UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF
    1934
  For the fiscal year ended December 31, 2009
  Commission file number 0-26123
  ONLINE RESOURCES
    CORPORATION
 (Exact name of registrant as
    specified in its charter)
  Delaware

52-1623052(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification Number)4795 Meadow Wood Lane
    Chantilly, Virginia(Address of principal
    executive offices)

20151(Zip
    code)  (703) 653-3100
 (Registrants telephone
    number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
 None
  Securities registered pursuant to Section 12(g) of the
    Act:
  Title of Each
    Class
 Common Stock, $0.0001 par value per share
  o þ
  o þ
  þ o
  Regulation S-T þ o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K: Form 10-K




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##### 





ONLINE
    RESOURCES CORPORATION
  ANNUAL
    REPORT ON
    FORM 10-K
  TABLE OF
    CONTENTS
  PagePART IItem 1:


Business Overview


4Item 1A:


Risk Factors


17Item 2:


Properties


27Item 3:


Legal Proceedings


27Item 4:


Submission of Matters to a Vote of Security Holders


27PART IIItem 5:


Market for the Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities


28Item 6:


Selected Consolidated Financial Data


28Item 7:


Managements Discussion and Analysis of Financial Condition
    and Results of Operations


29Item 7A:


Quantitative and Qualitative Disclosures About Market Risk


46Item 8:


Consolidated Financial Statements and Supplementary Data


48Index to Consolidated Financial Statements


48Item 9:


Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure


83Item 9A:


Controls and Procedures


83Item 9B:


Other Information


84PART IIIItem 10:


Directors and Executive Officers of the Company


85Item 11:


Executive Compensation


85Item 12:


Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholders Matters


85Item 13:


Certain Relationships and Related Transactions


85Item 14:


Principal Accountant Fees and Services


85PART IVItem 15:


Exhibits and Financial Statement Schedules


86Signatures


88  2




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SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
  Form 10-K 10-K.
  Form 10-K.
 3




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##### 



PART I  Item 1.
    Business
    Overview  Business
    Overview
  e-Commerce
  
    Banking Services: For banks, credit unions and other
    depository financial institutions, we provide electronic bill
    payment and online banking services. Our electronic bill payment
    services provide customers a cost effective solution to process
    their transactions. Our online banking products include an
    integrated suite of web-based account presentation, payment,
    relationship management and professional services. Our solutions
    give our clients an enhanced experience for their users, the
    marketing processes to drive Internet channel adoption, and
    innovative products and services that help them maintain their
    competitive position. With Online Resources services, a
    financial institutions web site enables its business and
    consumer end-users to consolidate information from multiple
    accounts and make bill payments to billers, merchants, or
    individuals, via their financial institutions web site.
    e-Commerce
    Services:For billers, card issuers and credit providers, we
    provide web- and phone-based account presentation, payment,
    relationship management and professional services. We enable
    consumer and business end-users to manage their account or make
    a payment to a single card issuer, credit provider or biller.
    For billers, we provide a full suite of payment options,
    including consolidation of incoming payments made by credit
    cards, signature debit cards, ACH and PIN-less debit via
    multiple access points such as online, interactive voice
    response, or IVR, and call center customer service
    representatives. The suite also includes bill presentment,
    convenience payments, flexible payment scheduling and other
    advanced payment and collection services.  e-Commerce
       4




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##### 



Our
    Industry
  US Online Banking: Forecast 2009 to 2014 US Online
    Bill Payment Forecast: 2009 To 2014
    
    The Boston Consulting Group, a financial research and advisory
    firm, found in 2003 that online bill payment customers of
    depository financial institutions were up to 40 percent
    more profitable at the end of a
    12-month
    period compared to those customers who did not pay bills online,
    because the online bill payment customers:  
    generate significantly higher revenues than offline customers by
    using more banking products and services and maintaining higher
    account balances;
    cost less to serve because online users tend to utilize more
    self-service functions and therefore interact with the more
    costly retail branch and call center service channels less
    frequently than offline customers; and
    are less likely to move their accounts to other financial
    institutions than offline customers.  
    Bank of Americas 2002 control group study found that
    online bill payers were 31% more profitable for the bank than
    non-bill payers. Bank of America also concluded that online bill
    payers were less likely to move their accounts to other banks.
    Consequently, Bank of America and many other large financial
    institutions eliminated their monthly end-user fees for online
    bill payment and launched aggressive marketing campaigns to
    promote adoption of the online channel. A growing majority of
    smaller financial institutions have also eliminated online bill
    payment fees and responded with similar marketing campaigns.
    This practice has since become standard practice for financial
    institutions, which is positive for companies like Online
    Resources because the elimination of online bill payment fees
    has generated significant increase in end-user adoption, more
    than offsetting any volume pricing discounts we may extend to
    our clients.     5




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##### 



July 2009 How US Credit
    Card Customers Use and Rate Issuers Secure Sites
      
    managing multiple technology vendors to provide account
    presentation, payments and other services;
    reconciling multiple payment methods and sources in increasingly
    shortened timeframes;
    understanding how to evaluate and enhance channel
    profitability; and
    maximizing the value of the channel by increasing adoption and
    usage.    Our
    Services
      
   and/or
   6




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##### 



Account Presentation Services.
  
    view transaction histories and account balances;
    review and retrieve current and past statements;
    transfer funds and balances;
    initiate or schedule either one-time or recurring payments;
    access and maintain account information; and
    perform many self-service administrative functions.  Money HQ sm person-to-person ®
  Payments Services. same-day, Money HQ sm
     7




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##### 



Relationship Management Services. e-mail
    Professional Services.
  Third-Party Services.
  
    fully integrated bill payment and account retrieval through
    Intuits
    Quicken®;
    check ordering available through Harland, Deluxe, Clarke
    American or Liberty;
    inter-institution funds transfer and account aggregation
    provided by CashEdge;
    check imaging provided by AFS and its service bureaus, Bisys,
    Fiserv, FSI/ Vsoft, Empire Corporate, Intercept, Fidelity,
    Corporate One, Eascorp, MICR Resource Management (MRM), Synergy,
    Transdata and Mid-Atlantic; and
    electronic statement through BIT Statement, COWWW, BDI
    e-statement,
    Datamail, Digital Mailer, InfoImage, Reed Data, XDI and Bankware.  Our
    Solution
   8




---



##### 



Our Technology Infrastructure. one-by-one
      
 9




---



##### 



Our Operating and Technical Expertise.
  Our Integrated Marketing Process.
  Our Professional and Support Services.
  Our
    Strategy
    Continue to Grow Our Client Bases.
  Increase Adoption Rates.
  Provide Additional Products and Services to Our Installed
    Client Base.
  Maintain and Leverage Technological
    Leadership.
 10




---



##### 



Pursue Strategic Acquisitions.
  Leverage Growth Over Our Relatively Fixed Cost
    Base.
  Sales and
    Marketing
          Our
    Technology
    
    front-end servers proprietary and commercial
    communications software and hardware providing Internet and
    private communications access to our platform for end-users;
    middleware proprietary and commercial
    software and hardware used to integrate end-user and financial
    data and to process financial transactions;
    back-end systems databases and proprietary
    software which support our account presentation and payments
    services; 11




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##### 




    support systems proprietary and commercial
    systems supporting our end-user service and other support
    services;
    enabling technology software enabling clients
    and their end-users to easily access our platform; and
    interoperable Service Oriented Architecture, or SOA software design permitting consistent, tight
    integration of product functionality across various product
    lines.            12




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##### 



Note:
    This diagram is a representation of our gateway and does not
    include all links. Connections depicted are for illustrative
    purposes only.         13




---



##### 



Proprietary
    Rights
          Competition
     14




---



##### 



business-to-business
      end-to-end end-to-end
    
    trust and reliability;
    technical capabilities, scalability, and security;
    speed to market;
    end-user service;
    ability to interface with our clients and their
    technology; and
    operating effectiveness. 15




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##### 



Government
    Regulation
    truth-in-lending case-by-case
       16




---



##### 



Employees
    Available
    Information
  www.orcc.com. Form 10-K, Form 10-Q Form 8-K
  Item 1A.
    Risk
    Factors  You should carefully consider the following risks before
    investing in our common stock. These are not the only risks that
    we may face. If any of the events referred to below occur, our
    business, financial condition, liquidity and results of
    operations could suffer. In that case, the trading price of our
    common stock could decline, and you may lose all or part of your
    investment.
  Risks
    Related to Our Business
  We
    cannot be sure that we will achieve profitability in future
    periods.
    Our
    clients are concentrated in a small number of industries,
    including the financial services industry, and changes within
    those industries could reduce demand for our products and
    services.
     17




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##### 



The
    failure to retain existing end-users or changes in their
    continued use of our services will adversely affect our
    operating results.
    Any
    failure of our clients to effectively market our services could
    have a material adverse effect on our business.
    Demand
    for low-cost or free online financial services and competition
    may place significant pressure on our pricing structure and
    revenues and may have an adverse effect on our financial
    condition.
    If we
    are unable to expand or adapt our services to support our
    clients and their end-users needs, our business may
    be materially adversely affected.
    If we
    lose a material client, our business may be adversely
    impacted.
    Consolidation
    of the financial services industry could negatively impact our
    business.
   18




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##### 



Our
    failure to compete effectively in our markets would have a
    material adverse effect on our business.
        Our
    quarterly financial results are subject to fluctuations, which
    could have a material adverse effect on the price of our
    stock.
    Goodwill
    recorded on our balance sheet may become impaired, which could
    have a material adverse effect on our operating
    results.
    Our
    limited ability to protect our proprietary technology and other
    rights may adversely affect our ability to
    compete.
   19




---



##### 



Our
    failure to properly develop, market or sell new products could
    adversely affect our business.
    If we
    are found to infringe the proprietary rights of others, we could
    be required to redesign our products, pay royalties or enter
    into license agreements with third parties.
      
    be expensive and time consuming to defend;
    cause us to cease making, licensing or using products that
    incorporate the challenged intellectual property;
    require us to redesign our products, if feasible;
    divert managements attention and resources; and
    require us to pay royalties or enter into licensing agreements
    in order to obtain the right to use necessary technologies.    System
    failures could hurt our business and we could be liable for some
    types of failures the extent or amount of which cannot be
    predicted.
   20




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##### 



Security
    breaches could have a material adverse effect on our
    business.
  state-of-the-art
      The
    potential obsolescence of our technology or the offering of new,
    more efficient means of conducting account presentation and
    payments services could negatively impact our
    business.
    We
    rely on internally developed software and systems as well as
    third-party products, any of which may contain errors and
    bugs.
  and/or
  The
    failure to attract or retain our officers and skilled employees
    could have a material adverse effect on our
    business.
   21




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##### 



Our
    recent change of chief executive officer may be viewed
    negatively and have an adverse impact on our
    business.
    We
    could be sued for contract or product liability claims and
    lawsuits may disrupt our business, divert managements
    attention or have an adverse effect on our financial
    results.
    Failure
    to comply with financial network operating rules could reduce
    the value of our services to our clients and make those services
    more costly to provide.
   22




---



##### 



Government
    regulation could interfere with our business.
        If we
    cannot maintain a satisfactory rating from the federal
    depository institution regulators, we may lose existing clients
    and have difficulty attracting new clients.
    We
    could be affected by future laws or regulations enacted in
    response to climate change concerns and other
    actions.
   23




---



##### 



We are
    exposed to costs and risks associated with complying with
    corporate governance and disclosure standards.
    If we
    are unable to expand our financial reporting capabilities to
    accommodate our rapid growth, we could fail to prevent or detect
    material errors and have to restate our financial statements.
    Any such restatement could increase our litigation risk, limit
    our access to the capital markets and reduce investor
    confidence, which may adversely affect the market price of our
    common stock.
    Risks
    Related to Our Capital Structure
  Our
    stock price is volatile.
    
    actual or anticipated variations in quarterly operating results;
    announcements of technological innovations;
    new products or services offered by us or our competitors;
    changes in financial estimates or ratings by securities analysts;
    conditions or trends in the Internet and online commerce
    industries;
    changes in the economic performance
    and/or
    market valuations of other Internet, online service industries;
    announcements by us of significant acquisitions, strategic
    partnerships, joint ventures or capital commitments;
    recent and potential proxy fights;
    additions or departures of key personnel; 24




---



##### 




    future equity or debt offerings or acquisitions or our
    announcements of these transactions; and
    other events or factors, many of which are beyond our control.    We
    have a substantial number of shares of common and convertible
    preferred stock outstanding, including shares issued in
    connection with certain acquisitions and shares that may be
    issued upon exercise of grants under our equity compensation
    plans that, if sold, could affect the trading price of our
    common stock.
    We
    have a significant amount of debt and redeemable preferred stock
    which will have to be repaid and may adversely affect our
    financial performance.
  Series A-1
  Our
    plans to operate and grow may be limited if we are unable to
    obtain sufficient financing.
   25




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##### 



Holders
    of our outstanding preferred stock have liquidation and other
    rights that are senior to the rights of the holders of our
    common stock.
  Series A-1 (Series A-1 Series A-1 Series A-1
  Holders
    of our
    Series A-1
    Preferred Stock have voting rights that may restrict our ability
    to take corporate actions.
  Series A-1 A-1
  Holders
    of our
    Series A-1
    Preferred Stock have a redemption right.
  Series A-1
  Future
    offerings of debt, which would be senior to our common stock
    upon liquidation, and/or preferred equity securities which may
    be senior to our common stock for purposes of dividend
    distributions or upon liquidation, may adversely affect the
    market price of our common stock.
  Series A-1
 26




---



##### 



If we
    are unable to comply with the covenants in our credit agreement,
    a default under the terms of that agreement could arise thereby
    potentially resulting in an acceleration of the repayment of
    borrowed funds.
    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders    Proposal One.
    For

Against

Abstain17,348,063

3,354,172

136,597  27




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##### 



PART II  Item 5.
    Market
    for the Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities    2009

2008Fiscal Quarter Ended

High

Low

High

LowFirst Quarter

$
4.69


$
2.85


$
12.01


$
9.09Second Quarter


6.36



3.71



10.47



8.35Third Quarter


6.86



4.87



10.26



6.84Fourth Quarter


6.49



5.06



7.65



2.00   Risk
    Factors   Our Stock Price is Volatile 10-K.
      Equity Compensation Plans Form 10-K.
  Number of securities



Number of securitiesto be issued upon



remaining available forexercise of

Weighted-average

future issuance underoutstanding options,

exercise price of

equity compensation planswarrants and rights

outstanding options,

(excluding securities(a)

warrants and rights

reflected in column(a))Equity compensation plans approved by security holders

3,168,779

$3.22

755,367Equity compensation plans not approved by security holders

1,607,675

$4.82

   Item 6.
    Selected
    Consolidated Financial Data  Consolidated Financial Statements and Supplementary Data 10-K.
 28




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##### 



Form 10-K.
  Year Ended December 31,(In thousands, except per share amounts)2009


2008


2007


2006


2005Statement of Operations Data:Revenues:Service fees

$
134,651


$
138,278


$
121,364


$
81,573


$
52,383Professional services and other


17,212



13,364



13,768



10,163



8,118Total revenues


151,863



151,642



135,132



91,736



60,501Cost of revenues


77,260



77,353



64,083



41,317



26,057Gross profit


74,603



74,289



71,049



50,419



34,444General and administrative


31,140



33,445



28,933



19,780



13,664Sales and marketing


20,747



24,207



23,446



18,009



8,680Systems and development


9,394



9,906



9,196



7,382



4,204Total expenses


61,281



67,558



61,575



45,171



26,548Income from operations


13,322



6,731



9,474



5,248



7,896Other (expense) income


(4,057
)


(3,637
)


(11,231
)


(3,992
)


1,301Income (loss) before income tax provision (benefit)


9,265



3,094



(1,757
)


1,256



9,197Income tax provision (benefit)(1)


4,135



1,175



(12,703
)


935



(13,466
)Net income


5,130



1,919



10,946



321



22,663Preferred stock accretion


9,208



8,873



8,302



4,309



Net (loss) income available to common stockholders

$
(4,078
)

$
(6,954
)

$
2,644


$
(3,988
)

$
22,663Net (loss) income available to common stockholders per share:Basic

$
(0.14
)

$
(0.24
)

$
0.10


$
(0.16
)

$
0.97Diluted

$
(0.14
)

$
(0.24
)

$
0.09


$
(0.16
)

$
0.88Shares used in calculation of net (loss) income to common
    stockholders per share:Basic


29,947



29,111



27,153



25,546



23,434Diluted


29,947



29,111



29,150



25,546



25,880Balance Sheet Data:Cash, cash equivalents and investments(2)

$
22,907


$
23,978


$
22,362


$
32,154


$
55,864Working capital


31,067



24,243



17,625



41,483



61,688Total assets


308,490



323,677



340,717



286,591



115,596Notes payable, less current portion


40,500



59,500



75,438



85,000



Other long-term liabilities


6,888



6,377



6,508



9,565



5,229Total liabilities


68,205



94,149



120,005



111,148



12,560Redeemable convertible preferred stock


100,623



91,415



82,542



72,108



Stockholders equity


139,662



138,113



138,170



103,335



103,036     (1)
    
    Includes a $13.7 million release of valuation allowance in
    2007 related to federal net operating losses. Includes
    $0.2 million release of valuation allowance in 2008 related
    to state net operations losses.(2)
    
    Includes a $1.0 million short-term investment in the
    Columbia Strategic Cash Portfolio fund in 2008. For additional
    information, see Note 5, Investments, in the Notes to
    the consolidated Financial Statements.  Item 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  CAUTIONARY
    NOTE
  Consolidated Financial Statements and
    Supplementary Data, Form 10-K.
 29




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##### 



Risk
    Factors 10-K.
  OVERVIEW
               30




---



##### 



Increase/Period Ended December 31,

(Decrease)2009

2008

Change

%Account presentation users (000s):Banking segment


1,371



1,360



11



1
%eCommerce segment


2,509



2,493



16



1
%Enterprise


3,880



3,853



27



1
%Payment services users (000s):Banking segment


4,861



3,693



1,168



32
%eCommerce segment


6,417



5,905



512



9
%Enterprise


11,278



9,598



1,680



18
%Total users (000s):Banking segment


5,917



4,820



1,097



23
%eCommerce segment


8,926



8,398



528



6
%Enterprise


14,843



13,218



1,625



12
%Payment services transactions (000s):Banking segment


152,656



159,268



(6,612
)


−4
%eCommerce segment


60,101



50,585



9,516



19
%Enterprise


212,757



209,853



2,904



1
%   set-up
      Critical
    Accounting Policies and Estimates
   31




---



##### 



Revenue Recognition Policy.
      Summary of Significant
    Accounting Policies Form 10-K
   32




---



##### 



percentage-of-completion percentage-of-completion
      Allowance for Doubtful Accounts.
  Income Taxes. 2021-2026.
     33




---



##### 



Cost of Internal Use Software and Computer Software to be
    Sold.
    Impairment of Goodwill, Intangible Assets and Long-Lived
    Assets.
         34




---



##### 



Theoretical Swap Derivative. Series A-1 (Series A-1 Series A-1
  Series A-1
  Derivative Instruments and Hedging
    Activities.
   35




---



##### 



Stock-Based Compensation.
  Recently
    Issued Pronouncements.
      tm
     36




---



##### 



,
     37




---



##### 



Results
    of Operations
    Year Ended December 31,2009


2008


2007Dollars


%


Dollars


%


Dollars


%Revenues:Banking

$
93,187



61
%

$
94,557



62
%

$
100,119



74
%eCommerce


58,676



39
%


57,085



38
%


35,013



26
%Total

$
151,863



100
%

$
151,642



100
%

$
135,132



100
%   Dollars


Margin


Dollars


Margin


Dollars


MarginGross profit:Banking

$
47,794



51
%

$
48,561



51
%

$
57,706



58
%eCommerce


26,809



46
%


25,728



45
%


13,343



38
%Total

$
74,603



49
%

$
74,289



49
%

$
71,049



53
%   Dollars


%


Dollars


%


Dollars


%Operating expenses:Banking

$
24,176



39
%

$
27,104



40
%

$
28,096



46
%eCommerce


19,644



32
%


22,702



34
%


18,535



30
%Corporate(1)


17,461



29
%


17,752



26
%


14,944



24
%Total

$
61,281



100
%

$
67,558



100
%

$
61,575



100
%   Dollars


Margin


Dollars


Margin


Dollars


MarginIncome from operations:Banking

$
23,618



25
%

$
21,457



23
%

$
29,610



30
%eCommerce


7,165



12
%


3,026



5
%


(5,192
)


−14
%Corporate(1)


(17,461
)






(17,752
)






(14,944
)


Total

$
13,322



9
%

$
6,731



4
%

$
9,474



7
%   (1)
    Corporate expenses are primarily comprised of corporate general
    and administrative expenses that are not considered in the
    measure of segment profit or loss used to evaluate the segments. 38




---



##### 



Year
    Ended December 31, 2009 Compared to the Year Ended
    December 31, 2008
  Revenues
    Years Ended December 31,


Change2009


2008


Difference


%Revenues (in thousands):Account presentation services

$
8,198


$
7,909


$
289



4
%Payment services


118,291



122,301



(4,010
)


−3
%Relationship management services


8,162



8,068



94



1
%Professional services and other


17,212



13,364



3,848



29
%Total revenues

$
151,863


$
151,642


$
221



−
%Payment metrics (in thousands):Banking payment transactions


152,656



159,268



(6,612
)


−4
%Biller payment transactions


60,101



50,585



9,516



19
%   Notes:
  Account Presentation Services.
  Payment Services.
  Relationship Management Services.
  Professional Services and Other.
 39




---



##### 



Costs and
    Expenses
  Years Ended December 31,


Change2009(1)


2008(1)


Difference(1)


%Revenues

$
151,863


$
151,642


$
221



−
%Costs of revenues


77,260



77,353



(93
)


−
%Gross profit


74,603



74,289



314



−
%Gross margin


49
%


49
%


−
%


−
%Operating expensesGeneral and administrative


31,140



33,445



(2,305
)


−7
%Sales and marketing


20,747



24,207



(3,460
)


−14
%Systems and development


9,394



9,906



(512
)


−5
%Total operating expenses


61,281



67,558



(6,277
)


−9
%Income from operations


13,322



6,731



6,591



98
%Other (expense) incomeInterest income


117



531



(414
)


−78
%Interest and other expense


(4,174
)


(4,168
)


(6
)


−
%Total other expense


(4,057
)


(3,637
)


(420
)


−12
%Income before tax provision


9,265



3,094



6,171



199
%Income tax provision


4,135



1,175



2,960



252
%Net income


5,130



1,919



3,211



167
%Preferred stock accretion


9,208



8,873



335



4
%Net loss available to common stockholders

$
(4,078
)

$
(6,954
)

$
2,876



41
%Net loss available to common stockholders per share:Basic

$
(0.14
)

$
(0.24
)

$
0.10



42
%Diluted

$
(0.14
)

$
(0.24
)

$
0.10



42
%Shares used in calculation of net loss available to common
    stockholders per share:Basic


29,947



29,111



836



3
%Diluted


29,947



29,111



836



3
%   Notes:
  (1)
    In thousands except for per share amounts.  Costs of Revenues.
  Gross Profit.
  General and Administrative.
 40




---



##### 



Sales and Marketing.
  Systems and Development.
  Income from Operations.
  Interest Income.
  Interest and Other Expense. mark-to-market mark-to-market
  Income Tax (Benefit) Provision.
  Preferred Stock Accretion. Series A-1 Series A-1
  Net Loss (Income) Available to Common
    Stockholders.
 41




---



##### 



Year
    Ended December 31, 2008 Compared to the Year Ended
    December 31, 2007
  Revenues
    Years Ended December 31,


Change2008


2007


Difference


%Revenues (in thousands):Account presentation services

$
7,909


$
8,998


$
(1,089
)


−12
%Payment services


122,301



104,228



18,073



17
%Relationship management services


8,068



8,138



(70
)


−1
%Professional services and other


13,364



13,768



(404
)


−3
%Total revenues

$
151,642


$
135,132


$
16,510



12
%Payment metrics (in thousands):Banking payment transactions


159,268



166,815



(7,547
)


−5
%Biller payment transactions(1)


42,690



31,896



10,794



34
%   Notes:
  (1)
    Excludes ITS for the purposes of comparison to prior year.  Account Presentation Services.
  Payment Services. Form 8-K/A
    Relationship Management Services.
  Professional Services and Other.
 42




---



##### 



Costs and
    Expenses
  Years Ended December 31,


Change2008(1)


2007(1)


Difference(1)


%Revenues

$
151,642


$
135,132


$
16,510



12
%Costs of revenues


77,353



64,083



13,270



21
%Gross profit


74,289



71,049



3,240



5
%Gross margin


49
%


53
%


(4
)%


−8
%Operating expensesGeneral and administrative


33,445



28,933



4,512



16
%Sales and marketing


24,207



23,446



761



3
%Systems and development


9,906



9,196



710



8
%Total operating expenses


67,558



61,575



5,983



10
%Income from operations


6,731



9,474



(2,743
)


−29
%Other (expense) incomeInterest income


531



1,242



(711
)


−57
%Interest and other expense


(4,168
)


(6,848
)


2,680



−39
%Loss on extinguishment of debt






(5,625
)


5,625



100
%Total other (expense) income


(3,637
)


(11,231
)


7,594



−68
%Income (loss) before tax (benefit) provision


3,094



(1,757
)


4,851



−276
%Income tax provision (benefit)


1,175



(12,703
)


13,878



−109
%Net income


1,919



10,946



(9,027
)


−82
%Preferred stock accretion


8,873



8,302



571



7
%Net (loss) income available to common stockholders

$
(6,954
)

$
2,644


$
(9,598
)


−363
%Net (loss) income available to common stockholders per share:Basic

$
(0.24
)

$
0.10


$
(0.34
)


−340
%Diluted

$
(0.24
)

$
0.09


$
(0.33
)


−367
%Shares used in calculation of net (loss) income available to
    common stockholders per share:Basic


29,111



27,153



1,953



7
%Diluted


29,111



29,150



(44
)


0
%   Notes:
  (1)
    In thousands except for per share amounts.  Costs of Revenues.
  Gross Profit.
 43




---



##### 



General and Administrative.
  Sales and Marketing.
  Systems and Development.
  Income from Operations.
  Interest Income.
  Interest and Other Expense. mark-to-market mark-to-market
  Income Tax (Benefit) Provision. mark-to-market Series A-1
  Preferred Stock Accretion. Series A-1 Series A-1
 44




---



##### 



Net Loss (Income) Available to Common
    Stockholders.
  Liquidity
    and Capital Resources
          trading-day
     45




---



##### 



For the Years EndedTotal


2010


2011


2012


2013


2014


ThereafterCapital lease obligations

$
19


$
19


$



$



$



$



$
Operating leases


25,702



4,753



4,823



4,504



4,349



3,651



3,622Purchase obligations


2,146



1,326



630



190











Notes payable(1)


48,750



8,250



30,938



9,562











Total obligations

$
76,617


$
14,348


$
36,391


$
14,256


$
4,349


$
3,651


$
3,622     (1)
    Senior secured debt (2007 Notes)            Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk     46




---



##### 



47




---



##### 



Item 8.
    Consolidated
    Financial Statements and Supplementary Data INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS  Reports of Independent Registered Public
    Accounting Firm


50Consolidated Balance Sheets


51Consolidated Statements of Operations


52Consolidated Statements of Stockholders
    Equity


53Consolidated Statements of Cash Flows


54Notes to Consolidated Financial Statements


56Supplementary DataFinancial Statement Schedule for each of the three years in the
    period ended December 31, 2008Schedule II  Valuation and
    Qualifying Accounts and Reserves*


87   *
    
    All other schedules prescribed under
    Regulation S-X
    are omitted because they are not applicable or not required. 48




---



##### 



Report of
    Independent Registered Public Accounting Firm
    Internal Control  Integrated Framework
        Internal Control  Integrated Framework
    KPMG
    LLP
     49




---



##### 



REPORT OF
    INDEPENDENT REGISTERED
    PUBLIC ACCOUNTING FIRM





The Board of Directors and Stockholders of Online Resources
    Corporation:



We have audited the accompanying consolidated balance sheets of
    Online Resources Corporation and subsidiaries (the Company) as
    of December 31, 2009 and 2008, and the related consolidated
    statements of operations, stockholders equity, and cash
    flows for the three years ended December 31, 2009. In
    connection with our audit of the consolidated financial
    statements, we have also audited financial statement
    schedule II for the three years ended December 31,
    2009. These consolidated financial statements and financial
    statement schedule are the responsibility of the Companys
    management. Our responsibility is to express an opinion on these
    consolidated financial statements and the financial statement
    schedule based on our audits.



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



In our opinion, the consolidated financial statements referred
    to above present fairly, in all material respects, the financial
    position of Online Resources Corporation and subsidiaries as of
    December 31, 2009 and 2008, and the results of their
    operations and their cash flows for each of the years in the
    three-year period ended December 31, 2009, in conformity
    with U.S. generally accepted accounting principles. Also in
    our opinion, the related financial statement schedule, when
    considered in relation to the basic consolidated financial
    statements taken as a whole, presents fairly, in all material
    respects, the information set forth therein.



We also have audited, in accordance with the standards of the
    Public Company Accounting Oversight Board (United States), the
    Companys internal control over financial reporting as of
    December 31, 2009, based on criteria established in
    Internal Control  Integrated Frameworkissued
    by the Committee of Sponsoring Organizations of the Treadway
    Commission (COSO), and our report dated March 9, 2010,
    expressed an unqualified opinion on the effectiveness of the
    Companys internal control over financial reporting.



/s/  KPMG
    LLP





McLean, Virginia

March 9, 2010


50




---



##### 



ONLINE
    RESOURCES CORPORATION
 CONSOLIDATED
    BALANCE SHEETS
    (in thousands, except par value amounts)  December 31,2009


2008ASSETSCurrent assets:Cash and cash equivalents

$
22,907


$
22,969Short-term investments






1,009Accounts receivable (net of allowance of $100 and $84,
    respectively)


17,457



15,742Deferred implementation costs


1,941



1,669Deferred tax asset, current portion


7,477



8,782Prepaid expenses and other current assets:


2,102



2,344Total current assets


51,884



52,515Property and equipment, net


25,561



28,707Deferred tax asset, less current portion


22,490



25,295Deferred implementation costs, less current portion


1,908



1,555Goodwill


181,516



181,516Intangible assets


19,972



27,668Other assets


5,159



6,421Total assets

$
308,490


$
323,677LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
2,008


$
1,198Accrued expenses


2,541



2,686Accrued compensation


1,198



932Notes payable, senior secured debt, current portion


8,250



15,937Deferred revenues, current portion


6,390



5,732Interest payable


27



6Interest rate swap liability


0



1,454Other current liabilities


403



327Total current liabilities


20,817



28,272Notes payable, senior secured debt, less current portion


40,500



59,500Deferred revenues, less current portion


4,440



3,573Other long-term liabilities


2,448



2,804Total liabilities


68,205



94,149Commitments and contingenciesRedeemable convertible preferred stock:Series A-1
    convertible preferred stock, $0.01 par value;
    75 shares authorized and issued at December 31, 2009
    and 2008 (Redeemable on July 3, 2013 at $135,815)


100,623



91,415Stockholders equity:Series B junior participating preferred stock,
    $0.01 par value; 297.5 shares authorized; none issued






Common stock, $0.0001 par value; 70,000 shares
    authorized; 30,439 issued and 30,112 outstanding at
    December 31, 2009 and 29,808 issued and 29,526 outstanding
    at December 31, 2008


3



3Additional paid-in capital


213,096



208,079Accumulated deficit


(70,776
)


(66,698
)Treasury stock, 327 shares at December 31, 2009 and
    282 shares at December 31, 2008


(2,661
)


(2,360
)Accumulated other comprehensive loss






(911
)Total stockholders equity


139,662



138,113Total liabilities and stockholders equity

$
308,490


$
323,677    51




---



##### 



ONLINE
    RESOURCES CORPORATION
 CONSOLIDATED
    STATEMENTS OF OPERATIONS
    (in thousands, except per share amounts)  Year Ended December 31,2009


2008


2007Revenues:Account presentation services

$
8,198


$
7,909


$
8,998Payment services


118,291



122,301



104,228Relationship management services


8,162



8,068



8,138Professional services and other


17,212



13,364



13,768Total revenues


151,863



151,642



135,132Costs and expenses:Service costs


73,032



72,632



57,456Implementation and other costs


4,228



4,721



6,627Costs of revenues


77,260



77,353



64,083Gross profit


74,603



74,289



71,049General and administrative


31,140



33,445



28,933Sales and marketing


20,747



24,207



23,446Systems and development


9,394



9,906



9,196Total expenses


61,281



67,558



61,575Income from operations


13,322



6,731



9,474Other (expense) income:Interest income


117



531



1,242Interest expense


(4,265
)


(3,612
)


(6,731
)Other (expense) income


91



(556
)


(117
)Loss on extinguishment of debt










(5,625
)Total other (expense) income


(4,057
)


(3,637
)


(11,231
)Income (loss) before income taxes


9,265



3,094



(1,757
)Income tax provision (benefit)


4,135



1,175



(12,703
)Net income


5,130



1,919



10,946Preferred stock accretion


9,208



8,873



8,302Net income (loss) available to common stockholders

$
(4,078
)

$
(6,954
)

$
2,644Net income (loss) available to common stockholders per share:Basic

$
(0.14
)

$
(0.24
)

$
0.10Diluted

$
(0.14
)

$
(0.24
)

$
0.09Shares used in calculation of net income (loss) available to
    common stockholders per share:Basic


29,947



29,111



27,153Diluted


29,947



29,111



29,150    52




---



##### 



ONLINE
    RESOURCES CORPORATION
 CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
    (in thousands)  AccumulatedAdditional








Other


TotalCommon Stock


Paid-In


Accumulated


Treasury


Comprehensive


StockholdersShares


Amount


Capital


Deficit


Stock


Income (Loss)


EquityBalance at January 1, 2007


25,789



3



166,355



(62,388
)


(228
)


(407
)


103,335Comprehensive income:Net income














10,946











10,946Net unrealized gain on hedging instrument, net of taxes of $60






















213



213Comprehensive income


























11,159Preferred stock accretion














(8,302
)










(8,302
)Equity compensation cost










3,296















3,296Exercise of common stock options


771







3,767















3,767Issuance of common stock


42







202















202Issuance of common stock in connection with ITS acquisition


2,217







24,713















24,713Balance at December 31, 2007


28,819


$
3


$
198,333


$
(59,744
)

$
(228
)

$
(194
)

$
138,170Comprehensive income:Net income














1,919











1,919Net unrealized loss on hedging instrument, net of taxes of $496






















(717
)


(717
)Comprehensive income


























1,202Treasury shares purchased


(190
)














(2,132
)






(2,132
)Preferred stock accretion














(8,873
)










(8,873
)Equity compensation cost










4,874















4,874Exercise of common stock options


290







826















826Issuance of common stock


343







190















190Issuance of common stock in connection with ITS price protection


264







3,856















3,856Balance at December 31, 2008


29,526


$
3


$
208,079


$
(66,698
)

$
(2,360
)

$
(911
)

$
138,113Comprehensive income:Net income














5,130











5,130Realized loss on hedge activity






















1,789



1,789Unrealized loss on hedging instrument, net of taxes of $542






















(878
)


(878
)Comprehensive income


























6,041Preferred stock accretion














(9,208
)










(9,208
)Treasury shares purchased


(119
)














(506
)






(506
)Equity compensation cost










4,149















4,149Exercise of common stock options


274







820















820Issuance of common stock


371







200















200Retirement of shares


38







(205
)






205







0Other


22







53















53Balance at December 31, 2009


30,112


$
3


$
213,096


$
(70,776
)

$
(2,661
)

$
(0
)

$
139,662    53




---



##### 



ONLINE
    RESOURCES CORPORATION
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS
    (in thousands)  Year Ended December 31,2009


2008


2007Operating activitiesNet income

$
5,130


$
1,919


$
10,946Adjustments to reconcile net income to net cash provided by
    operating activities:Deferred tax benefit


3,568



778



(13,380
)Depreciation and amortization


20,236



21,270



19,811Equity compensation expense


4,201



4,696



3,198Write off and amortization of debt issuance costs


285



372



4,330Loss on disposal of assets, net


(14
)


50



180Provision for losses on accounts receivable


77



56



(12
)Loss on investments


(91
)


556



117Change in fair value of stock price protection






1,565



(355
)Change in fair value of theoretical swap derivative


(106
)


(3,574
)


(1,145
)Loss on cash flow hedge derivative security






261



350Changes in operating assets and liabilities, net of acquisitions:Restricted cash






1,535



2,292Consumer deposit receivable






8,279



(3,297
)Consumer deposit payable






(10,555
)


5,285Redemption of certificate of deposit






2,294



Accounts receivable


(1,792
)


748



(2,169
)Prepaid expenses and other assets


60



1,595



(1,769
)Deferred implementation costs


(594
)


(137
)


(474
)Accounts payable


675



(438
)


(3,245
)Accrued expenses and other liabilities


27



(3,319
)


(1,118
)Interest payable


20



(65
)


(2,616
)Deferred revenues


1,525



(284
)


1,296Net cash provided by operating activities


33,207



27,602



18,225Investing activitiesPurchases of property and equipment


(9,260
)


(13,471
)


(16,360
)Sale of property and equipment


46







Purchase of short-term investments










(10,167
)Sale of short-term investments


2,100



6,570



1,880Acquisition of Internet Transactions Solutions, Inc., net of
    cash acquired






(110
)


(12,220
)Net cash used in investing activities


(7,114
)


(7,011
)


(36,867
)Financing activitiesNet proceeds from issuance of common stock


568



827



3,998Repurchase of shares issued related to ITS acquisition






(1,965
)


Payments for ITS price protection






(112
)Purchase of cash flow derivative










(121
)Sale of cash flow derivative










22Debt issuance costs on refinancing of long-term debt










(1,479
)Prepayment penalty on repayment of 2006 notes










(1,700
)Proceeds from issuance of 2007 notes










85,000Repayment of 2006 notes










(85,000
)Repayment of 2007 Notes


(26,687
)


(9,563
)Repayment of capital lease obligations


(36
)


(36
)


(40
)Net cash (used in) provided by financing activities


(26,155
)


(10,849
)


680Net (decrease) increase in cash and cash equivalents


(62
)


9,742



(17,962
)Cash and cash equivalents at beginning of year


22,969



13,227



31,189Cash and cash equivalents at end of year

$
22,907


$
22,969


$
13,227    54




---



##### 



ONLINE
    RESOURCES CORPORATION
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS (continued)
    (in thousands except share data)
  SUPPLEMENTAL
    INFORMATION TO STATEMENT OF CASH FLOWS:
  Year Ended December 31,2009


2008


2007Cash paid for interest

$
3,899


$
4,772


$
10,091Income taxes paid

$
839


$
632


$
464Net unrealized (loss) gain on hedge and investments

$
(1,420
)

$
(1,759
)

$
137   SUPPLEMENTAL
    SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
  Year Ended December 31,2009


2008


2007Common stock issued in connection with ITS acquisition

$



$
3,856


$
24,713    55




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    ORGANIZATION    2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Significant
    Accounting Policies
  Use of
    Estimates
    Principles
    of Consolidation
    Cash
    and Cash Equivalents
    Consumer
    Deposit Receivable and Payables
   56




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Short-term
    Investments
      Fair
    Value of Financial Instruments
  Financial Instruments.
  Concentration
    of Credit Risk
      Revenue
    Recognition
     57




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
              percentage-of-completion
  percentage-of-completion
 58




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Income
    Taxes
  Income Taxes,
  Allowance
    for Doubtful Accounts
    Property
    and Equipment
  Property and Equipment and Capitalized Software
    Costs,
  Asset Group

Depreciable LifeCentral processing systems and terminals

3-5 yearsOffice furniture and equipment

5 yearsCentral processing systems and terminals under capital leases

shorter life of 3-7 years or lease termOffice furniture and equipment under capital leases

shorter life of 5 years or lease termLeasehold improvements

generally remaining lease term (1)     (1)
    
    If the leasehold improvements estimated life is shorter than the
    remaining lease term, the estimated life is used as the
    depreciable term.  Capitalized
    Software Costs
   59




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Property and Equipment and
    Capitalized Software Costs,
  Goodwill
        Impairment
    of Long-Lived Assets and Intangible Assets
   60




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Theoretical
    Swap Derivative
  Series A-1 (Series A-1 Series A-1
  Derivative
    Instruments
        Reclassification
    Subsequent
    Events
   61




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Net
    (Loss) Income Available to Common Stockholders Per
    Share
    Accumulated
    Comprehensive Income (Loss)
    Stock-Based
    Compensation
  Equity Compensation
    Plans,
  with-and-without
  Recently
    Issued Pronouncements
  tm
     62




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  tm
          ,
   63




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    3.
    ACQUISITIONS  Internet
    Transaction Solutions, Inc.
    trading-day
       64




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Unaudited Pro formaInformationFor the Year EndedDecember 312007Revenues

$
146,891Net income (loss) available to common stockholders


2,703Net income (loss) available to common stockholders per share:Basic

$
0.09Diluted

$
0.07  65




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     At August 10, 2007Cash and cash equivalents

$
8,431Consumer deposits receivable


4,982Accounts receivable


48Other current assets


50Property and equipment


2,063Trademarks and patents


8Customer lists


21,220Goodwill


33,123Other assets


15Total assets purchased


69,940Accounts payable


7,634
(1)Consumer deposits payable


5,270Accrued expenses


1,089Deferred tax liabilities


7,808Total liabilities assumed


21,801Total net assets

$
48,139Cash

$
20,306Issuance of 2,216,552 common shares at $11.15 per share


24,713Stock price guarantee


2,783Transaction costs


337Aggregate purchase price

$
48,139     (1)
    
    Included $7.1 million of liabilities assumed related to the
    settlement of stock options which was expected to occur prior to
    closing.    4.
    REPORTABLE
    SEGMENTS     66




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Banking


eCommerce


Corporate(1)


TotalYear ended December 31, 2009:Revenues:Account presentation services

$
4,162



4,036







8,198Payment services


68,461



49,830







118,291Relationship management services


8,156



6







8,162Professional services and other


12,408



4,804







17,212Total revenues


93,187



58,676







151,863Costs of revenues


45,393



31,867







77,260Gross profit


47,794



26,809







74,603Operating expenses


24,176



19,644



17,461



61,281Income (loss) from operations

$
23,618


$
7,165


$
(17,461
)

$
13,322Year ended December 31, 2008:Revenues:Account presentation services

$
3,146



4,763







7,909Payment services


74,021



48,280







122,301Relationship management services


8,053



15







8,068Professional services and other


9,337



4,027







13,364Total revenues


94,557



57,085







151,642Costs of revenues


45,996



31,357







77,353Gross profit


48,561



25,728







74,289Operating expenses


27,104



22,702



17,752



67,558Income (loss) from operations

$
21,457


$
3,026


$
(17,752
)

$
6,731Year ended December 31, 2007:Revenues:Account presentation services

$
2,936


$
6,062


$



$
8,998Payment services


80,334



23,894







104,228Relationship management services


8,032



106







8,138Professional services and other


8,817



4,951







13,768Total revenues


100,119



35,013







135,132Costs of revenues


42,413



21,670







64,083Gross profit


57,706



13,343







71,049Operating expenses


28,096



18,535



14,944



61,575Income (loss) from operations

$
29,610


$
(5,192
)

$
(14,944
)

$
9,474     (1)
    
    Corporate expenses are primarily comprised of corporate general
    and administrative expenses that are not considered in the
    measure of segment profit or loss used to evaluate the segments. 67




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INVESTMENTS    6.
    PROPERTY
    AND EQUIPMENT    December 31,2009


2008Central processing systems and terminals

$
25,122


$
33,024Office furniture and equipment


4,118



4,414Central processing systems and terminals under capital leases


760



1,476Office furniture and equipment under capital leases


127



237Internal use software


33,440



27,983Leasehold improvements


7,363



7,479Total


70,930



74,613Less accumulated depreciation and amortization


(24,543
)


(30,517
)Less accumulated amortization of internal use software


(19,967
)


(13,871
)Less accumulated depreciation on assets held under capital leases


(859
)


(1,518
)$
25,561


$
28,707   7.
    GOODWILL
    AND INTANGIBLE ASSETS    Banking


eCommerceSegment


Segment


TotalBalance at December 31, 2007

$
81,778


$
102,522


$
184,300Adjustments(1)


(1,383
)


(1,401
)


(2,784
)Balance at December 31, 2008


80,395



101,121



181,516Adjustments










Balance at December 31, 2009

$
80,395


$
101,121


$
181,516     (1)
    
    Primarily related to the sale of Princetons net operating
    losses of $1.9 million, reversal of the valuation allowance
    on deferred tax assets acquired with Princeton of
    $1.7 million and a reclassification of ITS customer base
    upon receipt of the final valuation report offset by various
    acquisition related fees. 68




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31,2009


2008Gross carrying amount:Purchased technology

$
11,171


$
11,171Customer lists


40,754



40,754Patents and Trademarks






236Non-compete agreements


33



33Total gross carrying amount


51,958



52,194Accumulated amortization:Less accumulated amortization of purchased technology


(7,304
)


(5,386
)Less accumulated amortization of customer lists


(24,653
)


(18,943
)Less accumulated amortization of patents and trademarks






(174
)Less accumulated amortization of non-compete


(29
)


(23
)Total accumulated amortization


(31,986
)


(24,526
)Total intangible assets

$
19,972


$
27,668       8.
    COMMITMENTS &CONTINGENCIES       69




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Operating


Capital2010

$
4,753


$
202011


4,823



2012


4,504



2013


4,349



2014


3,651



Thereafter


3,622



Total minimum lease payments

$
25,702



20Less amount representing interest






(1
)Present value of minimum lease payments






19Less current portion






(19
)Long-term portion of minimum lease payments





$
       9.
    INCOME
    TAXES       70




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            December 31,2009


2008Deferred tax assets:Net operating loss carryforwards

$
32,311


$
38,607Deferred wages


2,420



3,223Deferred revenue (net of deferred cost)


1,005



774Deferred rent


1,090



1,192Fixed assets


878



910Other credits


1,351



992Other deferred tax assets


334



921Total deferred tax assets


39,389



46,619Valuation allowance for deferred tax assets


(1,690
)


(1,726
)Deferred liabilities:Acquired intangible assets


(7,732
)


(10,816
)Total deferred tax liabilities


(7,732
)


(10,816
)Net deferred tax assets

$
29,967


$
34,077  71




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year Ended December 31,2009


2008


2007Tax expense at statutory Federal rate

$
3,150


$
1,052


$
(597
)Effect of:State income tax, net


150



190



(401
)Other permanent differences, net


(3
)


(370
)


(267
)Return to provision adjustment










256Deferred tax adjustment related to stock compensation


860







Other


8



71



(Decrease) increase in valuation allowance


(30
)


232



(11,694
)Income tax expense (benefit)

$
4,135


$
1,175


$
(12,703
)Income tax expense consists of the following (in thousands):Current ExpenseFederal

$
360


$
317


$
402State


207



80



275567



397



677Deferred ExpenseFederal


3,548



570



(12,497
)State


20



208



(883
)3,568



778



(13,380
)Income tax expense (benefit)

$
4,135


$
1,175


$
(12,703
)        72




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    FINANCIAL
    INSTRUMENTS  Derivatives
    Instruments and Hedging Activities
  Cash Flow
    Hedging Strategy
      Theoretical
    Swap Derivative
  Series A-1 (Series A-1 Series A-1
  Series A-1
    Preferred Stock
  Series A-1 Redeemable Convertible
    Preferred Stock, A-1
 73




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  ITS Price
    Protection
  trading-day
        11.
    SENIOR
    SECURED NOTES       74




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      MaturingYear

Amounts2010

$
8,2502011

$
30,9382012

$
9,5622013

$
02014

$
0   12.
    REDEEMABLE
    CONVERTIBLE PREFERRED STOCK  Series A-1
    Redeemable Convertible Preferred Stock
  Series A-1. Series A-1
  Series A-1 Series A-1 Series A-1 Series A-1 Series A-1 Series A-1
  Series A-1
  Series A-1 Series A-1
 75




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Series A-1 Series A-1
  Series A-1 Series A-1
  Series B
    Preferred Stock
    13.
    NET
    (LOSS) INCOME AVAILABLE TO COMMON STOCKHOLDERS PER
    SHARE    Year Ended December 31,2009


2008


2007Net (loss) income available to stockholders

$
(4,078
)

$
(6,954
)

$
2,644Weighted average shares outstanding used in calculation of net
    income (loss) per share:Basic


29,947



29,111



27,153Dilutive options










1,997Diluted


29,947



29,111



29,150Net (loss) income available to common stockholders per share:Basic

$
(0.14
)

$
(0.24
)

$
0.10Diluted

$
(0.14
)

$
(0.24
)

$
0.09     14.
    EMPLOYEE
    BENEFIT PLANS  Employee
    Savings and Retirement Plan
   76




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Employee
    Stock Purchase Plan
    15.
    EQUITY
    COMPENSATION PLANS          Restricted
    Stock and Option Plans
     77




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Form 8-K
    Stock
    Options
    Year Ended December 31,2009

2008

2007Dividend yield










Expected volatility


62
%


51
%


56
%Risk-free interest rate


1.9
%


3.37
%


4.62
%Expected life in years


5.8



5.8



5.3   Dividend Yield.
  Expected Volatility.
  Risk-Free Interest Rate.
  Expected Life of Option Term.
  Forfeiture Rate.
 78




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted-Weighted-

AverageAverage

Remaining

AggregateExercise

Contract

IntrinsicShares

Price

Term

ValueOutstanding at January 1, 2009


2,952


$
6.14Granted


735


$
3.53Exercised


(274
)

$
2.99Forfeited or expired


(159
)

$
12.30Outstanding at December 31, 2009


3,254


$
5.52



3.79


$
4,421Vested or expected to vest at December 31, 2009


3,224


$
5.52



3.79


$
4,375Exercisable at December 31, 2009


2,150


$
5.75



2.97


$
2,828         Restricted
    Stock Units
    Weighted-AverageGrant-DateShares

Fair ValueNon-vested at January 1, 2009


786


$
11.06Granted


1,253



3.64Vested


(329
)


10.34Forfeited


(187
)


11.40Non-vested at December 31, 2009


1,523



10.83      79




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      16.
    FAIR
    VALUE MEASUREMENTS              Fair Value Measurements at December 31, 2009QuotedPrices inActive


SignificantMarkets for


Other


SignificantIdentical


Observable


UnobservableAssets


Inputs


Inputs(Level 1)


(Level 2)


(Level 3)


TotalFinancial assets (in thousands):Merrill Lynch Institutional Fund

$
7,623


$



$



$
7,623Theoretical swap derivative(2)










4,668



4,668$
7,623


$



$
4,668


$
12,291   Fair Value Measurements at December 31, 2008QuotedPrices inActive


SignificantMarkets for


Other


SignificantIdentical


Observable


UnobservableAssets


Inputs


Inputs(Level 1)


(Level 2)


(Level 3)


TotalFinancial assets (in thousands):Merrill Lynch Institutional Fund

$
11,030


$



$



$
11,030Investment in Strategic Cash Fund(1)










2,009



2,009Theoretical swap derivative(2)










4,562



4,562$
11,030


$



$
6,571


$
17,601Financial liabilities (in thousands):Interest Rate Swap(3)






(1,454
)






(1,454
)$



$
(1,454
)

$



$
(1,454
)  80




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (1)
    
    Includes the Companys short and long-term investment in
    the Columbia Strategic Cash Fund (the Fund) that was
    converted to a net asset value basis in December 2007 primarily
    due to liquidity issues. The Companys investment in the
    Columbia Strategic Cash Portfolio (the Fund) was
    liquidated in September 2009. The Funds value at
    December 31, 2009 was zero. The Funds value at
    December 31, 2008 was primarily the fair market value for
    the Funds investments in certain asset backed securities
    and structured investment vehicles that are collateralized by
    sub-prime
    mortgage securities or related to mortgage securities. The
    multiple investments included in the Fund were no longer trading
    and therefore the prices were not observable in the marketplace.
    As such, fair value of the Fund was assessed through review of
    current investment ratings, as available, and evaluation of the
    liquidation value of assets held by each investment and their
    subsequent cash redemptions. This assessment from multiple
    indicators of fair value was then discounted to reflect the
    expected timing of disposition and market risks to arrive at an
    estimated fair value of the Fund.(2)
    
    Represents the fair market value of the embedded derivative
    associated with the
    Series A-1
    Redeemable Convertible Preferred Stock issued in conjunction
    with the Princeton eCom acquisition on July 3, 2006.
    Management measures fair value of the derivative by estimating
    future cash flows related to the asset using a forecasted iMoney
    Net First Tier rate based on the one-month LIBOR rate adjusted
    for the historical spread for the estimated period in which the
    Series A-1
    Preferred Stock will be outstanding.(3)
    
    On October 17, 2008, the Company entered into an interest
    rate swap agreement, with a large commercial bank, to
    effectively swap the one-month LIBOR interest rate for a fixed
    interest rate equal to 2.9%. The fair market value of the
    interest rate swap is measured using the discounted present
    value of the forecasted one month LIBOR, an observable market
    input. The interest rate swap agreement expired on
    December 31, 2009.    Strategic Cash


TheoreticalFund Investment


Swap DerivativeBalance as of January 1, 2009

$
2,009


$
4,562Realized and unrealized gain(1)


91



106Redemptions(2)


(2,100
)


Balance as of December 31, 2009

$



$
4,668   Strategic Cash


TheoreticalFund Investment


Swap DerivativeBalance as of January 1, 2008

$
9,135


$
988Realized and unrealized (loss)/gain(1)


(555
)


3,574Redemptions(2)


(6,571
)


Balance as of December 31, 2008

$
2,009


$
4,562     (1)
    
    The realized and unrealized gains and losses are included as
    other (expense) income in the consolidated statements of
    operations for the years ended December 31, 2009 and
    December 31, 2008.(2)
    
    Redemptions are payments received by the Company for partial
    liquidation of the Columbia Strategic Cash Fund. 81




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   17.
    SUMMARIZED
    QUARTERLY DATA (UNAUDITED)    Quarter EndedMarch 31, 2009

June 30, 2009

September 30, 2009

December 31, 2009Total revenues

$
39,240


$
37,783


$
36,594


$
38,246Gross profit

$
19,576


$
17,767


$
17,778


$
19,482Net income

$
631


$
576


$
2,713


$
1,210Net (loss) income available to common stockholders

$
(1,618
)

$
(1,711
)

$
388


$
(1,137
)Net (loss) income available to common stockholders per share:Basic

$
(0.05
)

$
(0.06
)

$
0.01


$
(0.04
)Diluted

$
(0.05
)

$
(0.06
)

$
0.01


$
(0.04
)   Quarter EndedMarch 31, 2008

June 30, 2008

September 30, 2008

December 31, 2008Total revenues

$
39,196


$
37,153


$
38,133


$
37,160Gross profit

$
19,421


$
17,699


$
18,554


$
18,615Net (loss) income

$
(1,405
)

$
(974
)

$
766


$
3,532Net (loss) income available to common stockholders

$
(3,582
)

$
(3,173
)

$
(1,471
)

$
1,272Net (loss) income available to common stockholders per share:Basic

$
(0.12
)

$
(0.11
)

$
(0.05
)

$
0.04Diluted

$
(0.12
)

$
(0.11
)

$
(0.05
)

$
0.04      82




---



##### 



ITEM 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    ITEM 9A.
    Controls
    and Procedures  Effectiveness
    of Disclosure Controls and Procedures
  Rules 13a-15(f) 15d-15(f)
  (a) Effectiveness
    of Disclosure Controls and Procedures
  Rule 13a-15(f)
  (b) Changes
    in Internal Control over Financial Reporting
    (c) Managements
    Report on Internal Control over Financial Reporting
     83




---



##### 



Internal Control 
    Integrated Framework
    Item 9B.
    Other
    Information   84




---



##### 



PART III  Item 10.
    Directors
    and Executive Officers of the Company    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Market for the Registrants
    Common Equity, Related Stockholder Matters and Issuer Purchases
    of Equity Securities
  Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services   85




---



##### 



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    Consolidated Financial Statements. Form 10-K.
              Schedule II  Valuation and
    Qualifying Accounts.
    List of Exhibits.
  2
.1

Agreement and Plan of Merger dated July 26, 2007 among the
    Company, its acquisition subsidiary and Internet Transaction
    Solutions, Inc. (incorporated by reference from our
    Form 8-K
    filed on August 1, 2007)3
.1

Form of Amended and Restated Certificate of Incorporation of the
    Company (incorporated by reference from our registration
    statement on
    Form S-1;
    Registration
    No. 333-74777)3
.2

Form of Amended and Restated Bylaws of the Company (incorporated
    by reference from our
    Form 10-K
    for the year ended December 31, 2008 filed on March 3,
    2009)3
.3

Certificate of Designation of shares of
    Series A-1
    Convertible Preferred Stock (incorporated by reference from our
    Form 8-K
    filed on July 3, 2006)3
.4

Certificate of Correction to Certificate of Designation for the
    shares of
    Series A-1
    Convertible Preferred Stock (incorporated by reference from our
    Form 8-K
    filed on September 14, 2006)4
.1

Specimen of Common stock Certificate of the Company
    (incorporated by reference from our registration statement on
    Form S-1;
    Registration
    No. 333-74777)4
.2

Investor Rights Agreement dated July 3, 2006, by and among
    the Company and the holders of its shares of
    Series A-1
    Convertible Preferred Stock (incorporated by reference from our
    Form S-3/A
    filed on November 14, 2006)10
.1

Online Resources & Communications Corporation 1989
    Stock Option Plan (incorporated by reference from our
    registration statement on
    Form S-1;
    Registration
    No. 333-74777)10
.2

1999 Stock Option Plan (incorporated by reference from our
    registration statement on
    Form S-1;
    Registration
    No. 333-40674)10
.3

Employee Stock Purchase Plan (incorporated by reference from our
    registration statement on
    Form S-8;
    Registration
    No. 333-40674)10
.4

Lease Agreement to premises at 4795 Meadow Wood Lane, Chantilly,
    Virginia (incorporated by reference from our
    Form 10-Q
    for the quarter ended September 30, 2004 filed on
    November 5, 2004)10
.5

Amended and Restated 2005 Restricted Stock and Option Plan10
.6

Credit Agreement with Bank of America dated February 21,
    2007 (incorporated by reference from
    Form 8-K
    on February 26, 2007)23
.1

Consent of KPMG LLP, Independent Registered Public Accounting
    Firm31
.1

Certificate of Chief Executive Officer pursuant to
    Rule 13a-14(a)
    of the Securities Exchange Act, as amended31
.2

Certificate of Chief Financial Officer pursuant to
    Rule 13a-14(a)
    of the Securities Exchange Act, as amended32


Certificate of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002  86




---



##### 



Schedule II 
    Valuation and Qualifying Accounts:
    (in thousands)  Balance atBeginning of





Balance at EndClassification

Period

Additions

Deductions

of PeriodAllowance for doubtful accounts:Year ended December 31, 2007

$
148


$



$
64
(1)

$
84Year ended December 31, 2008

$
84


$
56


$
56
(1)

$
84Year ended December 31, 2009

$
84


$
16


$



$
100Allowance for deferred tax asset:Year ended December 31, 2007

$
68,221


$



$
62,338
(2)

$
5,883Year ended December 31, 2008

$
5,883


$
255
(3)

$
4,412
(4)

$
1,726Year ended December 31, 2009

$
1,726


$



$
36


$
1,690     Notes:
  (1)
    
    Uncollectable accounts written off.  (2)
    
    Reversal of $31.1 million due to electing to waive
    Princeton net operating losses that were determined not to be
    recoverable, release of $15.7 million of valuation
    allowance through goodwill related to valuation allowances
    established as a result of acquisitions, the release of
    $13.7 million through the income statement and a
    $1.9 million balance sheet reclassification.(3)
    
    The Company added a $0.3 million valuation allowance
    against certain deferred tax assets arising from capital losses
    that are not more likely than not realizable.(4)
    
    Includes release of approximately $1.9 million of valuation
    allowance related to New Jersey net operating losses that were
    determined to be recoverable and New Jersey net operating losses
    sold. Approximately $0.2 million of the valuation amount
    released resulted in an income tax benefit. 87




---



##### 



SIGNATURES      By:
    /s/  RAYMOND
    T. CROSIER   Acting Chief Executive Officer and
 Chief Operating Officer
    Signature

Title

Date/s/  RAYMOND
    T. CROSIERRaymond
    T. Crosier

Acting Chief Executive Officer and Chief Operating Officer
    (Principal Executive Officer)

March 9, 2010/s/  CATHERINE
    A. GRAHAMCatherine
    A. Graham

Executive Vice President and Chief Financial Officer (Principal
    Financial Officer)

March 9, 2010/s/  DAVID
    G. MATHEWS, IIIDavid
    G. Mathews, III

Vice President, Accounting (Principal Accounting Officer)

March 9, 2010/s/  STEPHEN
    S. COLEStephen
    S. Cole

Director

March 9, 2010/s/  JOHN
    DORMANJohn
    Dorman

Director

March 9, 2010/s/  EDWARD
    D. HOROWITZEdward
    D. Horowitz

Director

March 9, 2010/s/  BRUCE
    A. JAFFEBruce
    A. Jaffe

Director

March 9, 2010/s/  MICHAEL
    E. LEITNERMichael
    E. Leitner

Director

March 9, 2010/s/  ERVIN
    R. SHAMESErvin
    R. Shames

Director

March 9, 2010/s/  WILLIAM
    H. WASHECKAWilliam
    H. Washecka

Director

March 9, 2010/s/  BARRY
    D. WESSLERBarry
    D. Wessler

Director

March 9, 2010  88