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,
    2010
  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


15Item 2:


Properties


25Item 3:


Legal Proceedings


26Item 4:


(REMOVED AND RESERVED)


26PART IIItem 5:


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


27Item 6:


Selected Consolidated Financial Data


27Item 7:


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


29Item 7A:


Quantitative and Qualitative Disclosures About
    Market Risk


44Item 8:


Consolidated Financial Statements and
    Supplementary Data


45Index to Consolidated Financial Statements


45Item 9:


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


78Item 9A:


Controls and Procedures


78Item 9B:


Other Information


79PART IIIItem 10:


Directors and Executive Officers of the
    Company


80Item 11:


Executive Compensation


80Item 12:


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


80Item 13:


Certain Relationships and Related Transactions


80Item 14:


Principal Accountant Fees and Services


80PART IVItem 15:


Exhibits and Financial Statement Schedules


81Signatures


83   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 clients a cost effective solution to
    process transactions for their consumer end-users. Our online
    banking products include an integrated suite of web-based
    account presentation and payment services, as well as supporting
    call center, consumer marketing and professional services. These
    solutions give 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.    
    e-Commerce
    Services:For billers, card issuers and credit providers, we
    provide web- and phone-based payment, account presentation and
    web-collections services, along with supporting professional
    services. Our services include a full suite of payment options
    that can be made available to consumers, including acceptance of
    payments made by credit card, signature debit card, ACH and
    PIN-less debit through multiple channels including online,
    interactive voice response, or IVR, and call center customer
    service representatives. These options also include flexible
    payment scheduling, convenience payments, bill presentment and
    other advanced payment and collection services.        Our
    Industry
   4




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##### 



US Online Bill Payment Forecast: 2009 To
    2014 US
    Online Banking Forecast 2009 to 2014
    How US Credit Card Customers Use and Rate Issuers
    Secure Sites
    Our
    Strategy
      
    enhancing our products and processes with self-service tools to
    enable greater client control of their applications, enhance
    ease of use for end-users, improve our response times and
    increase operating efficiencies;
    rationalizing and consolidating our operating platforms to
    enhance service reliability and reduce operating costs;
    creating improved organizations and processes to more
    effectively manage key functions such as product and technology
    development and deployment; 5




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##### 




    rebalancing our resources to add the skill sets needed to drive
    innovation while optimizing our resource costs; and
    improving the awareness of Online Resources and our capabilities
    as a payments specialist in the marketplace.    Growing Our Client Bases.
    Increasing Usage of Our Services.
  Providing Additional Products and Services to Our Installed
    Client Base.
  Leveraging our Unique Payments
    Infrastructure.
  Our
    Services
   6




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##### 



Bill Payment and Transaction Processing
    Services. same-day, Money HQ sm,
       7




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##### 



Online Banking and 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 ®
  Customer Care and Consumer Marketing
    Services. e-mail
    Professional Services.
  Third-Party Services.
  
    fully integrated bill payment and account retrieval through
    Intuits Quicken (R) ;
    account opening provided by Andera;
    check ordering available through Harland, Deluxe, Clarke
    American or Liberty;
    inter-institution funds transfer and account aggregation
    provided by CashEdge; 8




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##### 




    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.  and/or
      Our
    Operations and Infrastructure
     9




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##### 



10




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##### 



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;
    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.      
    consolidate multiple architectures into a single system;
    leverage open source components and commodity equipment;
    expose self-service configuration capabilities to clients,
    eliminating costly but low value tasks; and
    leverage off-shore resources to gain additional skill sets,
    drive down headcount costs and better enable 24 hour
    productivity and production.    Our Sales
    and Marketing
   11




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##### 



Proprietary
    Rights
    and/or
       12




---



##### 



Competition
               13




---



##### 



end-to-end
  Government
    Regulation
    truth-in-lending case-by-case
       14




---



##### 



Employees
    Additional
    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.
   15




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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.
   16




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##### 



Consolidation
    of the financial services industry could negatively impact our
    business.
    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.
   17




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##### 



Our
    limited ability to protect our proprietary technology and other
    rights may adversely affect our ability to
    compete.
    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.   18




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##### 



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.
    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.
   19




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##### 



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.
      Our
    recent changes 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.
   20




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##### 



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.
      Certain
    payment funding methods expose us to the credit and/or operating
    risk of our clients.
   21




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##### 



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.
    We are
    exposed to costs and risks associated with complying with
    corporate governance and disclosure standards.
   22




---



##### 



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;
    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.
   23




---



##### 



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.
    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
 24




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##### 



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
  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   25




---



##### 



Item 3.
    Legal
    Proceedings    Item 4.
    (REMOVED
    AND RESERVED) 26




---



##### 



PART II  Item 5.
    Market
    for the Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities    2010


2009Fiscal Quarter Ended

High


Low


High


LowFirst Quarter

$
5.45


$
3.58


$
4.69


$
2.85Second Quarter


5.10



3.84



6.36



3.71Third Quarter


4.88



3.63



6.86



4.87Fourth Quarter


5.35



4.16



6.49



5.06   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


1,824,630


$
3.45



600,088Equity compensation plans not approved by security holders


1,821,813


$
4.00



   Item 6.
    Selected
    Consolidated Financial Data  Consolidated Financial Statements and Supplementary Data 10-K.
 27




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##### 



Form 10-K.
  Year Ended December 31,2010


2009


2008


2007


2006(In thousands, except per share amounts)Statement of Operations Data:Revenues:Service fees

$
130,823


$
134,651


$
138,278


$
121,364


$
81,573Professional services and other


18,690



17,212



13,364



13,768



10,163Total revenues


149,513



151,863



151,642



135,132



91,736Cost of revenues


78,953



77,260



77,353



64,083



41,317Gross profit


70,560



74,603



74,289



71,049



50,419General and administrative


32,146



31,140



33,445



28,933



19,780Sales and marketing


19,532



20,747



24,207



23,446



18,009Systems and development


9,901



9,394



9,906



9,196



7,382Total expenses


61,579



61,281



67,558



61,575



45,171Income from operations


8,981



13,322



6,731



9,474



5,248Other (expense) income


(193
)


(4,057
)


(3,637
)


(11,231
)


(3,992
)Income (loss) before income tax provision (benefit)


8,788



9,265



3,094



(1,757
)


1,256Income tax provision (benefit)(1)


3,412



4,135



1,175



(12,703
)


935Net income


5,376



5,130



1,919



10,946



321Preferred stock accretion


9,560



9,208



8,873



8,302



4,309Net (loss) income available to common stockholders

$
(4,184
)

$
(4,078
)

$
(6,954
)

$
2,644


$
(3,988
)Net (loss) income available to common stockholders per share:Basic

$
(0.14
)

$
(0.14
)

$
(0.24
)

$
0.10


$
(0.16
)Diluted

$
(0.14
)

$
(0.14
)

$
(0.24
)

$
0.09


$
(0.16
)Shares used in calculation of net (loss) income to common
    stockholders per share:Basic


30,954



29,947



29,111



27,153



25,546Diluted


30,954



29,947



29,111



29,150



25,546Balance Sheet Data:Cash, cash equivalents and investments

$
29,127


$
22,907


$
23,978


$
22,362


$
32,154Working capital


14,346



31,067



24,243



17,625



41,483Total assets


310,585



308,490



323,677



340,717



286,591Notes payable, less current portion


9,563



40,500



59,500



75,438



85,000Other long-term liabilities


6,956



6,888



6,377



6,508



9,565Total liabilities


60,642



68,205



94,149



120,005



111,148Redeemable convertible preferred stock


110,182



100,623



91,415



82,542



72,108Stockholders equity


139,761



139,662



138,113



138,170



103,335     (1)
    
    Includes a $13.7 million release of valuation allowance in
    2007 related to federal net operating losses. 28




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##### 



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. Risk Factors 10-K.
  OVERVIEW
             29




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##### 



Increase/Period Ended December 31,


(Decrease)2010


2009


Change


%Account presentation users (000s):Banking segment


1,484



1,371



113



8
%eCommerce segment


2,499



2,509



(10
)


0
%Enterprise


3,983



3,880



103



3
%Payment services users (000s):Banking segment


4,748



4,861



(113
)


(2
)%eCommerce segment


8,209



6,417



1,792



28
%Enterprise


12,957



11,278



1,679



15
%Total users (000s):Banking segment


5,856



5,917



(61
)


(1
)%eCommerce segment


10,708



8,926



1,782



20
%Enterprise


16,564



14,843



1,721



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


148,258



152,656



(4,398
)


(3
)%eCommerce segment


71,343



60,101



11,242



19
%Enterprise


219,601



212,757



6,844



3
%   set-up
     30




---



##### 



Critical
    Accounting Policies and Estimates
    Revenue Recognition Policy.
       31




---



##### 



percentage-of-completion percentage-of-completion
      Allowance for Doubtful Accounts.
  Income Taxes. 2021-2026.
    Cost of Internal Use Software and Computer Software to be
    Sold.
 32




---



##### 



Impairment of Goodwill, Intangible Assets and Long-Lived
    Assets.
           33




---



##### 



Theoretical Swap Derivative. Series A-1 (Series A-1 Series A-1
  Series A-1
  Derivative Instruments and Hedging
    Activities.
   34




---



##### 



Stock-Based Compensation.
        Recently
    Issued Pronouncements.
       35




---



##### 



Results
    of Operations
    Year Ended December 31,2010


2009


2008Dollars


%


Dollars


%


Dollars


%Revenues:Banking

$
90,320



60
%

$
93,187



61
%

$
94,557



62
%eCommerce


59,193



40
%


58,676



39
%


57,085



38
%Total

$
149,513



100
%

$
151,863



100
%

$
151,642



100
%Dollars


Margin


Dollars


Margin


Dollars


MarginGross profit:Banking

$
43,963



49
%

$
47,794



51
%

$
48,561



51
%eCommerce


26,597



45
%


26,809



46
%


25,728



45
%Total

$
70,560



47
%

$
74,603



49
%

$
74,289



49
%Dollars


%


Dollars


%


Dollars


%Operating expenses:Banking

$
24,600



40
%

$
24,176



39
%

$
27,104



40
%eCommerce


19,070



31
%


19,644



32
%


22,702



34
%Corporate(1)


17,909



29
%


17,461



29
%


17,752



26
%Total

$
61,579



100
%

$
61,281



100
%

$
67,558



100
%Dollars


Margin


Dollars


Margin


Dollars


MarginIncome from operations:Banking

$
19,363



21
%

$
23,618



25
%

$
21,457



23
%eCommerce


7,527



13
%


7,165



12
%


3,026



5
%Corporate(1)


(17,909
)






(17,461
)






(17,752
)


Total

$
8,981



6
%

$
13,322



9
%

$
6,731



4
%     (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.  Year
    Ended December 31, 2010 Compared to the Year Ended
    December 31, 2009
  Revenues
    36




---



##### 



Years Ended December 31,


Change2010


2009


Difference


%Revenues (in thousands):Account presentation services

$
9,408


$
8,198


$
1,210



15
%Payment services


113,007



118,291



(5,284
)


(4
)%Relationship management services


8,408



8,162



246



3
%Professional services and other


18,690



17,212



1,478



9
%Total revenues

$
149,513


$
151,863


$
(2,350
)


(2
)%Payment metrics (in thousands):Banking payment transactions


148,258



152,656



(4,398
)


(3
)%Biller payment transactions


71,343



60,101



11,242



19
%   Notes:
  Account Presentation Services.
  Payment Services.
  Relationship Management Services.
  Professional Services and Other.
 37




---



##### 



Costs and
    Expenses
  Years Ended December 31,


Change2010(1)


2009(1)


Difference(1)


%Revenues

$
149,513


$
151,863


$
(2,350
)


(2
)%Costs of revenues


78,953



77,260



1,693



2
%Gross profit


70,560



74,603



(4,043
)


(5
)%Gross margin


47
%


49
%


2
%


0
%Operating expensesGeneral and administrative


32,146



31,140



1,006



3
%Sales and marketing


19,532



20,747



(1,215
)


(6
)%Systems and development


9,901



9,394



507



5
%Total operating expenses


61,579



61,281



299



0
%Income from operations


8,981



13,322



(4,342
)


(33
)%Other (expense) incomeInterest income


65



117



(52
)


(44
)%Interest and other expense


(258
)


(4,174
)


3,916



94
%Total other expense


(193
)


(4,057
)


3,864



95
%Income before tax provision


8,788



9,265



(477
)


(5
)%Income tax provision


3,412



4,135



(723
)


(17
)%Net income


5,376



5,130



246



5
%Preferred stock accretion


9,560



9,208



352



4
%Net loss available to common stockholders

$
(4,184
)

$
(4,078
)

$
(106
)


(3
)%Net loss available to common stockholders per share:Basic

$
(0.14
)

$
(0.14
)

$
0.00



0
%Diluted

$
(0.14
)

$
(0.14
)

$
0.00



0
%Shares used in calculation of net loss available to common
    stockholders per share:Basic


30,954



29,947



1,007



3
%Diluted


30,954



29,947



1,007



3
%     Notes:
  (1)
    
    In thousands except for per share amounts.  Costs of Revenues.
  Gross Profit.
 38




---



##### 



General and Administrative.
  Sales and Marketing.
  Systems and Development.
  Income from Operations.
  Interest Income.
  Interest and Other Expense. mark-to-market
  Income Tax (Benefit) Provision.
  Preferred Stock Accretion. Series A-1 Series A-1
  Net Loss (Income) Available to Common
    Stockholders.
 39




---



##### 



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
%   Account Presentation Services.
  Payment Services.
  Relationship Management Services.
  Professional Services and Other.
 40




---



##### 



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.
 41




---



##### 



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.
 42




---



##### 



Liquidity
    and Capital Resources
              For the Years EndedTotal


2011


2012


2013


2014


2015


ThereafterOperating leases

$
21,057


$
4,888


$
4,541


$
4,353


$
3,653


$
1,666


$
1,956Purchase obligations


1,311



1,168



143















Notes payable(1)


36,750



27,188



9,562















Total obligations

$
59,118


$
33,244


$
14,246


$
4,353


$
3,653


$
1,666


$
1,956     (1)
    
    Senior secured debt (2007 Notes)     43




---



##### 



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk           44




---



##### 



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


46Consolidated Balance Sheets


48Consolidated Statements of Operations


49Consolidated Statements of Stockholders
    Equity


50Consolidated Statements of Cash Flows


51Notes to Consolidated Financial Statements


53Supplementary DataFinancial Statement Schedule for each of the three years in the
    period ended December 31, 2008Schedule II  Valuation and
    Qualifying Accounts and Reserves*


82     *
    
    All other schedules prescribed under
    Regulation S-X
    are omitted because they are not applicable or not required. 45




---



##### 



Report of
    Independent Registered Public Accounting Firm     Internal Control  Integrated Framework
        Internal Control  Integrated Framework
    KPMG
    LLP
    46




---



##### 



Report of
    Independent Registered Public Accounting Firm
           Internal Control  Integrated Framework
  KPMG
    LLP
    47




---



##### 



ONLINE
    RESOURCES CORPORATION
  CONSOLIDATED BALANCE SHEETS
 (in
    thousands, except par value amounts)
  December 31,2010


2009ASSETSCurrent assets:Cash and cash equivalents

$
29,127


$
22,907Accounts receivable (net of allowance of $232 and $100,
    respectively)


20,410



17,457Deferred implementation costs


2,970



1,941Deferred tax asset, current portion


3,893



7,477Prepaid expenses and other current assets:


2,069



2,102Total current assets


58,469



51,884Property and equipment, net


25,145



25,561Deferred tax asset, less current portion


22,536



22,490Deferred implementation costs, less current portion


2,436



1,908Goodwill


181,516



181,516Intangible assets


14,157



19,972Other assets


6,326



5,159Total assets

$
310,585


$
308,490LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
2,410


$
2,008Accrued expenses


3,019



2,541Accrued compensation


3,274



1,198Notes payable, senior secured debt, current portion


27,188



8,250Deferred revenues, current portion


7,757



6,390Other current liabilities


475



430Total current liabilities


44,123



20,817Notes payable, senior secured debt, less current portion


9,563



40,500Deferred revenues, less current portion


4,925



4,440Other long-term liabilities


2,031



2,448Total liabilities


60,642



68,205Commitments and contingenciesRedeemable convertible preferred stock:Series A-1
    convertible preferred stock, $0.01 par value;
    75 shares authorized and issued at December 31, 2010
    and 2009 (Redeemable on July 3, 2013 at $135,815)


110,182



100,623Stockholders 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; 31,856 issued and 31,429 outstanding at
    December 31, 2010 and 30,439 issued and 30,112 outstanding
    at December 31, 2009


3



3Additional paid-in capital


217,873



213,096Accumulated deficit


(75,192
)


(70,776
)Treasury stock, 427 shares at December 31, 2010 and
    327 shares at December 31, 2009


(2,923
)


(2,661
)Total stockholders equity


139,761



139,662Total liabilities and stockholders equity

$
310,585


$
308,490    48




---



##### 



ONLINE
    RESOURCES CORPORATION
  CONSOLIDATED STATEMENTS OF OPERATIONS
 (in
    thousands, except per share amounts)
  Year Ended December 31,2010


2009


2008Revenues:Account presentation services

$
9,408


$
8,198


$
7,909Payment services


113,007



118,291



122,301Relationship management services


8,408



8,162



8,068Professional services and other


18,690



17,212



13,364Total revenues


149,513



151,863



151,642Costs and expenses:Service costs


74,554



73,032



72,632Implementation and other costs


4,399



4,228



4,721Costs of revenues


78,953



77,260



77,353Gross profit


70,560



74,603



74,289General and administrative


32,146



31,140



33,445Sales and marketing


19,532



20,747



24,207Systems and development


9,901



9,394



9,906Total expenses


61,579



61,281



67,558Income from operations


8,981



13,322



6,731Other (expense) income:Interest income


65



117



531Interest expense


(226
)


(4,265
)


(3,612
)Other (expense) income


(32
)


91



(556
)Total other (expense) income


(193
)


(4,057
)


(3,637
)Income (loss) before income taxes


8,788



9,265



3,094Income tax provision (benefit)


3,412



4,135



1,175Net income


5,376



5,130



1,919Preferred stock accretion


9,560



9,208



8,873Net income (loss) available to common stockholders

$
(4,184
)

$
(4,078
)

$
(6,954
)Net income (loss) available to common stockholders per share:Basic

$
(0.14
)

$
(0.14
)

$
(0.24
)Diluted

$
(0.14
)

$
(0.14
)

$
(0.24
)Shares used in calculation of net income (loss) available to
    common stockholders per share:Basic


30,954



29,947



29,111Diluted


30,954



29,947



29,111    49




---



##### 



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, 2008


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


























1,202Preferred stock accretion














(8,873
)










(8,873
)Treasury shares purchased


(190
)














(2,132
)






(2,132
)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 acquisition


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


$
139,662Comprehensive income:Net income














5,376











5,376Preferred stock accretion














(9,560
)










(9,560
)Treasury shares purchased


(207
)














(994
)






(994
)Treasury shares issued














(232
)


732







500Equity compensation cost










3,190















3,190Exercise of common stock options


480







1,455















1,455Issuance of common stock


1,044







132















132Balance at December 31, 2010


31,429


$
3


$
217,873


$
(75,192
)

$
(2,923
)

$
(0
)

$
139,761    50




---



##### 



ONLINE
    RESOURCES CORPORATION
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in
    thousands)
  Year Ended December 31,2010


2009


2008Operating activitiesNet income

$
5,376


$
5,130


$
1,919Adjustments to reconcile net income to net cash provided by
    operating activities:Deferred tax benefit


3,538



3,568



778Depreciation and amortization


19,052



20,236



21,270Equity compensation expense


2,853



4,201



4,696Write off and amortization of debt issuance costs


310



285



372(Gain) loss on disposal of assets, net






(14
)


50Provision for losses on accounts receivable


200



77



56(Gain) loss on investments






(91
)


556Change in fair value of stock price protection










1,565Change in fair value of theoretical swap derivative


(1,336
)


(106
)


(3,574
)Loss on cash flow hedge derivative security










261Changes in operating assets and liabilities, net of acquisitions:Restricted cash










1,535Consumer deposit receivable










8,279Consumer deposit payable










(10,555
)Redemption of certificate of deposit










2,294Accounts receivable


(2,193
)


(1,792
)


748Prepaid expenses and other assets


(368
)


60



1,595Deferred implementation costs


(1,549
)


(594
)


(137
)Accounts payable


(338
)


675



(438
)Accrued expenses and other liabilities


2,498



27



(3,319
)Interest payable


(7
)


20



(65
)Deferred revenues


1,852



1,525



(284
)Net cash provided by operating activities


29,888



33,207



27,602Investing activitiesCapital expenditures


(12,741
)


(9,260
)


(13,471
)Sale of property and equipment


0



46



Purchase of short-term investments


0







Sale of short-term investments


0



2,100



6,570Acquisition of Internet Transactions Solutions, Inc., net of
    cash acquired


0







(110
)Net cash used in investing activities


(12,741
)


(7,114
)


(7,011
)Financing activitiesNet proceeds from issuance of common stock


1,093



568



827Repurchase of shares issued related to ITS acquisition


0







(1,965
)Payments for ITS price protection


0







(112
)Repayment of 2007 Notes


(12,000
)


(26,687
)


(9,563
)Repayment of capital lease obligations


(20
)


(36
)


(36
)Net cash used in financing activities


(10,927
)


(26,155
)


(10,849
)Net increase (decrease) in cash and cash equivalents


6,220



(62
)


9,742Cash and cash equivalents at beginning of year


22,907



22,969



13,227Cash and cash equivalents at end of year

$
29,127


$
22,907


$
22,969    51




---



##### 



ONLINE
    RESOURCES CORPORATION
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS  (Continued)
  SUPPLEMENTAL
    INFORMATION TO STATEMENT OF CASH FLOWS:
  Year Ended December 31,2010

2009

2008Cash paid for interest

$
1,179


$
3,899


$
4,772Income taxes paid

$
728


$
839


$
632Net unrealized loss on hedge and investments

$
0


$
(1,420
)

$
(1,759
)   SUPPLEMENTAL
    SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
  Year Ended December 31,2010

2009

2008Common stock issued in connection with ITS acquisition

$



$



$
3,856    52




---



##### 



ONLINE
    RESOURCES CORPORATION
 NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  1.
    ORGANIZATION  e-Commerce
  2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Significant
    Accounting Policies
  Use of
    Estimates
    Principles
    of Consolidation
    Cash
    and Cash Equivalents
    Consumer
    Deposit Receivable and Payables
    Short-term
    Investments
     53




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair
    Value of Financial Instruments
  Financial Instruments.
  Concentration
    of Credit Risk
      Revenue
    Recognition
         54




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          percentage-of-completion
  percentage-of-completion
 55




---



##### 



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
   56




---



##### 



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
   57




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Theoretical
    Swap Derivative
  Series A-1 (Series A-1 Series A-1
  Derivative
    Instruments
        Reclassification
    Net
    (Loss) Income Available to Common Stockholders Per
    Share
   58




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Accumulated
    Comprehensive Income (Loss)
    Stock-Based
    Compensation
  Equity Compensation Plans,
  with-and-without
  Recently
    Issued Pronouncements
  tm
       59




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    3.
    REPORTABLE
    SEGMENTS     60




---



##### 



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


eCommerce


Corporate(1)


TotalYear ended December 31, 2010:Revenues:Account presentation services

$
5,415



3,993







9,408Payment services


62,040



50,967







113,007Relationship management services


8,113



295







8,408Professional services and other


14,752



3,938







18,690Total revenues


90,320



59,193







149,513Costs of revenues


46,357



32,596







78,953Gross profit


43,963



26,597







70,560Operating expenses


24,600



19,070



17,909



61,579Income (loss) from operations

$
19,363


$
7,527


$
(17,909
)

$
8,981Year 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
)

$
6,731     (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. 61




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  4.
    INVESTMENTS    5.
    PROPERTY
    AND EQUIPMENT    December 31,2010


2009Central processing systems and terminals

$
30,889


$
25,122Office furniture and equipment


4,907



4,118Central processing systems and terminals under capital leases


763



760Office furniture and equipment under capital leases


127



127Internal use software


37,639



33,440Leasehold improvements


7,552



7,363Total


81,877



70,930Less accumulated depreciation and amortization


(30,320
)


(24,543
)Less accumulated amortization of internal use software


(25,524
)


(19,967
)Less accumulated depreciation on assets held under capital leases


(888
)


(859
)$
25,145


$
25,561   6.
    GOODWILL
    AND INTANGIBLE ASSETS    Banking


eCommerceSegment


Segment


TotalBalance at December 31, 2008

$
80,395



101,121



181,516Adjustments










Balance at December 31, 2009


80,395



101,121



181,516Adjustments










Balance at December 31, 2010

$
80,395


$
101,121


$
181,516  62




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2010


2009Gross carrying amount:Purchased technology

$
11,171


$
11,171Customer lists


40,754



40,754Patents and Trademarks


133



Non-compete agreements


33



33Total gross carrying amount


52,091



51,958Accumulated amortization:Less accumulated amortization of purchased technology


(8,915
)


(7,304
)Less accumulated amortization of customer lists


(28,972
)


(24,653
)Less accumulated amortization of patents and trademarks


(14
)


Less accumulated amortization of non-compete


(33
)


(29
)Total accumulated amortization


(37,934
)


(31,986
)Total intangible assets

$
14,157


$
19,972       7.
    COMMITMENTS &
    CONTINGENCIES      Operating2011

$
4,8882012


4,5412013


4,3532014


3,6532015


1,666Thereafter


1,956Total minimum lease payments

$
21,057   Kent D. Stuckey v. Online Resources
    Corporation, U.S. District Court for Southern Dist. Ohio,
    Eastern Div., Case
    No. 2:08-CV-1188.
 63




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Matthew P. Lawlor v. Online Resources
    Corporation Circuit Court of Fairfax County, Virginia,
    Case
    No. 2010-5601
    Leon Stambler v. Intuit Inc., et al., Civil
    Action
    No. 2:10-C-181,
    Eastern Dist. Texas, Marshall Div.
  8.
    INCOME
    TAXES       64




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            December 31,2010


2009Deferred tax assets:Net operating loss carryforwards

$
25,477


$
32,311Deferred wages


1,943



2,420Deferred revenue (net of deferred cost)


1,005



1,005Deferred rent


974



1,090Fixed assets


1,508



878Other credits


1,658



1,351Other deferred tax assets


1,170



334Total deferred tax assets


33,735



39,389Valuation allowance for deferred tax assets


(1,813
)


(1,690
)Deferred liabilities:Acquired intangible assets


(5,493
)


(7,732
)Total deferred tax liabilities


(5,493
)


(7,732
)Net deferred tax assets

$
26,429


$
29,967  65




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year Ended December 31,2010


2009


2008Tax expense at statutory Federal rate

$
2,987


$
3,150


$
1,052Effect of:State income tax, net


516



150



190Other permanent differences, net


(345
)


(3
)


(370
)Deferred tax adjustment related to stock compensation


245



860



Other


9



8



71(Decrease) increase in valuation allowance






(30
)


232Income tax expense (benefit)

$
3,412


$
4,135


$
1,175Income tax expense consists of the following (in thousands):Current ExpenseFederal

$
306


$
360


$
317State


635



207



80941



567



397Deferred ExpenseFederal


2,324



3,548



570State


147



20



2082,471



3,568



778Income tax expense (benefit)

$
3,412


$
4,135


$
1,175        66




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  9.
    FINANCIAL
    INSTRUMENTS  Derivatives
    Instruments and Hedging Activities
  Cash Flow
    Hedging Strategy
      Theoretical
    Swap Derivative
  Series A-1 (Series A-1 Series A-1
    December 31,

December 31,

Balance Sheet2010

2009

LocationAsset Derivatives:Theoretical swap(1)

$
6,004


$
4,668



Other assets     (1)
    
    See Note 15, Fair Value Measurements, for a description of
    how the derivatives shown above are valued. 67




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended December 31,Derivative Not Designated as Hedging Instrument:

2010

2009Amount of gain (loss) recognized in income on derivative, pre tax

$
1,336


$
106   Year Ended December 31,Derivative Cash Flow Hedging Relationships:

2010

2009Amount of loss recognized in OCI on derivative, after tax

$



$
878Amount of loss reclassified from OCI into income, pre tax

$



$
1,788     (1)
    
    See Note 14, Fair Value Measurements, for additional
    information. The gain (loss) recognized in income is included in
    interest expense.  Series A-1
    Preferred Stock
  Series A-1 Redeemable Convertible
    Preferred Stock, A-1
  ITS Price
    Protection
  trading-day
       68




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    10.
    SENIOR
    SECURED NOTES          MaturingYear

Amounts2011

$
27,1882012

$
9,5622013

$
02014

$
02015

$
0   11.
    REDEEMABLE
    CONVERTIBLE PREFERRED STOCK  Series A-1
    Redeemable Convertible Preferred Stock
  Series A-1. Series A-1
 69




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  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
  Series A-1 Series A-1
  Series B
    Preferred Stock
   70




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  12.
    NET
    (LOSS) INCOME AVAILABLE TO COMMON STOCKHOLDERS PER
    SHARE    Year Ended December 31,2010


2009


2008Net (loss) income available to stockholders

$
(4,184
)

$
(4,078
)

$
(6,954
)Weighted average shares outstanding used in calculation of net
    income (loss) per share:Basic


30,954



29,947



29,111Dilutive options










Diluted


30,954



29,947



29,111Net (loss) income available to common stockholders per share:Basic

$
(0.14
)

$
(0.14
)

$
(0.24
)Diluted

$
(0.14
)

$
(0.14
)

$
(0.24
)     13.
    EMPLOYEE
    BENEFIT PLANS  Employee
    Savings and Retirement Plan
    Employee
    Stock Purchase Plan
    14.
    EQUITY
    COMPENSATION PLANS   71




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Restricted
    Stock and Option Plans
    8-K
    Stock
    Options
    Year Ended December 31,2010

2009

2008Dividend yield










Expected volatility


62
%


62
%


51
%Risk-free interest rate


2.75
%


1.9
%


3.37
%Expected life in years


6.4



5.8



5.8   Dividend Yield.
 72




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Expected Volatility.
  Risk-Free Interest Rate.
  Expected Life of Option Term.
  Forfeiture Rate.
    Weighted-Weighted-


AverageAverage


Remaining


AggregateExercise


Contract


IntrinsicShares


Price


Term


ValueOutstanding at January 1, 2010


3,254


$
5.52Granted


281


$
4.64Exercised


(480
)

$
3.03Forfeited or expired


(543
)

$
7.75Outstanding at December 31, 2010


2,512


$
5.41



3.17


$
2,175Vested or expected to vest at December 31, 2010


2,504


$
5.41



3.16


$
2,172Exercisable at December 31, 2010


1,916


$
5.64



2.39


$
1,867          73




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Restricted
    Stock Units
    Weighted-AverageGrant-DateShares


Fair ValueNon-vested at January 1, 2010


1,523


$
5.07Granted


1,046



4.70Vested


(805
)


4.53Forfeited


(630
)


5.48Non-vested at December 31, 2010


1,134



4.88           15.
    FAIR
    VALUE MEASUREMENTS         74




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Fair Value Measurements at December 31, 2010QuotedPrices inActive


SignificantMarkets for


Other


SignificantIdentical


Observable


UnobservableAssets


Inputs


Inputs(Level 1)


(Level 2)


(Level 3)


TotalFinancial assets (in thousands):Merrill Lynch Institutional Fund

$
12,162


$



$



$
12,162Theoretical swap derivative(1)










6,004



6,004$
12,162


$



$
6,004


$
18,166   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(1)










4,668



4,668$
7,623


$



$
4,668


$
12,291     (1)
    
    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.    Strategic Cash


TheoreticalFund Investment


Swap DerivativeBalance as of January 1, 2010

$



$
4,668Realized and unrealized gain(1)






1,336Redemptions(2)






Balance as of December 31, 2010

$



$
6,004   75




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  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     (1)
    
    The realized and unrealized gains are included as other
    (expense) income and interest expense in the consolidated
    statements of operations for the years ended December 31,
    2010 and December 31, 2009.(2)
    
    Redemptions are payments received by the Company for partial
    liquidation of the Columbia Strategic Cash Fund.  16.
    SUBSEQUENT
    EVENT    17.
    SUMMARIZED
    QUARTERLY DATA  (UNAUDITED)    Quarter EndedMarch 31,

June 30,

September 30,

December 31,2010

2010

2010

2010Total revenues

$
38,582


$
36,359


$
36,795


$
37,777Gross profit

$
18,956


$
16,973


$
17,401


$
17,230Net income

$
2,179


$
1,069


$
1,702


$
426Net (loss) income available to common stockholders

$
(157
)

$
(1,305
)

$
(711
)

$
(2,011
)Net (loss) income available to common stockholders per share:Basic

$
(0.01
)

$
(0.04
)

$
(0.02
)

$
(0.06
)Diluted

$
(0.01
)

$
(0.04
)

$
(0.02
)

$
(0.06
)   76




---



##### 



ONLINE
    RESOURCES CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Quarter EndedMarch 31,

June 30,

September 30,

December 31,2009

2009

2009

2009Total revenues

$
39,240


$
37,783


$
36,594


$
38,246Gross profit

$
19,576


$
17,767


$
17,778


$
19,482Net (loss) 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
)    77




---



##### 



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     78




---



##### 



Internal Control 
    Integrated Framework
    Item 9B.
    Other
    Information   79




---



##### 



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   80




---



##### 



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    Consolidated Financial Statements. Form 10-K.
  Report of Independent Registered Public
    Accounting Firm


46Consolidated Balance Sheets


48Consolidated Statements of Operations


49Consolidated Statements of Stockholders
    Equity


50Consolidated Statements of Cash Flows


51Notes to Consolidated Financial Statements


53   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 Plan
    (incorporated by reference from Form 10-Q for the quarter
    ended June 30, 2008 on August 11, 2008)10
.6

Credit Agreement with Bank of America dated February 21,
    2007 (incorporated by reference from
    Form 8-K
    on February 26, 2007)10
.7

Employment Agreement dated June 14, 2010 between Online
    Resources and Joseph L. Cowan23
.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  81




---



##### 



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, 2008

$
84


$
56


$
56
(1)

$
84Year ended December 31, 2009

$
84


$
16


$



$
100Year ended December 31, 2010

$
100


$
200


$
68
(1)

$
232Allowance for deferred tax asset:Year ended December 31, 2008

$
5,883


$
255
(2)

$
4,412
(3)

$
1,726Year ended December 31, 2009

$
1,726


$



$
36


$
1,690Year ended December 31, 2010

$
1,690


$
122


$



$
1,812     Notes:
  (1)
    
    Uncollectable accounts written off.(2)
    
    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.(3)
    
    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. 82




---



##### 



SIGNATURES      By:
    /s/  JOSEPH
    L. COWAN   President and Chief Executive Officer
    Signature

Title

Date/s/  JOSEPH
    L. COWANJoseph
    L. Cowan

President and Chief Executive Officer (Principal Executive
    Officer)

March 15, 2011/s/  CATHERINE
    A. GRAHAMCatherine
    A. Graham

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

March 15, 2011/s/  DAVID
    G. MATHEWS, IIIDavid
    G. Mathews, III

Vice President, Accounting (Principal Accounting Officer)

March 15, 2011/s/  STEPHEN
    S. COLEStephen
    S. Cole

Director

March 15, 2011/s/  JOHN
    DORMANJohn
    Dorman

Director

March 15, 2011/s/  EDWARD
    D. HOROWITZEdward
    D. Horowitz

Director

March 15, 2011/s/  BRUCE
    A. JAFFEBruce
    A. Jaffe

Director

March 15, 2011/s/  DONALD
    W. LAYDEN, JR.Donald
    W. Layden, Jr.

Director

March 15, 2011/s/  MICHAEL
    E. LEITNERMichael
    E. Leitner

Director

March 15, 2011/s/  ERVIN
    R. SHAMESErvin
    R. Shames

Director

March 15, 2011/s/  WILLIAM
    H. WASHECKAWilliam
    H. Washecka

Director

March 15, 2011/s/  BARRY
    D. WESSLERBarry
    D. Wessler

Director

March 15, 2011  83