,229
    
    
    
    20.18
    %
    
    
    21,659
    
    
    
    8.00
    %
    
    
    27,074
    
    
    
    10.00
    %Tier I Capital (to Risk-weighted Assets)
    
    
    52,160
    
    
    
    19.03
    %
    
    
    10,830
    
    
    
    4.00
    %
    
    
    16,244
    
    
    
    6.00
    %Tier I Leverage Capital
    
    
    52,160
    
    
    
    11.53
    %
    
    
    18,100
    
    
    
    4.00
    %
    
    
    22,624
    
    
    
    5.00
    %December 31, 2008:Total Capital (to Risk-weighted Assets)
    
    
    53,920
    
    
    
    21.87
    %
    
    
    19,720
    
    
    
    8.00
    %
    
    
    24,650
    
    
    
    10.00
    %Tier I Capital (to Risk-weighted Assets)
    
    
    50,838
    
    
    
    20.62
    %
    
    
    9,860
    
    
    
    4.00
    %
    
    
    14,790
    
    
    
    6.00
    %Tier I Leverage Capital
    
    
    50,838
    
    
    
    10.94
    %
    
    
    18,595
    
    
    
    4.00
    %
    
    
    23,244
    
    
    
    5.00
    %
 NOTE 10. RELATED PARTIES
  2009
    
    
    2008
    
    
    2007Loans:Balance, January 1
    
    $
    2,041
    
    
    
    1,620
    
    
    
    1,243New loans
    
    
    2,713
    
    
    
    578
    
    
    
    478Payments
    
    
    (1,809
    )
    
    
    (157
    )
    
    
    (101
    )Balance, December 31
    
    $
    2,945
    
    
    
    2,041
    
    
    
    1,620Deposits:Balance, January 1
    
    $
    3,326
    
    
    
    4,175
    
    
    
    4,162Net change
    
    
    1,686
    
    
    
    (849
    )
    
    
    13Balance, December 31
    
    $
    1,640
    
    
    
    3,326
    
    
    
    4,175
   22




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 10. RELATED PARTIES (continued)
    NOTE 11. FAIR VALUE
  Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets at December 31, 2009:Securities available-for-sale:U.S. Government Agency funds
    
    $
    33,178
    
    
    
    
    
    
    
    33,178
    
    
    
    Equity securities
    
    
    148
    
    
    
    148
    
    
    
    
    
    
    
    Assets at December 31, 2008:Securities available-for-sale:US Treasury securities
    
    $
    1,011
    
    
    
    
    
    
    
    1,011
    
    
    
    US Government Agency funds
    
    
    29,140
    
    
    
    
    
    
    
    29,140
    
    
    
    Equity securities
    
    
    89
    
    
    
    89
    
    
    
    
    
    
    
    
    23




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 11. FAIR VALUE (continued)
  Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets at December 31, 2009:Impaired loans
    
    $
    1,803,326
    
    
    
    
    
    
    
    
    
    
    
    1,803,326Assets at December 31, 2008:Impaired loans
    
    $
    2,412,505
    
    
    
    
    
    
    
    
    
    
    
    2,412,505
   Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets at December 31, 2009:Other real estate owned
    
    $
    2,194,611
    
    
    
    
    
    
    
    
    
    
    
    2,194,611
   Cash and Federal Funds Sold:
  Investment Securities:
  Loans:
   24




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 11. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
 Deposits:
  Federal Funds Purchased and Securities Sold Under Agreements to Repurchase:
   2009
    
    
    2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Value
    
    
    ValueFinancial assets:Cash and federal funds sold
    
    $
    30,774
    
    
    
    30,774
    
    
    
    29,105
    
    
    
    29,105Securities:Available-for-sale
    
    
    33,326
    
    
    
    33,326
    
    
    
    30,240
    
    
    
    30,240Held-to-maturity
    
    
    143,957
    
    
    
    145,326
    
    
    
    146,510
    
    
    
    149,125Non-marketable
    
    
    900
    
    
    
    900
    
    
    
    600
    
    
    
    600Loans, net of allowance
    
    
    207,113
    
    
    
    206,563
    
    
    
    198,383
    
    
    
    201,570Financial liabilities:Deposits
    
    
    382,868
    
    
    
    382,586
    
    
    
    367,245
    
    
    
    370,312Federal funds purchased and securities
sold under agreements to repurchase
    
    
    8,434
    
    
    
    8,434
    
    
    
    10,917
    
    
    
    10,917
 NOTE 12. CONCENTRATIONS OF CREDIT
  NOTE 13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
   25




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (continued)
  2009
    
    
    2008Commitments to extend credit
    
    $
    27,516
    
    
    
    20,370Standby letters of credit
    
    
    257
    
    
    
    192
   Mississippi National Bankers Bank
    
    $
    58
 NOTE 14. COMMITMENTS AND CONTINGENCIES
     26




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 15. RECLASSIFICATION
  NOTE 16. FORMATION OF HOLDING COMPANY
   NOTE 17. PRIOR PERIOD ADJUSTMENT
   Increase in pension obligations during the periodNovember 1, 2007  December 31, 2007
    
    $
    18,550Tax savings
    
    
    (6,307
    )Net prior period adjustment
    
    $
    12,243
 NOTE 18. SUBSEQUENT EVENTS
   27