Exhibit 13
 
 Executive Summary
 U.S. Banker th
   Earnings Highlights
   34




---



##### 



Earning Assets
  Net Interest Income
   .
   35




---



##### 



Interest Rate Sensitivity
    Loans
     36




---



##### 



Allowance for Loan Losses
    Critical Accounting Policies
     37




---



##### 



Asset Quality
   Securities Available for Sale and Investment Securities
   38




---



##### 



Deposits
  Liquidity
   39




---



##### 



Off Balance Sheet Arrangements
  Contractual Obligations
   Risk-Based Capital/Stockholders Equity
   40




---



##### 



Non-Interest Income
   Non-Interest Expense
   Income Taxes
   41




---



##### 



TABLE 1
COMPARATIVE AVERAGE BALANCES  YIELDS AND RATES
  2010
    
    
    2009
    
    
    2008Interest
    
    
    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
    
    $
    215,128
    
    
    $
    14,031
    
    
    
    6.52
    %
    
    $
    208,928
    
    
    $
    14,101
    
    
    
    6.75
    %
    
    $
    199,239
    
    
    $
    14,723
    
    
    
    7.39
    %Securities held to maturity:Taxable
    
    
    122,745
    
    
    
    3,642
    
    
    
    2.97
    %
    
    
    104,730
    
    
    
    4,212
    
    
    
    4.02
    %
    
    
    155,437
    
    
    
    7,422
    
    
    
    4.77
    %Exempt from Federal
income tax
    
    
    23,201
    
    
    
    719
    
    
    
    3.10
    %
    
    
    13,747
    
    
    
    432
    
    
    
    3.14
    %
    
    
    8,347
    
    
    
    293
    
    
    
    3.51
    %Securities available
for sale:Taxable
    
    
    58,397
    
    
    
    1,614
    
    
    
    2.76
    %
    
    
    49,359
    
    
    
    1,394
    
    
    
    2.82
    %
    
    
    23,561
    
    
    
    802
    
    
    
    3.40
    %Other interest earning assets
    
    
    25,285
    
    
    
    51
    
    
    
    0.20
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %Federal funds sold
and securities pur-
chased under agree-
ments to resell
    
    
    8,244
    
    
    
    9
    
    
    
    0.11
    %
    
    
    30,758
    
    
    
    53
    
    
    
    0.17
    %
    
    
    26,248
    
    
    
    617
    
    
    
    2.35
    %Total interest-earning
assets
    
    $
    453,000
    
    
    
    20,066
    
    
    
    4.43
    %
    
    $
    407,522
    
    
    
    20,192
    
    
    
    4.95
    %
    
    $
    412,832
    
    
    
    23,857
    
    
    
    5.78
    %Non interest-earning assets:Cash and due from
banks
    
    
    17,038
    
    
    
    
    
    
    
    
    
    
    
    16,673
    
    
    
    
    
    
    
    
    
    
    
    24,677Bank premises and
equipment
    
    
    16,228
    
    
    
    
    
    
    
    
    
    
    
    17,423
    
    
    
    
    
    
    
    
    
    
    
    16,074Other assets
    
    
    18,425
    
    
    
    48,231
    
    
    
    
    
    
    
    14,807
    
    
    
    
    
    
    
    
    
    
    
    14,947Allowance for possible
loan losses
    
    
    (3,091
    )
    
    
    
    
    
    
    
    
    
    
    (3,056
    )
    
    
    
    
    
    
    
    
    
    
    (2,784
    )Total assets
    
    $
    501,600
    
    
    
    
    
    
    
    
    
    
    $
    453,369
    
    
    
    
    
    
    
    
    
    
    $
    465,746
  42




---



##### 



TABLE 1 (continued)
COMPARATIVE AVERAGE BALANCES  YIELDS AND RATES (continued)
 2010
    
    
    2009
    
    
    2008Interest
    
    
    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
    
    $
    243,902
    
    
    
    1,670
    
    
    
    0.68
    %
    
    $
    139,557
    
    
    
    1,947
    
    
    
    1.40
    %
    
    $
    177,198
    
    
    
    2,804
    
    
    
    1.58
    %Time Deposits
    
    
    109,505
    
    
    
    1,916
    
    
    
    1.75
    %
    
    
    105,666
    
    
    
    3,010
    
    
    
    2.85
    %
    
    
    106,594
    
    
    
    4,008
    
    
    
    3.76
    %Federal funds purchased,
securities sold under
agreements to repur-
chase and other short-
term borrowings
    
    
    12,171
    
    
    
    24
    
    
    
    0.20
    %
    
    
    12,153
    
    
    
    40
    
    
    
    0.33
    %
    
    
    18,766
    
    
    
    325
    
    
    
    1.73
    %Total interest-bearing
liabilities
    
    $
    365,578
    
    
    
    3,610
    
    
    
    0.99
    %
    
    $
    257,376
    
    
    
    4,997
    
    
    
    1.94
    %
    
    $
    302,558
    
    
    
    7,137
    
    
    
    2.36
    %Noninterest-bearing
liabilities:Deposits
    
    
    74,924
    
    
    
    
    
    
    
    
    
    
    
    137,296
    
    
    
    
    
    
    
    
    
    
    
    105,603Other liabilities
    
    
    8,990
    
    
    
    
    
    
    
    
    
    
    
    9,028
    
    
    
    
    
    
    
    
    
    
    
    7,480Total liabilities
    
    
    449,492
    
    
    
    
    
    
    
    
    
    
    
    403,700
    
    
    
    
    
    
    
    
    
    
    
    415,641Stockholders
equity
    
    
    52,108
    
    
    
    
    
    
    
    
    
    
    
    49,669
    
    
    
    
    
    
    
    
    
    
    
    50,105Total liabilities and
stockholders
equity
    
    $
    501,600
    
    
    
    
    
    
    
    
    
    
    $
    453,369
    
    
    
    
    
    
    
    
    
    
    $
    465,746Net interest income/
margin-tax
equivalent
    
    
    
    
    
    $
    16,456
    
    
    
    3.63
    %
    
    
    
    
    
    $
    15,195
    
    
    
    3.73
    %
    
    
    
    
    
    $
    16,720
    
    
    
    4.05
    %Tax equivalent
adjustment:Loans
    
    
    
    
    
    
    148
    
    
    
    
    
    
    
    
    
    
    
    185
    
    
    
    
    
    
    
    
    
    
    
    211Investment
securities
    
    
    
    
    
    
    719
    
    
    
    
    
    
    
    
    
    
    
    432
    
    
    
    
    
    
    
    
    
    
    
    293Securities available
for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherTotal tax equivalent
adjustment
    
    
    
    
    
    
    867
    
    
    
    
    
    
    
    
    
    
    
    617
    
    
    
    
    
    
    
    
    
    
    
    504Net interest
income
    
    
    
    
    
    $
    17,323
    
    
    
    
    
    
    
    
    
    
    $
    15,812
    
    
    
    
    
    
    
    
    
    
    $
    17,224
  43




---



##### 



TABLE 2
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS
  Year ended December 31, 20102010 Compared to 2009
    
    
    2009 Compared to 2008Increase(Decrease) Due To
    
    
    Increase(Decrease) Due ToVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    NetInterest income on:Loans
    
    $
    6,200
    
    
    $
    (70
    )
    
    $
    6,130
    
    
    $
    9,689
    
    
    $
    (622
    )
    
    $
    9,067Investment securities:Taxable
    
    
    18,015
    
    
    
    (570
    )
    
    
    17,445
    
    
    
    (50,707
    )
    
    
    (3,210
    )
    
    
    (53,917
    )Exempt from Federal
income tax
    
    
    9,454
    
    
    
    287
    
    
    
    9,741
    
    
    
    5,400
    
    
    
    139
    
    
    
    5,539Securities available for sale:Taxable
    
    
    9,038
    
    
    
    220
    
    
    
    9,258
    
    
    
    25,798
    
    
    
    592
    
    
    
    26,390Other interest earning assets
    
    
    25,285
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Federal funds sold and
securities purchased
under agreements to
resell
    
    
    (22,514
    )
    
    
    (44
    )
    
    
    (22,558
    )
    
    
    4,510
    
    
    
    (564
    )
    
    
    3,946Total
    
    $
    45,478
    
    
    $
    (126
    )
    
    $
    20,016
    
    
    $
    (5,310
    )
    
    $
    (3,665
    )
    
    $
    (8,975
    )Interest expense on:Int DDAs & Savings deposits
    
    $
    104,345
    
    
    $
    (277
    )
    
    $
    104,068
    
    
    $
    (37,641
    )
    
    $
    (857
    )
    
    $
    (38,498
    )Time deposits
    
    
    3,839
    
    
    
    (1,094
    )
    
    
    2,745
    
    
    
    (928
    )
    
    
    (998
    )
    
    
    (1,926
    )Federal funds purchased,
and securities sold
under agreements to
repurchase
    
    
    18
    
    
    
    (16
    )
    
    
    2
    
    
    
    (6,613
    )
    
    
    (285
    )
    
    
    (6,898
    )Total
    
    $
    108,202
    
    
    $
    (1,387
    )
    
    $
    106,815
    
    
    $
    (45,182
    )
    
    $
    (2,140
    )
    
    $
    (47,322
    )Changes in net interest
income-tax equivalent
    
    $
    (62,724
    )
    
    $
    1,261
    
    
    $
    (86,799
    )
    
    $
    39,872
    
    
    $
    (1,525
    )
    
    $
    38,347
   44




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##### 



TABLE 3
SECURITIES AVAILABLE FOR SALE AND PORTFOLIO SECURITIES
  DECEMBER 31,2010
    
    
    2009
    
    
    2008Securities available for saleU. S. Treasury and other U. S. Government agencies
    
    $
    116,217
    
    
    $
    33,178
    
    
    $
    30,239Obligations of states and political subdivisions
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    Other securities
    
    
    117
    
    
    
    148
    
    
    
    Total securities available for sale
    
    $
    116,334
    
    
    $
    33,326
    
    
    $
    30,239Investment securitiesU. S. Treasury and other U. S. Government agencies
    
    $
    83,157
    
    
    $
    123,670
    
    
    $
    137,196Obligations of states and political subdivisions
    
    
    29,825
    
    
    
    20,288
    
    
    
    9,313Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    Other securities
    
    
    900
    
    
    
    900
    
    
    
    600Total investment securities
    
    
    113,882
    
    
    
    144,858
    
    
    
    147,109Total securities available for sale and investment securities
    
    $
    230,216
    
    
    $
    178,184
    
    
    $
    177,348
  45




---



##### 



TABLE 4
MATURITY DISTRIBUTION AND YIELDS OF SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES
  MaturingAfter
    
    
    
    
    
    
    After 5 YrsWithin
    
    
    
    
    
    
    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
    
    $
    5,003
    
    
    
    3.75
    %
    
    $
    5,001
    
    
    
    1.25
    %
    
    $
    106,213
    
    
    
    2.99
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    116,217Other securities
    
    
    117Total securities
available
for sale
    
    $
    5,120
    
    
    
    3.75
    %
    
    $
    5,001
    
    
    
    1.25
    %
    
    $
    106,213
    
    
    
    2.99
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    116,334Investment securitiesU.S. Treasury
and other U.S.
Government
agencies
    
    $
    4,000
    
    
    
    4.07
    %
    
    $
    49,007
    
    
    
    2.26
    %
    
    $
    30,150
    
    
    
    3.61
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    83,157Obligations of states
and political
subdivisions
    
    
    886
    
    
    
    4.40
    %
    
    
    14,241
    
    
    
    4.13
    %
    
    
    10,672
    
    
    
    4.18
    %
    
    
    4,026
    
    
    
    5.92
    %
    
    
    29,825Other securities
    
    
    900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    900Total investment
securities
    
    $
    5,786
    
    
    
    4.24
    %
    
    $
    63,248
    
    
    
    3.20
    %
    
    $
    40,822
    
    
    
    3.90
    %
    
    $
    4,026
    
    
    
    5.92
    %
    
    $
    113,882Total securities
available for sale
and investment
securities
    
    $
    10,906
    
    
    
    3.93
    %
    
    $
    68,249
    
    
    
    2.73
    %
    
    $
    147,035
    
    
    
    3.04
    %
    
    $
    4,026
    
    
    
    5.92
    %
    
    $
    230,216
   46




---



##### 



TABLE 5
SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY
 SECURITIES AVAILABLE-FOR-SALE
    
    
    SECURITIES HELD-TO-MATURITYDECEMBER 31, 2010
    
    
    DECEMBER 31, 2010GROSS
    
    
    GROSS
    
    
    
    
    
    
    
    
    
    
    GROSS
    
    
    GROSSAMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZED
    
    
    
    
    
    
    AMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZEDCOST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUE
    
    
    COST
    
    
    GAINS
    
    
    LOSSES
    
    
    FAIR VALUEU S GOVERNMENT AND
AGENCY SECURITIES
    
    $
    119,168,000
    
    
    $
    5,000
    
    
    $
    (2,956,000
    )
    
    $
    116,217,000
    
    
    $
    83,157,000
    
    
    $
    1,219,000
    
    
    $
    
    
    
    $
    84,376,000STATE AND MUNICIPAL
SECURITIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,825,000
    
    
    
    587,000
    
    
    
    (399,000
    )
    
    
    30,013,000OTHER SECURITIES
    
    
    72,000
    
    
    
    45,000
    
    
    
    
    
    
    
    117,000
    
    
    
    900,000
    
    
    
    
    
    
    
    
    
    
    
    900,000TOTAL
    
    $
    119,240,000
    
    
    $
    50,000
    
    
    $
    (2,956,000
    )
    
    $
    116,334,000
    
    
    $
    113,882,000
    
    
    $
    1,806,000
    
    
    $
    (399,000
    )
    
    $
    115,289,000SECURITIES AVAILABLE-FOR-SALE
    
    
    SECURITIES HELD-TO-MATURITYDECEMBER 31, 2009
    
    
    DECEMBER 31, 2009GROSS
    
    
    GROSS
    
    
    
    
    
    
    
    
    
    
    GROSS
    
    
    GROSSAMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZED
    
    
    
    
    
    
    AMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZEDCOST
    
    
    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
    )
    
    $
    146,446,000SECURITIES AVAILABLE-FOR-SALE
    
    
    SECURITIES HELD-TO-MATURITYDECEMBER 31, 2008
    
    
    DECEMBER 31, 2008GROSS
    
    
    GROSS
    
    
    
    
    
    
    
    
    
    
    GROSS
    
    
    GROSSAMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZED
    
    
    
    
    
    
    AMORTIZED
    
    
    UNREALIZED
    
    
    UNREALIZEDCOST
    
    
    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
  47




---



##### 



TABLE 6
LOAN PORTFOLIO
  2010
    
    
    2009
    
    
    2008Commercial, Industrial & Governmental
    
    $
    30,880
    
    
    $
    31,325
    
    
    $
    29,800Real Estate
    
    
    159,589
    
    
    
    142,787
    
    
    
    133,001Consumer Loans
    
    
    28,222
    
    
    
    35,492
    
    
    
    37,780Other Loans
    
    
    1,069
    
    
    
    599
    
    
    
    894Total Loans
    
    $
    219,760
    
    
    $
    210,203
    
    
    $
    201,475
 TABLE 7
LOAN MATURITIES & INTEREST RATE SENSITIVITY
  Remaining Maturity Fixed Rate3 months or less
    
    $
    16,763Over 3 months through 12 months
    
    
    35,641Over 1 year through 5 years
    
    
    156,846Over 5 years
    
    
    6,593Total Loans
    
    $
    215,843
  48




---



##### 



TABLE 8
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
  Year ended December 31,2010
    
    
    2009
    
    
    2008Beginning Balance
    
    $
    3,100
    
    
    $
    3,100
    
    
    $
    3,100Charge Offs:Commercial & Industrial
    
    
    147
    
    
    
    83
    
    
    
    78Real Estate
    
    
    336
    
    
    
    296
    
    
    
    68Consumer
    
    
    1,022
    
    
    
    739
    
    
    
    681OtherTotal Charge Offs
    
    
    1,505
    
    
    
    1,118
    
    
    
    827Recoveries:Commercial & Industrial
    
    
    123
    
    
    
    54
    
    
    
    44Real Estate
    
    
    25
    
    
    
    
    
    
    
    6Consumer
    
    
    498
    
    
    
    283
    
    
    
    214OtherTotal Recoveries
    
    
    646
    
    
    
    337
    
    
    
    264Net Charge Offs
    
    
    859
    
    
    
    781
    
    
    
    563Provision for Possible Losses
    
    
    1,027
    
    
    
    781
    
    
    
    563Ending Balance
    
    $
    3,268
    
    
    $
    3,100
    
    
    $
    3,100Total Loans Outstanding
    
    $
    219,760
    
    
    $
    210,203
    
    
    $
    201,475Average daily loans
    
    $
    215,128
    
    
    $
    208,928
    
    
    $
    199,2392010
    
    
    2009
    
    
    2008Percentages: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
    %
    
    
    1.5
    %
    
    
    1.6
    %Allowance for loan losses to nonperforming assets
    
    
    51.2
    %
    
    
    98.5
    %
    
    
    370.4
    %Net charge offs to average loans
    
    
    0.4
    %
    
    
    0.4
    %
    
    
    0.3
    %
  49




---



##### 



TABLE 9
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
  December 31,2010
    
    
    2009
    
    
    2008% Gross
    
    
    Loan Loss
    
    
    % Gross
    
    
    Loan Loss
    
    
    % Gross
    
    
    Loan LossLoans
    
    
    Allowance
    
    
    Loans
    
    
    Allowance
    
    
    Loans
    
    
    AllowanceOutstanding
    
    
    Allocation
    
    
    Outstanding
    
    
    Allocation
    
    
    Outstanding
    
    
    AllocationCommercial & Industrial
    
    
    1.80
    
    
    $
    59
    
    
    
    7.09
    
    
    $
    220
    
    
    
    4.95
    
    
    $
    153Real Estate
    
    
    81.66
    
    
    
    2,669
    
    
    
    61.39
    
    
    
    1,903
    
    
    
    13.38
    
    
    
    415Consumer
    
    
    12.29
    
    
    
    402
    
    
    
    23.20
    
    
    
    719
    
    
    
    43.87
    
    
    
    1,360Other
    
    
    4.25
    
    
    
    139
    
    
    
    7.99
    
    
    
    248
    
    
    
    2.04
    
    
    
    63Unallocated
    
    
    
    
    
    
    
    
    
    
    0.33
    
    
    
    10
    
    
    
    35.76
    
    
    
    1,109100.00
    
    
    $
    3,268
    
    
    
    100.00
    
    
    $
    3,100
    
    
    
    100.00
    
    
    $
    3,100
 TABLE 10
NONPERFORMING ASSETS
  December 31,2010
    
    
    2009
    
    
    2008Non-accrual Loans & Accruing Loans Past Due 90 Days or more
    
    $
    4,106
    
    
    $
    951
    
    
    $
    601Other Real Estate
    
    
    2,276
    
    
    
    2,195
    
    
    
    236$
    6,382
    
    
    $
    3,146
    
    
    $
    837Nonperforming Assets as % of Total Loans
    
    
    2.9
    %
    
    
    1.5
    %
    
    
    0.4
    %Non-accrual Loans & Loans Past Due 90 Days or More
as % of Total Loans
    
    
    1.9
    %
    
    
    0.5
    %
    
    
    0.3
    %
  50




---



##### 



TABLE 11
AVERAGE DEPOSITS
  YEAR ENDED DECEMBER 31,2010
    
    
    2009
    
    
    2008Non-interest bearing deposits
    
    $
    74,924
    
    
    $
    77,927
    
    
    $
    105,603Interest-bearing deposits
    
    
    243,902
    
    
    
    199,147
    
    
    
    177,198Interest-bearing time deposits
    
    
    109,505
    
    
    
    106,107
    
    
    
    106,594Total
    
    $
    428,331
    
    
    $
    383,181
    
    
    $
    389,395
 TABLE 12
TIME DEPOSITS OF $100,000 OR MORE, MATURITY DISTRIBUTION
  Time remaining until maturity3 months or less
    
    $
    12,412Over 3 through 12 months
    
    
    49,877Over 12 months
    
    
    8,345Total
    
    $
    70,634
  51




---



##### 



TABLE 13
SHORT-TERM BORROWINGS
  Daily
    
    
    Average
    
    
    MaximumDecember
    
    
    Average
    
    
    Interest
    
    
    Month-EndBalance
    
    
    Balance
    
    
    Rate*
    
    
    Balance2010Federal funds purchased
and
securities sold under
agreements to repurchase
    
    $
    13,730
    
    
    $
    12,171
    
    
    
    0.20
    %
    
    $
    13,7302009Federal 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
    %
    
    $
    10,917
 *
    
    on daily average balance  52




---



##### 



TABLE 14
INTEREST SENSITIVITY
  0-3
    
    
    4-12
    
    
    1-5
    
    
    Over 5Months
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    TotalAssetsInterest-earning assets:Loans, net of unearned income
    
    $
    20,639
    
    
    $
    35,641
    
    
    $
    156,846
    
    
    $
    6,593
    
    
    $
    219,719Investment securities
    
    
    3,149
    
    
    
    2,637
    
    
    
    63,248
    
    
    
    44,848
    
    
    
    113,882Securities available for sale
    
    
    5,120
    
    
    
    
    
    
    
    5,001
    
    
    
    106,213
    
    
    
    116,334Federal funds sold and securities
purchased under agreements to
resell
    
    
    3,147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,147Total interest-earning assets
    
    
    32,055
    
    
    
    38,278
    
    
    
    225,095
    
    
    
    157,654
    
    
    
    453,082Noninterest-earning assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,314
    
    
    
    50,314Total assets
    
    $
    32,055
    
    
    $
    38,278
    
    
    $
    225,095
    
    
    $
    207,968
    
    
    $
    503,396Liabilities and stockholders equityInterest-bearing liabilities:Int DDAs, MMF, Savings deposits
    
    $
    21,146
    
    
    $
    68,139
    
    
    $
    145,676
    
    
    $
    
    
    
    $
    234,961Time deposits
    
    
    22,102
    
    
    
    74,595
    
    
    
    17,463
    
    
    
    
    
    
    
    114,160Federal funds purchased, and
securities
sold under agreements to repurchase
    
    
    13,730
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,730Total interest-bearing liabilities
    
    
    56,978
    
    
    
    142,734
    
    
    
    163,139
    
    
    
    
    
    
    
    362,851Noninterest-bearing deposits
    
    
    13,534
    
    
    
    39,807
    
    
    
    26,273
    
    
    
    
    
    
    
    79,614Other liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,181
    
    
    
    9,181Stockholders equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,750
    
    
    
    51,750Total liabilities and
stockholders equity
    
    $
    70,513
    
    
    $
    182,541
    
    
    $
    189,411
    
    
    $
    60,931
    
    
    $
    503,396Interest sensitive gap
    
    $
    (38,458
    )
    
    $
    (144,263
    )
    
    $
    35,684
    
    
    $
    147,037Cumulative interest sensitive gap
    
    $
    (38,458
    )
    
    $
    (182,721
    )
    
    $
    (147,037
    )
    
    $
    (0
    )Cumulative interest sensitive gap
as a percent of total assets
    
    
    -7.64
    %
    
    
    -36.30
    %
    
    
    -29.21
    %
    
    
    0.00
    %
  53




---



##### 



TABLE 15
CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES, AND
OFF-BALANCE SHEET ARRANGEMENTS
  PAYMENTS DUE INONE YEAR OR
    
    
    ONE TO
    
    
    THREE TO
    
    
    OVER FIVELESS
    
    
    THREE YEARS
    
    
    FIVE YEARS
    
    
    YEARS
    
    
    TOTALDeposits without a
stated maturity
    
    $
    142,626
    
    
    $
    85,975
    
    
    $
    85,974
    
    
    $
    
    
    
    $
    314,575Consumer certificates
of deposit
    
    
    96,697
    
    
    
    14,479
    
    
    
    2,984
    
    
    
    
    
    
    
    114,160Federal funds borrowed
& repurchase
agreements
    
    
    13,730
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,730Operating leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 COMMITMENTS
  ONE YEAR OR
    
    
    ONE TO
    
    
    THREE TO
    
    
    OVER FIVELESS
    
    
    THREE YEARS
    
    
    FIVE YEARS
    
    
    YEARS
    
    
    TOTALCommitments to extend
credit:Commercial
    
    $
    6,860
    
    
    $
    319
    
    
    $
    
    
    
    $
    
    
    
    $
    7,179Residential real estate
    
    
    2,621
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,621Revolving home equity
and credit card lines
    
    
    3
    
    
    
    720
    
    
    
    
    
    
    
    
    
    
    
    723Other
    
    
    19,642
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,642Standby letters of
credit
    
    $
    858
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    858
 PENSION EXPENSE (Net Periodic Pension Cost)
 2010
    
    
    2010
    
    
    2009
    
    
    2009Annual
    
    
    Quarterly
    
    
    Annual
    
    
    Quarterly(1) Service cost
    
    $
    405,474
    
    
    $
    101,369
    
    
    $
    320,583
    
    
    $
    80,146(2) Interest cost
    
    
    601,251
    
    
    
    150,313
    
    
    
    587,119
    
    
    
    146,780(3) Expected return on assets
    
    
    (659,804
    )
    
    
    (164,951
    )
    
    
    (548,938
    )
    
    
    (137,235
    )(4) Amortization of transition
(asset) or liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5) Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6) Amortization of (gain) or loss
    
    
    271,928
    
    
    
    67,982
    
    
    
    335,659
    
    
    
    83,915(7) Total
    
    $
    618,849
    
    
    $
    154,713
    
    
    $
    694,423
    
    
    $
    173,606
  54




---



##### 



First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(all amounts in thousands, except per share data)For the year ended December 31, 2010:Interest income
    
    $
    4,894
    
    
    
    5,092
    
    
    
    4,974
    
    
    
    5,199Interest expense
    
    
    1,002
    
    
    
    926
    
    
    
    864
    
    
    
    818Net interest income
    
    
    3,892
    
    
    
    4,166
    
    
    
    4,110
    
    
    
    4,381Provision for loan losses
    
    
    132
    
    
    
    244
    
    
    
    209
    
    
    
    442Net interest income after provision for loan losses
    
    
    3,760
    
    
    
    3,922
    
    
    
    3,901
    
    
    
    3,939Non-interest income
    
    
    1,657
    
    
    
    2,064
    
    
    
    2,398
    
    
    
    1,439Non-interest expense
    
    
    4,403
    
    
    
    4,324
    
    
    
    4,213
    
    
    
    3,676Income before income taxes
    
    
    1,014
    
    
    
    1,662
    
    
    
    2,086
    
    
    
    1,702Income taxes
    
    
    246
    
    
    
    506
    
    
    
    636
    
    
    
    160Net income
    
    $
    768
    
    
    
    1,156
    
    
    
    1,450
    
    
    
    1,542Net income per common share
    
    $
    0.58
    
    
    
    0.87
    
    
    
    1.09
    
    
    
    1.16For 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
    
    
    
    0.65
 *
    
    Certain reclassifications have been made to the quarterly data previously disclosed in order
to conform to the 2010 financial statement presentation.  29




---



##### 



2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Interest income
    
    $
    20,158,371
    
    
    
    20,163,187
    
    
    
    23,864,224
    
    
    
    27,890,994
    
    
    
    25,198,321Interest expense
    
    
    3,609,622
    
    
    
    4,997,092
    
    
    
    7,137,225
    
    
    
    9,219,867
    
    
    
    7,014,461Net interest income
    
    
    16,548,749
    
    
    
    15,166,095
    
    
    
    16,726,999
    
    
    
    18,671,127
    
    
    
    18,183,860Provision for loan losses
    
    
    1,027,127
    
    
    
    780,890
    
    
    
    563,178
    
    
    
    560,590
    
    
    
    318,120Net interest income after
provision for loan losses
    
    
    15,521,622
    
    
    
    14,385,205
    
    
    
    16,163,821
    
    
    
    18,110,537
    
    
    
    17,865,740Non-interest income
    
    
    7,558,671
    
    
    
    6,124,791
    
    
    
    6,992,953
    
    
    
    6,130,556
    
    
    
    5,613,823Non-interest expense
    
    
    16,616,635
    
    
    
    15,763,755
    
    
    
    16,199,124
    
    
    
    14,246,174
    
    
    
    13,436,503Income before income taxes
    
    
    6,463,658
    
    
    
    4,746,241
    
    
    
    6,957,650
    
    
    
    9,994,919
    
    
    
    10,043,060Income taxes
    
    
    1,548,000
    
    
    
    1,435,000
    
    
    
    2,228,000
    
    
    
    3,272,000
    
    
    
    3,187,000Net income
    
    $
    4,915,658
    
    
    
    3,311,241
    
    
    
    4,729,650
    
    
    
    6,722,919
    
    
    
    6,856,060Net income per common share
    
    $
    3.70
    
    
    
    2.49
    
    
    
    3.56
    
    
    
    5.05
    
    
    
    5.15Dividends per common share
    
    $
    1.35
    
    
    
    1.35
    
    
    
    1.35
    
    
    
    1.35
    
    
    
    1.25
  30




---



##### 



IN THOUSANDSAS OF DECEMBER 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006BALANCE SHEET:Total assets end of year
    
    $
    503,395
    
    
    
    450,474
    
    
    
    436,283
    
    
    
    459,533
    
    
    
    487,719Loans, net
    
    
    216,470
    
    
    
    207,113
    
    
    
    198,383
    
    
    
    200,812
    
    
    
    196,024Securities
    
    
    230,215
    
    
    
    178,183
    
    
    
    177,350
    
    
    
    183,367
    
    
    
    203,608Deposits
    
    
    428,201
    
    
    
    382,868
    
    
    
    367,245
    
    
    
    383,423
    
    
    
    426,071Stockholders equity
    
    
    52,351
    
    
    
    50,985
    
    
    
    49,061
    
    
    
    48,441
    
    
    
    42,980INCOME STATEMENT:Interest income
    
    
    20,158
    
    
    
    20,163
    
    
    
    23,864
    
    
    
    27,891
    
    
    
    25,198Interest expense
    
    
    3,609
    
    
    
    4,997
    
    
    
    7,137
    
    
    
    9,220
    
    
    
    7,014Net interest income
    
    
    16,549
    
    
    
    15,166
    
    
    
    16,727
    
    
    
    18,671
    
    
    
    18,184Provision for possible loan losses
    
    
    1,027
    
    
    
    781
    
    
    
    563
    
    
    
    561
    
    
    
    318Net interest income after
provision
for possible loan losses
    
    
    15,522
    
    
    
    14,385
    
    
    
    16,164
    
    
    
    18,110
    
    
    
    17,866Non-interest income
    
    
    7,559
    
    
    
    6,125
    
    
    
    6,993
    
    
    
    6,131
    
    
    
    5,614Non-interest expense
    
    
    16,617
    
    
    
    15,764
    
    
    
    16,199
    
    
    
    14,246
    
    
    
    13,437Net income
    
    
    4,916
    
    
    
    3,311
    
    
    
    4,730
    
    
    
    6,723
    
    
    
    6,856Cash dividends declared
    
    
    1,796
    
    
    
    1,796
    
    
    
    1,796
    
    
    
    1,796
    
    
    
    1,663PER SHARE DATA:Net income
    
    
    3.70
    
    
    
    2.49
    
    
    
    3.56
    
    
    
    5.05
    
    
    
    5.15Cash dividends
    
    
    1.35
    
    
    
    1.35
    
    
    
    1.35
    
    
    
    1.35
    
    
    
    1.25Book value
    
    
    39.34
    
    
    
    38.32
    
    
    
    36.88
    
    
    
    36.41
    
    
    
    32.31RATIOS:Return on average equity
    
    
    9.44
    
    
    
    6.67
    
    
    
    9.44
    
    
    
    14.73
    
    
    
    16.60Return on average assets
    
    
    0.97
    
    
    
    0.72
    
    
    
    1.01
    
    
    
    1.35
    
    
    
    1.38Capital to assets
    
    
    10.40
    
    
    
    11.32
    
    
    
    11.25
    
    
    
    10.47
    
    
    
    8.81Dividends declared as percentage
of income
    
    
    36.53
    
    
    
    54.24
    
    
    
    37.97
    
    
    
    26.71
    
    
    
    24.25
  31




---



##### 



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
    
    
    9




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 2010
    
    
    2009ASSETSCash and due from banks
    
    $
    20,010,142
    
    
    
    14,451,113Federal funds sold
    
    
    3,147,000
    
    
    
    16,450,000Securities:Available-for-sale at fair value
    
    
    116,333,500
    
    
    
    33,325,635Held-to-maturity at amortized cost
    
    
    112,981,596
    
    
    
    143,957,199Non-marketable equity securities
    
    
    900,060
    
    
    
    900,060Loans
    
    
    219,779,834
    
    
    
    210,256,672Less:Allowance for loan losses
    
    
    3,268,217
    
    
    
    3,100,000Unearned income
    
    
    41,271
    
    
    
    43,449Loans, net
    
    
    216,470,346
    
    
    
    207,113,223Property and equipment, net
    
    
    15,727,476
    
    
    
    16,778,718Other real estate owned
    
    
    2,275,723
    
    
    
    2,194,611Accrued income
    
    
    2,401,057
    
    
    
    2,499,639Goodwill, net
    
    
    880,398
    
    
    
    880,398Other assets
    
    
    12,267,658
    
    
    
    11,923,289Total assets
    
    $
    503,394,956
    
    
    
    450,473,885LIABILITIESDeposits:Non-interest bearing demand
    
    $
    79,614,176
    
    
    
    77,614,260Interest bearing savings, demand and other time deposits
    
    
    348,586,934
    
    
    
    305,253,753Total deposits
    
    
    428,201,110
    
    
    
    382,868,013Securities sold under agreements to repurchase
    
    
    13,729,528
    
    
    
    8,433,632Accrued expense and other liabilities
    
    
    9,113,767
    
    
    
    8,187,322Total liabilities
    
    
    451,044,405
    
    
    
    399,488,967STOCKHOLDERS 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
    
    
    39,013,928
    
    
    
    35,560,524Accumulated other comprehensive income (loss)
    
    
    (4,489,222
    )
    
    
    (2,401,451
    )Total stockholders equity
    
    
    52,350,551
    
    
    
    50,984,918Total liabilities and stockholders equity
    
    $
    503,394,956
    
    
    
    450,473,885
   3




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 2010
    
    
    2009
    
    
    2008Interest incomeInterest and fees on loans
    
    $
    14,030,856
    
    
    
    14,100,737
    
    
    
    14,722,605Interest on investment securities:Taxable
    
    
    5,255,077
    
    
    
    5,575,643
    
    
    
    8,223,847Exempt from federal and state income tax
    
    
    718,925
    
    
    
    431,597
    
    
    
    293,049Interest on federal funds sold
    
    
    59,957
    
    
    
    53,167
    
    
    
    617,070Other interest income
    
    
    93,556
    
    
    
    2,043
    
    
    
    7,653Total interest income
    
    
    20,158,371
    
    
    
    20,163,187
    
    
    
    23,864,224Interest expenseInterest on deposits
    
    
    3,586,035
    
    
    
    4,957,500
    
    
    
    6,812,012Interest on federal funds purchased and securities
sold under agreements to repurchase
    
    
    23,587
    
    
    
    39,592
    
    
    
    325,213Total interest expense
    
    
    3,609,622
    
    
    
    4,997,092
    
    
    
    7,137,225Net interest income
    
    
    16,548,749
    
    
    
    15,166,095
    
    
    
    16,726,999Provision for loan losses
    
    
    1,027,127
    
    
    
    780,890
    
    
    
    563,178Net interest income after provision for loan losses
    
    
    15,521,622
    
    
    
    14,385,205
    
    
    
    16,163,821Non-interest incomeService charges on deposit accounts
    
    
    4,452,383
    
    
    
    4,155,103
    
    
    
    4,331,617Other service charges, commissions and fees
    
    
    1,085,112
    
    
    
    1,044,066
    
    
    
    1,032,825Gain on sale of other real estate owned
    
    
    955,615
    
    
    
    47,279
    
    
    
    146,371Gain on sale of securities
    
    
    365,401
    
    
    
    
    
    
    
    117,392Other
    
    
    700,160
    
    
    
    925,622
    
    
    
    1,511,119Total non-interest income
    
    
    7,558,671
    
    
    
    6,172,070
    
    
    
    7,139,324Non-interest expenseSalaries and employee benefits
    
    
    7,677,966
    
    
    
    7,654,312
    
    
    
    6,806,340Occupancy expense
    
    
    2,985,133
    
    
    
    3,205,066
    
    
    
    2,737,432Services and fees expense
    
    
    2,095,508
    
    
    
    1,430,040
    
    
    
    1,314,581Other
    
    
    3,858,028
    
    
    
    3,521,616
    
    
    
    5,487,142Total non-interest expense
    
    
    16,616,635
    
    
    
    15,811,034
    
    
    
    16,345,495Income before income taxes
    
    
    6,463,658
    
    
    
    4,746,241
    
    
    
    6,957,650Income taxes
    
    
    1,548,000
    
    
    
    1,435,000
    
    
    
    2,228,000Net income
    
    $
    4,915,658
    
    
    
    3,311,241
    
    
    
    4,729,650Net income per common share
    
    $
    3.70
    
    
    
    2.49
    
    
    
    3.56
   4




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 2010
    
    
    2009
    
    
    2008Net income
    
    $
    4,915,658
    
    
    
    3,311,241
    
    
    
    4,729,650Other comprehensive income, net of tax:Unrealized gain (loss) on securities
available-for-sale
    
    
    (2,133,264
    )
    
    
    (327
    )
    
    
    185,862Unrealized gain (loss) on pension plan assets
    
    
    45,493
    
    
    
    409,082
    
    
    
    (2,499,326
    )Comprehensive income
    
    $
    2,827,887
    
    
    
    3,719,996
    
    
    
    2,416,186
   5




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 AccumulatedCommon Stock
    
    
    
    
    
    
    
    
    
    
    OtherShares
    
    
    
    
    
    
    
    
    
    
    Retained
    
    
    ComprehensiveIssued
    
    
    Amount
    
    
    Surplus
    
    
    Earnings
    
    
    Income (Loss)Balance, January 1, 2008
    
    
    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, 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, net of
taxes of $210,739
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    409,082Balance, December 31, 2009, as
originally reported
    
    
    1,330,338
    
    
    
    3,325,845
    
    
    
    14,500,000
    
    
    
    35,560,524
    
    
    
    (2,401,451
    )Prior period adjustment of
$333,702 (see Note 17)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333,702
    
    
    
    Balance,
December 31, 2009, as restated
    
    
    1,330,338
    
    
    
    3,325,845
    
    
    
    14,500,000
    
    
    
    35,894,226
    
    
    
    (2,401,451
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,915,658
    
    
    
    Cash dividends, $1.35 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,795,956
    )
    
    
    Change in unrealized gain
(loss) on securities
available-for-sale, net of
taxes of ($1,098,954)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,133,264
    )Change in unrealized gain
(loss) on pension plan, net of
taxes of $23,435
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,493Balance, December 31, 2010
    
    
    1,330,338
    
    
    $
    3,325,845
    
    
    
    14,500,000
    
    
    
    39,013,928
    
    
    
    (4,489,222
    )
   6




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 2010
    
    
    2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    4,915,658
    
    
    
    3,311,241
    
    
    
    4,729,650Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    1,395,506
    
    
    
    1,446,905
    
    
    
    1,214,757Provision for loan losses
    
    
    1,027,127
    
    
    
    780,890
    
    
    
    561,127Writedowns on real estate owned
    
    
    
    
    
    
    80
    
    
    
    55,947(Accretion) amortization of securities premium/discount
    
    
    122,445
    
    
    
    2,053
    
    
    
    69,178(Gain) on sale of assets
    
    
    (962,365
    )
    
    
    (47,279
    )
    
    
    (356,283
    )(Gain) on sale of securities
    
    
    (365,401
    )
    
    
    
    
    
    
    (117,392
    )Noncash charitable donation
    
    
    
    
    
    
    
    
    
    
    310,000Decrease in accrued income
    
    
    98,582
    
    
    
    586,894
    
    
    
    235,989Reinvested earnings on securities
    
    
    
    
    
    
    
    
    
    
    (61,649
    )Decrease in interest payable
    
    
    (108,596
    )
    
    
    (413,805
    )
    
    
    (140,185
    )Other, net
    
    
    1,835,120
    
    
    
    (2,479,986
    )
    
    
    (344,723
    )Net cash provided by operating activities
    
    
    7,958,076
    
    
    
    3,186,993
    
    
    
    6,156,416CASH FLOWS FROM INVESTING ACTIVITIES:Net (increase) decrease in federal funds sold and securities
purchased under agreements to resell
    
    
    13,303,000
    
    
    
    (5,411,000
    )
    
    
    15,438,000Proceeds from sales and maturities of securities available-for-sale
    
    
    100,232,140
    
    
    
    51,065,000
    
    
    
    43,045,413Purchases of securities available-for-sale
    
    
    (186,093,370
    )
    
    
    (54,156,709
    )
    
    
    (33,919,423
    )Proceeds from maturities of securities held-to-maturity
    
    
    133,145,000
    
    
    
    126,792,593
    
    
    
    91,075,741Purchases of securities held-to-maturity
    
    
    (102,305,295
    )
    
    
    (124,236,466
    )
    
    
    (93,792,767
    )Purchase of non-marketable equity securities
    
    
    
    
    
    
    (300,000
    )
    
    
    Net (increase) decrease in loans
    
    
    (10,783,494
    )
    
    
    (11,644,680
    )
    
    
    1,983,719Purchases of property and equipment
    
    
    (113,037
    )
    
    
    (475,507
    )
    
    
    (4,168,409
    )Proceeds from sale of assets
    
    
    1,382,972
    
    
    
    221,400
    
    
    
    140,000Net cash provided (used) by investing activities
    
    
    (51,232,084
    )
    
    
    (18,145,369
    )
    
    
    19,802,274CASH FLOWS FROM FINANCING ACTIVITIES:Net increase (decrease) in deposits
    
    
    45,333,097
    
    
    
    15,622,900
    
    
    
    (16,263,799
    )Net increase (decrease) in federal funds purchased and securities
sold under agreements to repurchase
    
    
    5,295,896
    
    
    
    (2,483,335
    )
    
    
    (10,101,519
    )Dividends paid
    
    
    (1,795,956
    )
    
    
    (1,795,957
    )
    
    
    (1,795,956
    )Net cash provided (used) by financing activities
    
    
    48,833,037
    
    
    
    11,343,608
    
    
    
    (28,161,274
    )Net increase (decrease) in cash and due from banks
    
    
    5,559,029
    
    
    
    (3,614,768
    )
    
    
    (2,202,584
    )Cash and due from banks, beginning
    
    
    14,451,113
    
    
    
    18,065,881
    
    
    
    20,268,465Cash and due from banks, ending
    
    $
    20,010,142
    
    
    
    14,451,113
    
    
    
    18,065,881
   7




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 2010
    
    
    2009
    
    
    2008Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    3,718,218
    
    
    
    5,410,897
    
    
    
    7,277,410Income taxes
    
    
    900,000
    
    
    
    1,680,000
    
    
    
    2,525,000
   8




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations:
   Basis of Consolidation:
  Use of Estimates:
      9




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Cash and Cash Equivalents:
  Securities:
    Loans:
    10




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Loans (continued):
   Allowance for Loan Losses:
    Property and Equipment, Net:
   11




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Other Real Estate Owned:
  Goodwill:
  Income Taxes:
  Comprehensive Income:
   12




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 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, 2010
    
    
    December 31, 2009Gross
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-sale:US Government
Agency Funds
    
    $
    119,168
    
    
    
    5
    
    
    
    (2,956
    )
    
    
    116,217
    
    
    
    32,927
    
    
    
    278
    
    
    
    (27
    )
    
    
    33,178Equity securities
    
    
    72
    
    
    
    45
    
    
    
    
    
    
    
    117
    
    
    
    72
    
    
    
    76
    
    
    
    
    
    
    
    148Total
    
    $
    119,240
    
    
    
    50
    
    
    
    (2,956
    )
    
    
    116,334
    
    
    
    32,999
    
    
    
    354
    
    
    
    (27
    )
    
    
    33,326Held-to-maturity:US Government
Agency Funds
    
    $
    83,157
    
    
    
    1,219
    
    
    
    
    
    
    
    84,376
    
    
    
    123,670
    
    
    
    1,043
    
    
    
    (240
    )
    
    
    124,473State, county and
municipal
securities
    
    
    29,825
    
    
    
    587
    
    
    
    (399
    )
    
    
    30,013
    
    
    
    20,287
    
    
    
    630
    
    
    
    (64
    )
    
    
    20,853Total
    
    $
    112,982
    
    
    
    1,806
    
    
    
    (399
    )
    
    
    114,389
    
    
    
    143,957
    
    
    
    1,673
    
    
    
    (304
    )
    
    
    145,326
  13




---



##### 



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
    
    $
    72
    
    
    
    117
    
    
    
    4,887
    
    
    
    4,954After one year through five years
    
    
    5,000
    
    
    
    5,001
    
    
    
    63,248
    
    
    
    64,536After five years through ten years
    
    
    114,168
    
    
    
    111,216
    
    
    
    36,795
    
    
    
    37,317Greater than ten years
    
    
    
    
    
    
    
    
    
    
    8,052
    
    
    
    7,582$
    119,240
    
    
    
    116,334
    
    
    
    112,982
    
    
    
    114,389
      Less Than 12 Months
    
    
    12 Months or Greater
    
    
    TotalGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesDecember 31, 2010:US Government Agency
Funds
    
    $
    101,212
    
    
    
    (2,956
    )
    
    
    
    
    
    
    
    
    
    
    101,212
    
    
    
    (2,956
    )State, county and
municipal securities
    
    
    9,786
    
    
    
    (399
    )
    
    
    
    
    
    
    
    
    
    
    9,786
    
    
    
    (399
    )Total
    
    $
    110,998
    
    
    
    (3,355
    )
    
    
    
    
    
    
    
    
    
    
    110,998
    
    
    
    (3,355
    )
  14




---



##### 



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, 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
    )
  %
   2010
    
    
    2009Beginning balance
    
    $
    900,060
    
    
    
    600,060Purchases of non-marketable
equity securities
    
    
    
    
    
    
    300,000Ending balance
    
    $
    900,060
    
    
    
    900,060
  15




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 3. LOANS
  2010
    
    
    2009Loans secured by real estate:Construction
    
    $
    28,111
    
    
    
    26,933Farmland
    
    
    1,708
    
    
    
    1,517Revolving, open-end securedby 1-4 family residential property
    
    
    1,021
    
    
    
    1,3811-4 family residential properties
    
    
    43,568
    
    
    
    42,352Multifamily (5 or more) residential
properties
    
    
    398
    
    
    
    77Nonfarm nonresidential properties
    
    
    83,461
    
    
    
    70,527Commercial and industrial
    
    
    27,210
    
    
    
    26,743Loans to individuals for household, family
and other personal expenditures
    
    
    29,544
    
    
    
    35,535Municipal and government
    
    
    3,670
    
    
    
    4,582Other
    
    
    1,089
    
    
    
    610$
    219,780
    
    
    
    210,257
  2010
    
    
    2009
    
    
    2008Balance, January 1,
    
    $
    3,100
    
    
    
    3,100
    
    
    
    3,100Recoveries
    
    
    646
    
    
    
    337
    
    
    
    264Loans charged off
    
    
    (1,505
    )
    
    
    (1,118
    )
    
    
    (827
    )Provision for loan losses
    
    
    1,027
    
    
    
    781
    
    
    
    563Balance, December 31,
    
    $
    3,268
    
    
    
    3,100
    
    
    
    3,100
    16




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 3. LOANS (continued)
  NOTE 4. PROPERTY AND EQUIPMENT NET
  2010
    
    
    2009Land and buildings
    
    $
    19,389
    
    
    
    19,148Furniture and equipment
    
    
    5,179
    
    
    
    5,10424,568
    
    
    
    24,252Accumulated depreciation
    
    
    (8,841
    )
    
    
    (7,474
    )Net property and equipment
    
    $
    15,727
    
    
    
    16,778
  NOTE 5. INCOME TAXES
  2010
    
    
    2009Deferred tax assets:Provision for loan losses not currently deductible
    
    $
    890
    
    
    
    862Write-down of other real estate not currently deductible
    
    
    224
    
    
    
    113Deferred compensation
    
    
    1,655
    
    
    
    1,592Loan origination costs not currently deductible
    
    
    318
    
    
    
    329Accrued interest on non-accrual loans
    
    
    91
    
    
    
    281Underfunded pension
    
    
    835
    
    
    
    649Losses on defined benefit plan assets
    
    
    1,325
    
    
    
    1,348Unrealized gains on securities available-for-sale
    
    
    988
    
    
    
    Gross deferred tax asset
    
    
    6,326
    
    
    
    5,174Deferred tax liabilities:Book basis of fixed assets greater than tax
    
    
    (2,851
    )
    
    
    (2,847
    )Discount accretion
    
    
    (10
    )
    
    
    (16
    )Unrealized gains on securities available-for-sale
    
    
    
    
    
    
    (111
    )Gross deferred tax liability
    
    
    (2,861
    )
    
    
    (2,974
    )Net deferred tax asset
    
    $
    3,465
    
    
    
    2,200
  17




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 5. INCOME TAXES (continued)
   2010
    
    
    2009
    
    
    2008Currently payable
    
    $
    1,946
    
    
    
    1,519
    
    
    
    2,334Deferred
    
    
    (398
    )
    
    
    (84
    )
    
    
    (106
    )Total income taxes
    
    $
    1,548
    
    
    
    1,435
    
    
    
    2,228
  2010
    
    
    2009
    
    
    2008Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Taxes computed at statutory rate
    
    $
    2,198
    
    
    
    34.0
    
    
    
    1,614
    
    
    
    34.0
    
    
    
    2,366
    
    
    
    34.0Increase (decrease) in taxes resulting from:Tax exempt life insurance income (net
of expense)
    
    
    (151
    )
    
    
    (2.3
    )
    
    
    (61
    )
    
    
    (1.3
    )
    
    
    (61
    )
    
    
    (0.9
    )Tax exempt interest income
    
    
    (300
    )
    
    
    (4.6
    )
    
    
    (141
    )
    
    
    (3.0
    )
    
    
    (99
    )
    
    
    (1.4
    )Tax credits available
    
    
    (181
    )
    
    
    (2.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Miscellaneous permanent differences
    
    
    (18
    )
    
    
    (0.3
    )
    
    
    23
    
    
    
    0.5
    
    
    
    22
    
    
    
    0.3$
    1,548
    
    
    
    24.0
    
    
    
    1,435
    
    
    
    30.2
    
    
    
    2,228
    
    
    
    32.0
    18




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 5. INCOME TAXES (continued)
  NOTE 6. DEPOSITS
  2010
    
    
    2009Non-interest bearing demand
    
    $
    79,614
    
    
    
    77,614Interest bearing demand
    
    
    190,373
    
    
    
    155,140Savings
    
    
    44,056
    
    
    
    44,007Certificates of deposit
    
    
    114,158
    
    
    
    106,107Total deposits
    
    $
    428,201
    
    
    
    382,868
  2011
    
    $
    84,8652012
    
    
    12,1492013
    
    
    2,8032014
    
    
    1,1362015
    
    
    8,156Thereafter
    
    
    5,049$
    114,158
   NOTE 7. LINES OF CREDIT
   19




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 8. EMPLOYEE BENEFIT PLANS
  December 31,2010
    
    
    2009
    
    
    2008Reconciliation of benefit obligation:Projected benefit obligation at beginning of
period
    
    $
    10,660
    
    
    
    9,662
    
    
    
    8,865Service cost
    
    
    405
    
    
    
    320
    
    
    
    326Interest cost
    
    
    601
    
    
    
    587
    
    
    
    632Actuarial (gain) loss
    
    
    519
    
    
    
    439
    
    
    
    426Distributions
    
    
    (391
    )
    
    
    (348
    )
    
    
    (587
    )Projected benefit obligation at end of period
    
    
    11,794
    
    
    
    10,660
    
    
    
    9,662Reconciliation of plan assets:Fair value of plan assets at beginning of period
    
    
    8,753
    
    
    
    7,830
    
    
    
    10,887Actual return (loss) on plan assets
    
    
    1,082
    
    
    
    1,355
    
    
    
    (2,369
    )Benefit payments
    
    
    (391
    )
    
    
    (348
    )
    
    
    (587
    )Expenses
    
    
    (107
    )
    
    
    (84
    )
    
    
    (101
    )Fair value of plan assets at end of period
    
    
    9,337
    
    
    
    8,753
    
    
    
    7,830Funded status, included in other liabilities
    
    $
    (2,457
    )
    
    
    (1,907
    )
    
    
    (1,832
    )Amounts recognized in accumulated other
comprehensive income (loss):Net loss
    
    $
    3,896
    
    
    
    3,965
    
    
    
    4,585Net periodic pension expense:Service cost
    
    $
    406
    
    
    
    320
    
    
    
    279Interest cost
    
    
    601
    
    
    
    587
    
    
    
    542Actual (gain) loss on plan assets
    
    
    (660
    )
    
    
    (549
    )
    
    
    (747
    )Amortization of (gain) loss
    
    
    272
    
    
    
    336
    
    
    
    Net periodic pension cost
    
    $
    619
    
    
    
    694
    
    
    
    74
   20




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 8. EMPLOYEE BENEFIT PLANS (continued)
 2010
    
    
    2009
    
    
    2008Rate assumptions:Discount rate
    
    
    5.19
    %
    
    
    5.77
    %
    
    
    6.23
    %Long term rate of investment return
    
    
    7.75
    %
    
    
    7.75
    %
    
    
    7.00
    %Rate of compensation increase
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    4.00
    %
   Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3December 31, 2010:Asset category:Cash and cash equivalents
    
    $
    161,320
    
    
    
    161,320
    
    
    
    
    
    
    
    Equity securities:US Companies
    
    
    3,709,080
    
    
    
    3,550,897
    
    
    
    158,183
    
    
    
    International companies
    
    
    110,115
    
    
    
    110,115
    
    
    
    
    
    
    
    Fixed income securities:US Government securities
    
    
    61,534
    
    
    
    
    
    
    
    61,534
    
    
    
    Corporate bonds
    
    
    95,087
    
    
    
    
    
    
    
    95,087
    
    
    
    Mutual funds
    
    
    5,200,324
    
    
    
    5,200,324
    
    
    
    
    
    
    
    Total pension plan assets
    
    $
    9,337,460
    
    
    
    9,022,656
    
    
    
    314,804
    
    
    
    
 Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3December 31, 2009:Asset 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
    
    
    
    
   21




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 8. EMPLOYEE BENEFIT PLANS (continued)
  2011
    
    $
    542,9222012
    
    
    570,5422013
    
    
    665,8152014
    
    
    686,0222015
    
    
    801,8672016-2020
    
    
    4,408,028
  NOTE 9. REGULATORY CAPITAL
      22




---



##### 



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, 2010:Total Capital (to Risk-weighted Assets)
    
    $
    58,744
    
    
    
    19.85
    %
    
    
    23,669
    
    
    
    8.00
    %
    
    
    29,587
    
    
    
    10.00
    %Tier I Capital (to Risk-weighted Assets)
    
    
    55,359
    
    
    
    18.71
    %
    
    
    11,835
    
    
    
    4.00
    %
    
    
    17,752
    
    
    
    6.00
    %Tier I Leverage Capital
    
    
    55,359
    
    
    
    11.06
    %
    
    
    15,022
    
    
    
    3.00
    %
    
    
    25,036
    
    
    
    5.00
    %December 31, 2009:Total Capital (to Risk-weighted Assets)
    
    
    55,512
    
    
    
    20.50
    %
    
    
    21,659
    
    
    
    8.00
    %
    
    
    27,040
    
    
    
    10.00
    %Tier I Capital (to Risk-weighted Assets)
    
    
    52,127
    
    
    
    19.25
    %
    
    
    10,830
    
    
    
    4.00
    %
    
    
    16,244
    
    
    
    6.00
    %Tier I Leverage Capital
    
    
    52,127
    
    
    
    11.51
    %
    
    
    13,574
    
    
    
    3.00
    %
    
    
    22,624
    
    
    
    5.00
    %
 NOTE 10. RELATED PARTIES
  2010
    
    
    2009
    
    
    2008Loans:Balance, January 1
    
    $
    2,945
    
    
    
    2,041
    
    
    
    1,620New loans
    
    
    704
    
    
    
    2,713
    
    
    
    578Payments
    
    
    (958
    )
    
    
    (1,809
    )
    
    
    (157
    )Balance, December 31
    
    $
    2,691
    
    
    
    2,945
    
    
    
    2,041Deposits:Balance, January 1
    
    $
    5,012
    
    
    
    3,326
    
    
    
    4,175Net change
    
    
    106
    
    
    
    1,686
    
    
    
    (849
    )Balance, December 31
    
    $
    5,118
    
    
    
    5,012
    
    
    
    3,326
   23




---



##### 



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, 2010:Securities available-for-sale:U.S. Government Agency funds
    
    $
    116,217
    
    
    
    
    
    
    
    116,217
    
    
    
    Equity securities
    
    
    117
    
    
    
    117
    
    
    
    
    
    
    
    Assets at December 31, 2009:Securities available-for-sale:US Government Agency funds
    
    $
    33,178
    
    
    
    
    
    
    
    33,178
    
    
    
    Equity securities
    
    
    148
    
    
    
    148
    
    
    
    
    
    
    
    
    24




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 11. FAIR VALUE (continued)
  Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets at December 31, 2010:Impaired loans
    
    $
    4,110,547
    
    
    
    
    
    
    
    
    
    
    
    4,110,547Assets at December 31, 2009:Impaired loans
    
    $
    2,862,207
    
    
    
    
    
    
    
    
    
    
    
    2,862,207
   Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets at December 31, 2010:Other real estate owned
    
    $
    2,275,723
    
    
    
    
    
    
    
    
    
    
    
    2,275,723Assets at December 31, 2009:Other real estate owned
    
    $
    2,194,611
    
    
    
    
    
    
    
    
    
    
    
    2,194,611
   Cash and Federal Funds Sold:
  Investment Securities:
  Loans:
   25




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 11. FAIR VALUE (continued)
 Deposits:
  Federal Funds Purchased and Securities Sold Under Agreements to Repurchase:
   2010
    
    
    2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Value
    
    
    ValueFinancial assets:Cash and federal funds sold
    
    $
    23,157
    
    
    
    23,157
    
    
    
    30,901
    
    
    
    30,901Securities:Available-for-sale
    
    
    116,334
    
    
    
    116,334
    
    
    
    33,326
    
    
    
    33,326Held-to-maturity
    
    
    112,982
    
    
    
    114,389
    
    
    
    143,957
    
    
    
    145,326Non-marketable
    
    
    900
    
    
    
    900
    
    
    
    900
    
    
    
    900Loans, net of allowance
    
    
    216,470
    
    
    
    
    
    
    
    207,113
    
    
    
    206,563Financial liabilities:Deposits
    
    
    428,201
    
    
    
    
    
    
    
    382,868
    
    
    
    382,586Federal funds purchased and securities
sold under agreements to repurchase
    
    
    13,730
    
    
    
    13,730
    
    
    
    8,434
    
    
    
    8,434
 NOTE 12. CONCENTRATIONS OF CREDIT
  NOTE 13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
   26




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (continued)
  2010
    
    
    2009Commitments to extend credit
    
    $
    30,164
    
    
    
    27,516Standby letters of credit
    
    
    858
    
    
    
    257
   Mississippi National Bankers Bank
    
    $
    108
 NOTE 14. COMMITMENTS AND CONTINGENCIES
     27




---



##### 



MERCHANTS & MARINE BANCORP, INC. AND SUBSIDIARY
 NOTE 15. RECLASSIFICATION
  NOTE 16. FORMATION OF HOLDING COMPANY
  NOTE 17. PRIOR PERIOD ADJUSTMENT
  Retained earnings at December 31, 2009, as originally presented
    
    $
    35,560,524To correct valuation of other real estate owned
    
    
    109,225To correct valuation of bank property
    
    
    224,477Total prior period adjustment
    
    
    333,702Retained earnings at December 31, 2009, as restated
    
    $
    35,894,226
 NOTE 18. SUBSEQUENT EVENTS
   28