EXHIBIT 13
 Business of DCB Financial Corp
     Common Stock and Shareholder Matters




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##### 



Quarter endedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2010
    
    
    2010
    
    
    2010
    
    
    2010High
    
    $
    7.25
    
    
    $
    7.25
    
    
    $
    6.20
    
    
    $
    4.17Low
    
    
    6.00
    
    
    
    5.00
    
    
    
    3.70
    
    
    
    3.02Dividends per share
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2009
    
    
    2009
    
    
    2009
    
    
    2009High
    
    $
    9.00
    
    
    $
    9.00
    
    
    $
    10.75
    
    
    $
    9.50Low
    
    
    5.10
    
    
    
    5.40
    
    
    
    7.65
    
    
    
    6.50Dividends per share
    
    
    0.02
    
    
    
    0.02
    
    
    
    0.02
    
    
    
    0.00
   Selected Consolidated Financial Information and Other Data
  Selected consolidated financial condition data:
    
    At December 31,(Dollars in thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Total assets
    
    $
    565,105
    
    
    $
    675,022
    
    
    $
    712,564
    
    
    $
    680,786
    
    
    $
    684,004Cash and cash equivalents
    
    
    33,521
    
    
    
    41,453
    
    
    
    34,658
    
    
    
    32,068
    
    
    
    15,894Securities available for sale
    
    
    69,597
    
    
    
    94,100
    
    
    
    111,360
    
    
    
    89,009
    
    
    
    88,071Securities held to maturity
    
    
    1,313
    
    
    
    1,752
    
    
    
    8,002
    
    
    
    
    
    
    
    Net loans
    
    
    412,617
    
    
    
    479,003
    
    
    
    507,076
    
    
    
    512,195
    
    
    
    547,021Deposits
    
    
    465,076
    
    
    
    557,455
    
    
    
    565,153
    
    
    
    510,874
    
    
    
    524,094Borrowed funds
    
    
    59,767
    
    
    
    66,159
    
    
    
    88,384
    
    
    
    110,082
    
    
    
    95,512Shareholders equity
    
    
    37,417
    
    
    
    49,343
    
    
    
    56,059
    
    
    
    57,068
    
    
    
    61,399
  24




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##### 



Selected Operating Data
    
    Year ended December 31,(In thousands, except per share data)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Interest income
    
    $
    28,118
    
    
    $
    32,341
    
    
    $
    38,405
    
    
    $
    43,556
    
    
    $
    44,407Interest expense
    
    
    6,925
    
    
    
    10,558
    
    
    
    16,743
    
    
    
    22,154
    
    
    
    21,315Net interest income
    
    
    21,193
    
    
    
    21,783
    
    
    
    21,662
    
    
    
    21,402
    
    
    
    23,092Provision for loan losses
    
    
    11,040
    
    
    
    9,398
    
    
    
    8,177
    
    
    
    10,159
    
    
    
    1,808Net interest income after
provision for loan losses
    
    
    10,153
    
    
    
    12,385
    
    
    
    13,485
    
    
    
    11,243
    
    
    
    21,284Noninterest income
    
    
    6,115
    
    
    
    3,219
    
    
    
    5,487
    
    
    
    5,928
    
    
    
    5,619Noninterest expense
    
    
    23,488
    
    
    
    22,989
    
    
    
    20,884
    
    
    
    17,962
    
    
    
    16,452Income (loss) before income tax
    
    
    (7,220
    )
    
    
    (7,385
    )
    
    
    (1,912
    )
    
    
    (791
    )
    
    
    10,451Income tax expense (credit)
    
    
    5,110
    
    
    
    (3,185
    )
    
    
    (2,241
    )
    
    
    (930
    )
    
    
    3,098Net income (loss)
    
    $
    (12,330
    )
    
    $
    (4,200
    )
    
    $
    329
    
    
    $
    139
    
    
    $
    7,353Per Share Data:Basic earnings (loss) per share
    
    $
    (3.32
    )
    
    $
    (1.13
    )
    
    $
    0.09
    
    
    $
    0.04
    
    
    $
    1.93Diluted earnings (loss) per share
    
    $
    (3.32
    )
    
    $
    (1.13
    )
    
    $
    0.09
    
    
    $
    0.04
    
    
    $
    1.92Dividends declared per share
    
    $
    0.00
    
    
    $
    0.06
    
    
    $
    0.56
    
    
    $
    0.60
    
    
    $
    0.55
 At or for the year ended December 31,Selected Financial Ratios:
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Interest rate spread
    
    
    3.44
    %
    
    
    3.21
    %
    
    
    2.97
    %
    
    
    2.90
    %
    
    
    2.85
    %Net interest margin
    
    
    3.58
    
    
    
    3.38
    
    
    
    3.29
    
    
    
    3.36
    
    
    
    3.48Return on average equity
    
    
    *
    
    
    
    *
    
    
    
    0.55
    
    
    
    0.23
    
    
    
    12.55Return on average assets
    
    
    *
    
    
    
    *
    
    
    
    0.05
    
    
    
    0.02
    
    
    
    1.05Average equity to average assets
    
    
    7.32
    
    
    
    7.64
    
    
    
    8.42
    
    
    
    8.88
    
    
    
    8.39Dividend payout ratio
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    28.50Allowance for loan losses as
a percentage of loans past
due over 90 days
    
    
    96.09
    
    
    
    84.08
    
    
    
    105.01
    
    
    
    64.05
    
    
    
    64.05
 *
    
    Not meaningful
  25




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##### 



Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
  Forward-Looking Statements
   Recent Accounting Standards
  Critical Accounting Policies
   26




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##### 



Overview of 2010
     27




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##### 




    
    The Corporations assets totaled $565,105 at December 31, 2010, compared to $675,022 at
December 31, 2009, a decrease of $109,917, or 16.3%. The decrease in assets was mainly
attributed to a decline in loans due to reduced opportunity in the market, and reduced
investment securities balances to increase cash and cash-like balances.
 
    
    Net loss for 2010 totaled $12,330, an increase in operating losses of $8,130, compared
to a net loss of $4,200 for fiscal year 2009. The 2010 operating results were negatively
affected by increases in provision expense, other-than-temporary-impairment losses on
held-to-maturity investments and increases in operating expense for consulting and legal to
manage non-performing loan portfolios. Additionally, the Corporation recorded a valuation
allowance on its deferred tax assets during 2010.
 
    
    The provision for loan losses totaled $11,040 for the year ended December 31, 2010
compared to $9,398 in 2009. Increased losses in commercial and commercial real estate
loans were the main driver of this increase. DCB maintains an allowance for loan losses at
a level considered adequate to absorb managements estimate of probable inherent credit
losses in its portfolios.
 
    
    The Corporations net interest income decreased slightly from the prior year to $21,193
in 2010 from $21,783 in 2009. This is mainly attributed to the lower level of earning
assets from year to year. The decline in the balance sheet was the result of Managements
actions related to reducing non-core time deposits which were funded through loan and
investment portfolio run-off.
 
    
    The ability to generate earnings is impacted in part by competitive pricing on loans and
deposits, and by changes in the rates on various U.S. Treasury, U.S. Government Agency and
State and political subdivision issues which comprise a significant portion of the Banks
investment portfolio. The Bank is competitive with interest rates and loan fees that it
charges, and in pricing and variety of accounts it offers to the depositor. The
Corporation confirms this by completing regular rate shops and comparisons versus competing
financial services companies. The dominant pricing mechanism on loans is the Prime
interest rate as published in the Wall Street Journal, on a fixed rate plus spread over
funding costs. The interest spread depends on the overall account relationship and the
creditworthiness of the borrower.
 
    
    Deposit rates are reviewed weekly by management and are discussed by the Asset/Liability
Committee on a monthly basis. The Banks primary objective in setting deposit rates is to
remain competitive in the market area and develop funding opportunities while earning an
adequate interest rate margin.
 Analysis of Financial Condition for the Years Ended December 31, 2010 and December 31, 2009
     28




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##### 



Comparison of Results of Operations for the Years Ended December 31, 2010 and December 31, 2009
 Net Loss 
 Net Interest Income
   Noninterest Income
  Noninterest Expense
  29




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##### 



Provision Expense 
    Comparison of Results of Operations for the Years Ended December 31, 2009 and December 31, 2008
 Net Income (Loss) 
 Net Interest Income 
   30




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##### 



Provision and Allowance for Loan Losses 
     31




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##### 



Noninterest Income 
 Noninterest Expense 
 Income Taxes 
  32




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##### 



Margin Analysis 
 Year ended December 31,2010
    
    
    2009
    
    
    2008Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    Interestoutstanding
    
    
    earned/
    
    
    Yield/
    
    
    outstanding
    
    
    earned/
    
    
    Yield/
    
    
    outstanding
    
    
    earned/
    
    
    Yield/balance
    
    
    paid
    
    
    rate
    
    
    balance
    
    
    paid
    
    
    rate
    
    
    balance
    
    
    paid
    
    
    rateInterest-earning assets:Federal funds sold
    
    $
    33,426
    
    
    $
    133
    
    
    
    0.40
    %
    
    $
    43,057
    
    
    $
    167
    
    
    
    0.39
    %
    
    $
    30,930
    
    
    $
    614
    
    
    
    1.99
    %Taxable securities
    
    
    75,836
    
    
    
    2,697
    
    
    
    3.56
    
    
    
    75,050
    
    
    
    3,299
    
    
    
    4.40
    
    
    
    87,169
    
    
    
    3,954
    
    
    
    4.54Tax-exempt securities
    
    
    16,608
    
    
    
    645
    
    
    
    3.88
    
    
    
    22,452
    
    
    
    987
    
    
    
    4.40
    
    
    
    23,589
    
    
    
    1,010
    
    
    
    4.28Loans (includes nonaccrual loans)
    
    
    465,983
    
    
    
    24,643
    
    
    
    5.29
    
    
    
    504,844
    
    
    
    27,888
    
    
    
    5.52
    
    
    
    517,635
    
    
    
    32,827
    
    
    
    6.34Total interest-earning assets
    
    
    591,853
    
    
    
    28,118
    
    
    
    4.75
    
    
    
    645,403
    
    
    
    32,341
    
    
    
    5.01
    
    
    
    659,323
    
    
    
    38,405
    
    
    
    5.82Noninterest-earning assets
    
    
    47,403
    
    
    
    
    
    
    
    
    
    
    
    62,481
    
    
    
    
    
    
    
    
    
    
    
    53,246Total assets
    
    $
    639,256
    
    
    
    
    
    
    
    
    
    
    $
    707,884
    
    
    
    
    
    
    
    
    
    
    $
    712,569Interest-bearing liabilities:Demand and money market deposits
    
    $
    199,457
    
    
    $
    471
    
    
    
    0.24
    %
    
    $
    198,012
    
    
    $
    651
    
    
    
    0.33
    %
    
    $
    221,018
    
    
    $
    3,128
    
    
    
    1.42
    %Savings deposits
    
    
    33,607
    
    
    
    49
    
    
    
    0.15
    
    
    
    32,828
    
    
    
    54
    
    
    
    0.16
    
    
    
    29,697
    
    
    
    136
    
    
    
    0.46Certificates of deposit
    
    
    232,474
    
    
    
    3,662
    
    
    
    1.58
    
    
    
    292,095
    
    
    
    6,624
    
    
    
    2.27
    
    
    
    251,665
    
    
    
    9,426
    
    
    
    3.75Total deposits
    
    
    465,538
    
    
    
    4,182
    
    
    
    
    
    
    
    522,935
    
    
    
    7,329
    
    
    
    
    
    
    
    502,380
    
    
    
    12,690Borrowed funds
    
    
    64,647
    
    
    
    2,743
    
    
    
    4.24
    
    
    
    64,246
    
    
    
    3,229
    
    
    
    5.03
    
    
    
    84,825
    
    
    
    4,053
    
    
    
    4.78Total interest-bearing liabilities
    
    
    530,185
    
    
    
    6,925
    
    
    
    1.31
    
    
    
    587,181
    
    
    
    10,558
    
    
    
    1.80
    
    
    
    587,205
    
    
    
    16,743
    
    
    
    2.85Noninterest-bearing liabilities
    
    
    62,251
    
    
    
    
    
    
    
    
    
    
    
    66,612
    
    
    
    
    
    
    
    
    
    
    
    65,395Total liabilities
    
    
    592,436
    
    
    
    
    
    
    
    
    
    
    
    653,793
    
    
    
    
    
    
    
    
    
    
    
    652,600Shareholders equity
    
    
    46,820
    
    
    
    
    
    
    
    
    
    
    
    54,091
    
    
    
    
    
    
    
    
    
    
    
    59,969Total liabilities and shareholders
equity
    
    $
    639,256
    
    
    
    
    
    
    
    
    
    
    $
    707,884
    
    
    
    
    
    
    
    
    
    
    $
    712,569Net interest income; interest rate spread
    
    
    
    
    
    $
    21,193
    
    
    
    3.44
    %
    
    
    
    
    
    $
    21,783
    
    
    
    3.21
    %
    
    
    
    
    
    $
    21,662
    
    
    
    2.97
    %Net interest margin (net interest income
as a percent of average interest-earning
assets)
    
    
    
    
    
    
    
    
    
    
    3.58
    %
    
    
    
    
    
    
    
    
    
    
    3.38
    %
    
    
    
    
    
    
    
    
    
    
    3.29
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    111.63
    %
    
    
    
    
    
    
    
    
    
    
    109.92
    %
    
    
    
    
    
    
    
    
    
    
    112.28
    %
  33




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##### 



Year ended December 31,2010 vs. 2009
    
    
    2009 vs. 2008Increase
    
    
    
    
    
    
    Increase(decrease)
    
    
    
    
    
    
    (decrease)due to
    
    
    
    
    
    
    due toVolume
    
    
    Rate
    
    
    Total
    
    
    Volume
    
    
    Rate
    
    
    TotalInterest income attributable to:Federal funds sold
    
    $
    (41
    )
    
    $
    (46
    )
    
    $
    (87
    )
    
    $
    236
    
    
    $
    (684
    )
    
    $
    (448
    )Taxable securities
    
    
    35
    
    
    
    (585
    )
    
    
    (550
    )
    
    
    (550
    )
    
    
    (105
    )
    
    
    (655
    )Tax-exempt securities
    
    
    (257
    )
    
    
    (84
    )
    
    
    (341
    )
    
    
    (49
    )
    
    
    26
    
    
    
    (23
    )Loans
    
    
    (2,146
    )
    
    
    (1,099
    )
    
    
    (3,245
    )
    
    
    (810
    )
    
    
    (4,128
    )
    
    
    (4,938
    )Total interest income
    
    
    (2,409
    )
    
    
    (1,814
    )
    
    
    (4,223
    )
    
    
    (1,173
    )
    
    
    (4,891
    )
    
    
    (6,064
    )Interest expense attributable to:Demand and money market deposits
    
    
    5
    
    
    
    (185
    )
    
    
    (180
    )
    
    
    (326
    )
    
    
    (2,151
    )
    
    
    (2,477
    )Savings deposits
    
    
    1
    
    
    
    (6
    )
    
    
    (5
    )
    
    
    14
    
    
    
    (97
    )
    
    
    (83
    )Certificates of deposit
    
    
    (1,352
    )
    
    
    (1,610
    )
    
    
    (2,962
    )
    
    
    1,514
    
    
    
    (4,316
    )
    
    
    (2,802
    )Borrowed funds
    
    
    (3,228
    )
    
    
    2,742
    
    
    
    (486
    )
    
    
    (982
    )
    
    
    159
    
    
    
    (823
    )Total interest expense
    
    
    (4,574
    )
    
    
    941
    
    
    
    (3,633
    )
    
    
    220
    
    
    
    (6,405
    )
    
    
    (6,185
    )Increase (decrease) in net
interest income
    
    $
    2,165
    
    
    $
    (2,755
    )
    
    $
    (590
    )
    
    $
    (1,393
    )
    
    $
    1,514
    
    
    $
    121
 Asset and Liability Management and Market Risk
      34




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##### 



Change in

    
    December 31, 2010
    
    
    December 31, 2009Interest Rate

    
    $ Change
    
    
    % Change
    
    
    NPV
    
    
    $ Change
    
    
    % Change
    
    
    NPV(Basis Points)

    
    In NPV
    
    
    In NPV
    
    
    Ratio
    
    
    In NPV
    
    
    In NPV
    
    
    Ratio+400
    
    
    
    
    $
    (11,714
    )
    
    
    (21.61
    )%
    
    
    8.06
    %
    
    
    *
    
    
    
    *
    
    
    
    *+300
    
    
    
    
    
    (8,447
    )
    
    
    (15.58
    )
    
    
    8.50
    
    
    $
    (1,358
    )
    
    
    (2.29
    )%
    
    
    8.98
    %+200
    
    
    
    
    
    (4,880
    )
    
    
    (9.00
    )
    
    
    8.96
    
    
    
    326
    
    
    
    .55
    
    
    
    9.16+100
    
    
    
    
    
    (1,582
    )
    
    
    (2.92
    )
    
    
    9.35
    
    
    
    901
    
    
    
    1.52
    
    
    
    9.04Base
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -100
    
    
    
    
    
    (4,342
    )
    
    
    (8.01
    )
    
    
    8.57
    
    
    
    (5,495
    )
    
    
    (9.28
    )
    
    
    7.89
 *
    -
    Not measured in 2009
   Liquidity
    35




---



##### 



Capital Resources
      36




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##### 



2010
    
    
    2009ASSETSCash and due from financial institutions
    
    $
    10,024
    
    
    $
    10,082Interest-bearing deposits
    
    
    23,497
    
    
    
    26,371Federal funds sold and overnight investments
    
    
    
    
    
    
    5,000Total cash and cash equivalents
    
    
    33,521
    
    
    
    41,453Securities available for sale
    
    
    69,597
    
    
    
    94,100Securities held to maturity
    
    
    1,313
    
    
    
    1,752Total securities
    
    
    70,910
    
    
    
    95,852Loans held for sale, at lower of cost or fair value
    
    
    753
    
    
    
    2,442Loans
    
    
    424,864
    
    
    
    489,482Less allowance for loan losses
    
    
    (12,247
    )
    
    
    (10,479
    )Net loans
    
    
    412,617
    
    
    
    479,003Real estate owned
    
    
    5,284
    
    
    
    4,912Investment in FHLB stock
    
    
    3,799
    
    
    
    3,799Premises and equipment, net
    
    
    13,175
    
    
    
    14,435Investment in unconsolidated affiliates
    
    
    
    
    
    
    1,439Bank-owned life insurance
    
    
    17,073
    
    
    
    16,326Accrued interest receivable and other assets
    
    
    7,973
    
    
    
    15,361Total assets
    
    $
    565,105
    
    
    $
    675,022LIABILITIESDepositsNoninterest-bearing
    
    $
    63,695
    
    
    $
    60,502Interest-bearing
    
    
    401,381
    
    
    
    496,953Total deposits
    
    
    465,076
    
    
    
    557,455Federal funds purchased and other short-term borrowings
    
    
    1,265
    
    
    
    3,011Federal Home Loan Bank advances
    
    
    58,502
    
    
    
    63,148Accrued interest payable and other liabilities
    
    
    2,848
    
    
    
    2,065Total liabilities
    
    
    527,691
    
    
    
    625,679SHAREHOLDERS EQUITYCommon stock, no par value, 7,500,000 shares authorized,
4,273,908 shares issued
    
    
    3,785
    
    
    
    3,785Retained earnings
    
    
    47,883
    
    
    
    60,213Treasury stock, at cost, 556,523 shares
    
    
    (13,494
    )
    
    
    (13,494
    )Accumulated other comprehensive loss
    
    
    (760
    )
    
    
    (1,161
    )Total shareholders equity
    
    
    37,414
    
    
    
    49,343Total liabilities and shareholders equity
    
    $
    565,105
    
    
    $
    675,022
   37




---



##### 



2010
    
    
    2009
    
    
    2008Interest and dividend incomeLoans
    
    $
    24,643
    
    
    $
    27,888
    
    
    $
    32,827Taxable securities
    
    
    2,697
    
    
    
    3,299
    
    
    
    3,954Tax-exempt securities
    
    
    645
    
    
    
    987
    
    
    
    1,010Federal funds sold and other
    
    
    133
    
    
    
    167
    
    
    
    614Total interest income
    
    
    28,118
    
    
    
    32,341
    
    
    
    38,405Interest expenseDeposits
    
    
    4,182
    
    
    
    7,329
    
    
    
    12,690Borrowings
    
    
    2,743
    
    
    
    3,229
    
    
    
    4,053Total interest expense
    
    
    6,925
    
    
    
    10,558
    
    
    
    16,743Net interest income
    
    
    21,193
    
    
    
    21,783
    
    
    
    21,662Provision for loan losses
    
    
    11,040
    
    
    
    9,398
    
    
    
    8,177Net interest income after provision for loan losses
    
    
    10,153
    
    
    
    12,385
    
    
    
    13,485Noninterest incomeService charges on deposit accounts
    
    
    2,726
    
    
    
    2,621
    
    
    
    2,653Trust department income
    
    
    960
    
    
    
    859
    
    
    
    910Gain on sale of securities
    
    
    301
    
    
    
    631
    
    
    
    307Gain (Loss) on sale of assets
    
    
    813
    
    
    
    (780
    )
    
    
    (1,080
    )Gain on sale of loans
    
    
    401
    
    
    
    311
    
    
    
    193Treasury management fees
    
    
    417
    
    
    
    469
    
    
    
    533Data processing servicing fees
    
    
    606
    
    
    
    573
    
    
    
    491Earnings on bank owned life insurance
    
    
    747
    
    
    
    703
    
    
    
    660Total other-than-temporary impairment losses
    
    
    (487
    )
    
    
    (6,301
    )
    
    
    Portion of loss recognized in other comprehensive
income (before taxes)
    
    
    (815
    )
    
    
    3,680
    
    
    
    Net impairment losses recognized in income
    
    
    (1,302
    )
    
    
    (2,621
    )
    
    
    Other
    
    
    446
    
    
    
    453
    
    
    
    820Total noninterest income
    
    
    6,115
    
    
    
    3,219
    
    
    
    5,487Noninterest expenseSalaries and employee benefits
    
    
    10,285
    
    
    
    10,276
    
    
    
    9,918Occupancy and equipment
    
    
    4,037
    
    
    
    4,496
    
    
    
    4,452Professional services
    
    
    1,908
    
    
    
    992
    
    
    
    1,060Advertising
    
    
    412
    
    
    
    439
    
    
    
    447Postage, freight and courier
    
    
    356
    
    
    
    334
    
    
    
    306Supplies
    
    
    261
    
    
    
    301
    
    
    
    338State franchise taxes
    
    
    615
    
    
    
    656
    
    
    
    499Federal deposit insurance premiums
    
    
    1,460
    
    
    
    1,815
    
    
    
    604Other
    
    
    4,154
    
    
    
    3,680
    
    
    
    3,260Total noninterest expense
    
    
    23,488
    
    
    
    22,989
    
    
    
    20,884Loss before income tax (benefit)
    
    
    (7,220
    )
    
    
    (7,385
    )
    
    
    (1,912
    )Income tax expense (benefit)
    
    
    5,110
    
    
    
    (3,185
    )
    
    
    (2,241
    )Net income (loss)
    
    $
    (12,330
    )
    
    $
    (4,200
    )
    
    $
    329Basic earnings (loss) per common share
    
    $
    (3.32
    )
    
    $
    (1.13
    )
    
    $
    0.09Diluted earnings (loss) per common share
    
    $
    (3.32
    )
    
    $
    (1.13
    )
    
    $
    0.09
   38




---



##### 



2010
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    (12,330
    )
    
    $
    (4,200
    )
    
    $
    329Unrealized gains on securities
Available-for-sale, net of related taxes
of $15, $430 and $490 in
2010, 2009 and 2008, respectively
    
    
    30
    
    
    
    834
    
    
    
    951Net unrealized gains (losses) on securities held-to-maturity for which a portion of an
other-than-temporary impairment
has been recognized in income,
net of taxes of $277, $1,251and $0
    
    
    538
    
    
    
    (2,429
    )
    
    
    Amortization of unrealized losses on held-to-maturity securities, net of taxes
of $16, $7 and $0
    
    
    32
    
    
    
    15
    
    
    
    Reclassification adjustment for realized gains
included in net income, net of taxes
of $102, $215 and $104 in 2010, 2009 and
2008, respectively
    
    
    (199
    )
    
    
    (416
    )
    
    
    (203
    )Comprehensive income (loss)
    
    $
    (11,929
    )
    
    $
    (6,196
    )
    
    $
    1,077
   39




---



##### 



AccumulatedOther
    
    
    TotalCommon
    
    
    Retained
    
    
    Treasury
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Earnings
    
    
    Stock
    
    
    Income (Loss)
    
    
    EquityBalance at January 1, 2008
    
    $
    3,785
    
    
    $
    66,690
    
    
    $
    (13,494
    )
    
    $
    87
    
    
    $
    57,068Net income
    
    
    
    
    
    
    329
    
    
    
    
    
    
    
    
    
    
    
    329Unrealized gains on securities
designated as available-for-sale, net of realized gains and
tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    748
    
    
    
    748Dividends ($0.56 per share)
    
    
    
    
    
    
    (2,086
    )
    
    
    
    
    
    
    
    
    
    
    (2,086
    )Balance at December 31, 2008
    
    
    3,785
    
    
    
    64,933
    
    
    
    (13,494
    )
    
    
    835
    
    
    
    56,059Net loss
    
    
    
    
    
    
    (4,200
    )
    
    
    
    
    
    
    
    
    
    
    (4,200
    )Unrealized gains on securities
designated as available-for-sale, net of realized gains
and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    418
    
    
    
    418Unrealized losses on securities
designated as held-to-maturity, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,414
    )
    
    
    (2,414
    )Dividends ($0.06 per share)
    
    
    
    
    
    
    (520
    )
    
    
    
    
    
    
    
    
    
    
    (520
    )Balance at December 31, 2009
    
    
    3,785
    
    
    
    60,213
    
    
    
    (13,494
    )
    
    
    (1,161
    )
    
    
    49,343Net loss
    
    
    
    
    
    
    (12,330
    )
    
    
    
    
    
    
    
    
    
    
    (12,330
    )Unrealized losses on securities
designated as available-for-sale, net of realized gains
and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (169
    )
    
    
    (169
    )Reduction of noncredit related Losses on securities
designated as held-to-maturity, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    570
    
    
    
    570Balance at December 31, 2010
    
    $
    3,785
    
    
    $
    47,883
    
    
    $
    (13,494
    )
    
    $
    (760
    )
    
    $
    37,414
   40




---



##### 



2010
    
    
    2009
    
    
    2008Cash flows from operating activitiesNet income (loss)
    
    $
    (12,330
    )
    
    $
    (4,200
    )
    
    $
    329Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activitiesDepreciation
    
    
    1,571
    
    
    
    1,822
    
    
    
    1,622Provision for loan losses
    
    
    11,040
    
    
    
    9,398
    
    
    
    8,177Deferred income taxes
    
    
    5,110
    
    
    
    (2,618
    )
    
    
    291Gain on sale of securities
    
    
    (301
    )
    
    
    (631
    )
    
    
    (307
    )Gain on sale of loans
    
    
    (401
    )
    
    
    (311
    )
    
    
    (193
    )(Gain) loss on sale of assets
    
    
    (813
    )
    
    
    780
    
    
    
    1,080Stock option plan expense
    
    
    33
    
    
    
    115
    
    
    
    75Premium amortization on securities, net
    
    
    676
    
    
    
    514
    
    
    
    426FHLB stock dividends
    
    
    
    
    
    
    (103
    )
    
    
    (192
    )Other-than-temporary impairment loss
    
    
    1,302
    
    
    
    2,621
    
    
    
    Loans originated for sale in the secondary market
    
    
    (23,752
    )
    
    
    (22,250
    )
    
    
    (17,387
    )Proceeds from sale of loans
    
    
    25,842
    
    
    
    22,569
    
    
    
    17,575Earnings on bank owned life insurance
    
    
    (747
    )
    
    
    (703
    )
    
    
    (660
    )Net changes in other assets and other liabilities
    
    
    2,800
    
    
    
    (4,669
    )
    
    
    _1,836Net cash provided by (used in) operating activities
    
    
    10,030
    
    
    
    2,334
    
    
    
    12,672Cash flows used in investing activitiesSecuritiesPurchases
    
    
    (25,199
    )
    
    
    (43,387
    )
    
    
    (64,798
    )Sales, maturities, principal payments, and calls
    
    
    49,175
    
    
    
    60,257
    
    
    
    35,512Net change in loans
    
    
    51,859
    
    
    
    18,206
    
    
    
    (9,243
    )Premises and equipment expenditures
    
    
    (311
    )
    
    
    (684
    )
    
    
    (2,981
    )Proceeds from sale of real estate owned
    
    
    3,224
    
    
    
    674
    
    
    
    1,238Investment in unconsolidated affiliates
    
    
    2,061
    
    
    
    (162
    )
    
    
    (7
    )Net cash provided by (used in) investing activities
    
    
    80,809
    
    
    
    34,904
    
    
    
    (40,279
    )Cash flows provided by (used in) financing activitiesNet change in deposits
    
    
    (92,379
    )
    
    
    (7,698
    )
    
    
    54,279Net change in federal funds purchased
and other short-term borrowings
    
    
    (1,746
    )
    
    
    (2,359
    )
    
    
    (11,226
    )Proceeds from Federal Home Loan Bank advances
    
    
    
    
    
    
    
    
    
    
    205Repayment of Federal Home Loan Bank advances
    
    
    (4,646
    )
    
    
    (19,866
    )
    
    
    (10,677
    )Cash dividends paid
    
    
    
    
    
    
    (520
    )
    
    
    (2,384
    )Net cash provided by (used in) financing activities
    
    
    (98,771
    )
    
    
    (30,443
    )
    
    
    30,197Net change in cash and cash equivalents
    
    
    (7,932
    )
    
    
    6,795
    
    
    
    2,590Cash and cash equivalents at beginning of year
    
    
    41,453
    
    
    
    34,658
    
    
    
    32,068Cash and cash equivalents at end of year
    
    $
    33,521
    
    
    $
    41,453
    
    
    $
    34,658
   41




---



##### 



2010
    
    
    2009
    
    
    2008Supplemental disclosure of cash flow informationCash paid during the year for:Interest on deposits and borrowings
    
    $
    7,221
    
    
    $
    11,072
    
    
    $
    16,868Income taxes
    
    $
    
    
    
    $
    
    
    
    $
    1,145Supplemental disclosure of non cash investing
and financing activities:Transfers from loans to real estate owned
    
    $
    3,487
    
    
    $
    1,748
    
    
    $
    6,190Loans originated upon sale of real estate owned
    
    $
    
    
    
    $
    1,232
    
    
    $
    Cash dividends declared but unpaid
    
    $
    
    
    
    $
    
    
    
    $
    298Transfer of securities from available for sale to the held
to maturity classification
    
    $
    
    
    
    $
    
    
    
    $
    8,002
   42




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation:
 Nature of Operations:
 Business Segments:
 Use of Estimates:
 Cash Flows:
 Securities:
   43




---



##### 



Loans Held for Sale:
 Loans:
  Allowance for Loan Losses:
    44




---



##### 



Concentrations of Credit Risk:
 Investment in Federal Home Loan Bank Stock:
 Premises and Equipment:
 Foreclosed Assets:
 Servicing Assets:
 Bank Owned Life Insurance:
 Investment in Unconsolidated Affiliates:
 Income Taxes: Income Taxes
  45




---



##### 



Financial Instruments:
 Earnings (Loss) Per Common Share:
  2010
    
    
    2009
    
    
    2008Weighted-average common shares
outstanding (basic)
    
    
    3,717,385
    
    
    
    3,717,385
    
    
    
    3,717,385Dilutive effect of assumed exercise
of stock options
    
    
    
    
    
    
    
    
    
    
    Weighted-average common shares
outstanding (diluted)
    
    
    3,717,385
    
    
    
    3,717,385
    
    
    
    3,717,385
 Stock Option Plan:
   46




---



##### 



Year EndedDecember 31, 2010WeightedAverage
    
    
    Weighted
    
    
    AggregateExercise
    
    
    Average Remaining
    
    
    IntrinsicShares
    
    
    Price
    
    
    Contractual Life
    
    
    ValueOutstanding at beginning of year
    
    
    204,883
    
    
    $
    24.77
    
    
    
    8.6 years
    
    
    $
    Granted
    
    
    131,816
    
    
    
    3.50
    
    
    
    9.9 years
    
    
    
    Forfeited
    
    
    (50,893
    )
    
    
    21.30Outstanding at end of year
    
    
    285,806
    
    
    $
    11.87
    
    
    
    8.6 years
    
    
    $
    Options exercisable at year end
    
    
    81,800
    
    
    $
    18.27
    
    
    
    
    
    
    $
    Weighted-average fair value of
options granted during the year
    
    
    
    
    
    $
    0.76
    
    
    
    
    
    
    $
    
  Number Outstanding
    
    
    Range Of Exercise Prices69,862
    
    
    
    $23.00 - $30.7042,709
    
    
    
    $14.15 - $16.9042,894
    
    
    
    $7.50 - $9.00130,341
    
    
    
    $3.50
 Comprehensive Income (Loss):
  47




---



##### 



Restrictions on Cash:
 Dividend Restrictions:
 Fair Value of Financial Instruments:
 Advertising and Marketing:
 Reclassification:
 Recent Accounting Pronouncements:
  48




---



##### 



NOTE 2  SECURITIES
  December 31, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCosts
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Government and agency obligations
    
    $
    29,510
    
    
    $
    599
    
    
    $
    (123
    )
    
    $
    29,986State and municipal obligations
    
    
    12,153
    
    
    
    193
    
    
    
    (84
    )
    
    
    12,262Corporate bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    29,290
    
    
    
    1,059
    
    
    
    
    
    
    
    27,349Total
    
    $
    67,953
    
    
    $
    1,851
    
    
    $
    (207
    )
    
    $
    69,597
  Adjusted
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    ValueCollateralized Debt Obligations
    
    $
    1,313
    
    
    $
    367
    
    
    $
    1,680
  December 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Government and agency obligations
    
    $
    27,235
    
    
    $
    297
    
    
    $
    (77
    )
    
    $
    27,455State and municipal obligations
    
    
    25,444
    
    
    
    543
    
    
    
    (35
    )
    
    
    25,952Corporate bonds
    
    
    1,012
    
    
    
    27
    
    
    
    
    
    
    
    1,039Mortgage-backed securities
    
    
    38,455
    
    
    
    1,144
    
    
    
    (8
    )
    
    
    39,591Total debt securities
    
    
    92,146
    
    
    
    2,011
    
    
    
    (120
    )
    
    
    94,037Other securities
    
    
    57
    
    
    
    20
    
    
    
    (14
    )
    
    
    63Total
    
    $
    92,203
    
    
    $
    2,031
    
    
    $
    (134
    )
    
    $
    94,100
  49




---



##### 



NOTE 2  SECURITIES
  Adjusted
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    FairCost
    
    
    Losses
    
    
    ValueCollateralized debt obligations
    
    $
    5,410
    
    
    $
    (3,658
    )
    
    $
    1,752
 Credit Losses Recognized on Investments
  Accumulated Credit Losses2010
    
    
    2009Credit losses on debt securities held to maturityBeginning of period
    
    $
    2,621
    
    
    $
    Additions related to other-than-temporary losses not
previously recognized
    
    
    1,302
    
    
    
    2,621Reductions due to sales
    
    
    
    
    
    
    Reductions due to change in intent or likelihood of sale
    
    
    
    
    
    
    Additions related to increases in previously recognized
other-than-temporary losses
    
    
    
    
    
    
    Reductions due to increases in expected cash flows
    
    
    
    
    
    
    End of period
    
    $
    3,923
    
    
    $
    2,621
  50




---



##### 



NOTE 2  SECURITIES
  2010
    
    (Less than 12 months)
    
    
    (12 months or longer)
    
    
    
    
    
    
    
    
    
    
    TotalDescription of
    
    Number of
    
    
    Fair
    
    
    Unrealized
    
    
    Number of
    
    
    Fair
    
    
    Unrealized
    
    
    Number of
    
    
    Fair
    
    
    UnrealizedSecurities
    
    investments
    
    
    value
    
    
    losses
    
    
    investments
    
    
    value
    
    
    losses
    
    
    investments
    
    
    value
    
    
    lossesU.S. Government and
agency obligations
    
    
    10
    
    
    $
    9,904
    
    
    $
    (123
    )
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    10
    
    
    $
    9,904
    
    
    $
    (123
    )State and municipal
obligations
    
    
    9
    
    
    
    3,575
    
    
    
    (84
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    3,575
    
    
    
    (84
    )Mortgage-backed
securities and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total securities
    
    
    19
    
    
    $
    13,479
    
    
    $
    (207
    )
    
    
    0
    
    
    $
    1,313
    
    
    $
    (2,795
    )
    
    
    19
    
    
    $
    13,479
    
    
    $
    (207
    )
 2009
    
    (Less than 12 months)
    
    
    (12 months or longer)
    
    
    
    
    
    
    
    
    
    
    TotalDescription of
    
    Number of
    
    
    Fair
    
    
    Unrealized
    
    
    Number of
    
    
    Fair
    
    
    Unrealized
    
    
    Number of
    
    
    Fair
    
    
    UnrealizedSecurities
    
    investments
    
    
    value
    
    
    losses
    
    
    investments
    
    
    value
    
    
    losses
    
    
    investments
    
    
    value
    
    
    lossesU.S. Government and
agency obligations
    
    
    5
    
    
    $
    5,087
    
    
    $
    (77
    )
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    5
    
    
    $
    5,087
    
    
    $
    (77
    )State and municipal
obligations
    
    
    9
    
    
    
    3,504
    
    
    
    (35
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    3,504
    
    
    
    (35
    )Collateralized debt
obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    1,752
    
    
    
    (3,658
    )
    
    
    2
    
    
    
    1,752
    
    
    
    (3,658
    )Mortgage-backed
securities and other
    
    
    5
    
    
    
    1,048
    
    
    
    (1
    )
    
    
    6
    
    
    
    931
    
    
    
    (21
    )
    
    
    11
    
    
    
    1,979
    
    
    
    (22
    )Total securities
    
    
    19
    
    
    $
    9,639
    
    
    $
    (113
    )
    
    
    8
    
    
    $
    2,683
    
    
    $
    (3,679
    )
    
    
    27
    
    
    $
    12,322
    
    
    $
    (3,792
    )
    51




---



##### 



NOTE 2  SECURITIES
     Amortized
    
    
    FairCost
    
    
    ValueDue in one year or less
    
    $
    445
    
    
    $
    446Due from one to five years
    
    
    17,696
    
    
    
    17,821Due from five to ten years
    
    
    15,574
    
    
    
    15,988Due after ten years
    
    
    7,948
    
    
    
    7,993Mortgage-backed securities
    
    
    26,290
    
    
    
    27,349Total debt securities
    
    
    67,953
    
    
    
    69,597Other securities
    
    
    1,313
    
    
    
    1,680Total
    
    $
    69,266
    
    
    $
    71,277
  2010
    
    
    2009
    
    
    2008Proceeds from investments sales
    
    $
    15,764
    
    
    $
    20,882
    
    
    $
    728Net realized gains
    
    $
    383
    
    
    $
    631
    
    
    $
    307
  52




---



##### 



NOTE 2  SECURITIES
  NOTE 3  LOANS
  2010
    
    
    2009Commercial and industrial
    
    $
    155,410
    
    
    $
    176,799Commercial real estate
    
    
    135,035
    
    
    
    155,576Residential real estate and home equity
    
    
    93,646
    
    
    
    98,542Real estate construction and land development
    
    
    17,339
    
    
    
    27,133Consumer and credit card
    
    
    23,411
    
    
    
    31,394424,841
    
    
    
    489,444Add: Net deferred loan origination costs
    
    
    23
    
    
    
    38Total loans receivable
    
    $
    424,864
    
    
    $
    489,482
   Balance at December 31, 2009
    
    $
    7,988New loans
    
    
    1Repayments
    
    
    (7,273
    )Balance at December 31, 2010
    
    $
    716
  53




---



##### 



NOTE 4  CREDIT QUALITY
 Allowance for Credit Losses
  at December 31, 2010ResidentialReal EstateConsumer and
    
    
    Commercial and
    
    
    Commercial
    
    
    and HomeCredit Card
    
    
    Industrial
    
    
    Real Estate
    
    
    Equity
    
    
    TotalBeginning Balance
    
    $
    874
    
    
    $
    2,476
    
    
    $
    6,817
    
    
    $
    312
    
    
    $
    10,479Charge Offs
    
    
    (824
    )
    
    
    (2,261
    )
    
    
    (6,175
    )
    
    
    (498
    )
    
    
    (9,758
    )Recoveries
    
    
    200
    
    
    
    270
    
    
    
    4
    
    
    
    12
    
    
    
    486Provision
    
    
    546
    
    
    
    3,689
    
    
    
    6,140
    
    
    
    665
    
    
    
    11,040Ending Balance
    
    $
    796
    
    
    $
    4,174
    
    
    $
    6,786
    
    
    $
    491
    
    
    $
    12,247Individually
evaluated for
impairment
    
    $
    
    
    
    $
    2,812
    
    
    $
    5,158
    
    
    $
    
    
    
    $
    7,970Collectively
evaluated for
impairment
    
    
    796
    
    
    
    1,362
    
    
    
    1,628
    
    
    
    491
    
    
    
    4,277Ending Balance
    
    $
    796
    
    
    $
    4,174
    
    
    $
    6,786
    
    
    $
    491
    
    
    $
    12,247Financing ReceivablesIndividually
evaluated for
impairment
    
    $
    
    
    
    $
    18,967
    
    
    $
    42,104
    
    
    $
    
    
    
    $
    61,071Collectively
evaluated for
impairment
    
    
    23,411
    
    
    
    136,144
    
    
    
    110,270
    
    
    
    93,646
    
    
    
    363,770Total
    
    $
    23,411
    
    
    $
    155,410
    
    
    $
    152,374
    
    
    $
    93,646
    
    
    $
    424,841
  2009
    
    
    2008Balance beginning of year
    
    $
    6,137
    
    
    $
    8,298Provision for loan losses
    
    
    9,398
    
    
    
    8,177Loans charged-off
    
    
    (5,790
    )
    
    
    (10,654
    )Recoveries
    
    
    734
    
    
    
    316Balance at end of year
    
    $
    10,479
    
    
    $
    6,137
  54




---



##### 



NOTE 4  CREDIT QUALITY
 Impaired Loans
   At December 31, 2010Unpaid
    
    
    
    
    
    
    Average
    
    
    InterestRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    IncomeInvestment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    RecognizedWith No Related AllowanceRecordedConsumer and Credit Card
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial and Industrial
    
    
    5,615
    
    
    
    5,757
    
    
    
    
    
    
    
    4,196
    
    
    
    295Commercial Real Estate
    
    
    17,529
    
    
    
    20,855
    
    
    
    
    
    
    
    14,597
    
    
    
    993Residential RE and Home
Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    With Allowance RecordedConsumer and Credit Card
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial and Industrial
    
    
    13,352
    
    
    
    15,238
    
    
    
    2,812
    
    
    
    13,651
    
    
    
    741Commercial Real Estate
    
    
    24,575
    
    
    
    28,823
    
    
    
    5,158
    
    
    
    25,209
    
    
    
    821Residential RE and Home
Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalConsumer and Credit Card
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial and Industrial
    
    
    18,967
    
    
    
    20,995
    
    
    
    2,812
    
    
    
    17,847
    
    
    
    1,036Commercial Real Estate
    
    
    42,104
    
    
    
    49,678
    
    
    
    5,158
    
    
    
    39,806
    
    
    
    1,814Residential RE and Home
Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    61,071
    
    
    $
    70,673
    
    
    $
    7,970
    
    
    $
    57,653
    
    
    $
    2,850
  2009
    
    
    2008Average balance of impaired loans
during the year
    
    $
    20,435
    
    
    $
    13,301Interest income
recognized during impairment
    
    
    
    
    
    
    Loans
with no allocated allowance
    
    $
    15,321
    
    
    $
    4,644Loans with allocated allowance
    
    
    31,985
    
    
    
    8,166Total
    
    $
    47,306
    
    
    $
    12,810Amount of the allowance for
loan losses allocated to
unconfirmed losses on impaired
loans
    
    $
    6,326
    
    
    $
    2,767
  55




---



##### 



NOTE 4  CREDIT QUALITY
   2010
    
    
    2009
    
    
    2008Loans past due over 90 days still accruing interest
    
    $
    1,858
    
    
    $
    886
    
    
    $
    1,146Nonaccrual loans
    
    
    16,567
    
    
    
    11,275
    
    
    
    4,698Total
    
    $
    18,425
    
    
    $
    12,161
    
    
    $
    5,844
   2010Consumer and credit card
    
    $
    33Commercial and industrial
    
    
    6,043Commercial real estate
    
    
    10,102Residential real estate and home equity
    
    
    389Total
    
    $
    16,567
  56




---



##### 



NOTE 4  CREDIT QUALITY
 Credit Quality Indicators
  Commercial and
    
    
    Commercial RealCategory
    
    Industrial
    
    
    EstatePrime-1
    
    $
    8,459
    
    
    $
    561Good-2
    
    
    22,355
    
    
    
    20,404Fair-3
    
    
    45,853
    
    
    
    39,067Compromised-4
    
    
    31,628
    
    
    
    27,692Vulnerable-5
    
    
    22,154
    
    
    
    11,785Substandard-6
    
    
    24,959
    
    
    
    52,865Doubtful-7
    
    
    2
    
    
    
    Loss-8
    
    
    
    
    
    
    Total
    
    $
    155,410
    
    
    $
    152,374
 Risk Category Descriptions
 Prime  1
  Good  2
  Fair  3
  Compromised  4
  
    
    At inception, the loan was properly underwritten and did not possess an
unwarranted level of credit risk; also the loan met the above criteria for a risk grade
of 1 (Prime), 2 (Good), 3 (Fair) or 4 (Compromised).
 
    
    At inception, the loan was secured with collateral possessing a loan-to-value
adequate to protect the Bank from loss.
  57




---



##### 



NOTE 4  CREDIT QUALITY
 
    
    The loan exhibited two or more years of satisfactory repayment with a reasonable
reduction of the principal balance.
 
    
    During the period that the loan has been outstanding, there has been no evidence of
any credit weakness. Some examples of weakness include slow payment, lack of
cooperation by the borrower, breach of loan covenants, or the business is in an
industry which is known to be experiencing problems. If any of these credit weaknesses
is observed, a lower risk grade may be warranted.
 Vulnerable (Special Mention)  5
 unwarranted
 Substandard  6
  
    
    Loans, which possess a defined credit weakness and the likelihood that a loan
will be paid from the primary source, is uncertain. Financial deterioration is
underway and very close attention is warranted to ensure that the loan is collected
without loss.
 
    
    Loans are inadequately protected by the current net worth and paying capacity of the
obligor.
 
    
    The primary source of repayment is gone, and the Bank is forced to rely on a
secondary source of repayment such as collateral liquidation or guarantees.
 
    
    Loans are characterized by the distinct possibility that the Bank will sustain some
loss if deficiencies are not corrected.
 
    
    Unusual courses of action are needed to maintain a high probability of repayment.
 
    
    The borrower is not generating enough cash flow to repay loan principal; however,
continues to make interest payments.
 
    
    The lender is forced into a subordinated or unsecured position due to flaws in
documentation.
 
    
    Loans have been restructured so that payment schedules, terms and collateral
represent concessions to the borrower when compared to the normal loan terms.
 
    
    The lender is seriously contemplating foreclosure or legal action due to the
apparent deterioration in the loan.
 
    
    There is a significant deterioration in the market conditions and the borrower is
highly vulnerable to these conditions.
 Doubtful  7
  
    
    Loans have all of the weaknesses of those classified as Substandard.
Additionally, however, these weaknesses make collection or liquidation in full based on
existing conditions improbable.
 
    
    The primary source of repayment is gone, and there is considerable doubt as to the
quality of the secondary source of repayment.
 
    
    The possibility of loss is high, but, because of certain important pending factors,
which may strengthen the loan, loss classification is deferred until its exact status
is known. A Doubtful classification is established during this period of deferring the
realization of the loss.
 Loss  8
   58




---



##### 



Consumer Risk
  Residential RealConsumer and
    
    
    Estate and HomePayment Category
    
    Credit Card
    
    
    EquityPerforming
    
    $
    22,970
    
    
    $
    92,832Non-Performing
    
    
    441
    
    
    
    814Total
    
    $
    23,411
    
    
    $
    93,646
 Age Analysis of Past Due Loans
  Recorded60-89
    
    
    Greater
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    InvestmentDays
    
    
    than 90
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    > 90 days30-59 Days
    
    
    Past
    
    
    Days Past
    
    
    Total
    
    
    
    
    
    
    Financing
    
    
    andCategory
    
    Past Due
    
    
    Due
    
    
    Due
    
    
    Past Due
    
    
    Current
    
    
    Receivables
    
    
    AccruingConsumer and Credit
Card
    
    $
    300
    
    
    $
    104
    
    
    $
    441
    
    
    $
    845
    
    
    $
    22,566
    
    
    $
    23,411
    
    
    $
    407Commercial and
Industrial
    
    
    359
    
    
    
    3
    
    
    
    1,373
    
    
    
    1,735
    
    
    
    153,675
    
    
    
    155,410
    
    
    
    991Commercial Real
Estate
    
    
    885
    
    
    
    2,050
    
    
    
    10,118
    
    
    
    13,053
    
    
    
    139,321
    
    
    
    152,374
    
    
    
    35Residential Real
Estate and Home
Equity
    
    
    472
    
    
    
    123
    
    
    
    814
    
    
    
    1,409
    
    
    
    92,237
    
    
    
    93,646
    
    
    
    425Total
    
    $
    2,016
    
    
    $
    2,280
    
    
    $
    12,746
    
    
    $
    17,042
    
    
    $
    407,799
    
    
    $
    424,841
    
    
    $
    1,858
  59




---



##### 



NOTE 5  PREMISES AND EQUIPMENT
  2010
    
    
    2009Land
    
    $
    1,899
    
    
    $
    1,899Buildings
    
    
    13,916
    
    
    
    13,824Furniture and equipment
    
    
    13,817
    
    
    
    13,63129,632
    
    
    
    29,354Accumulated depreciation
    
    
    (16,457
    )
    
    
    (14,919
    )Total
    
    $
    13,175
    
    
    $
    14,435
  2011
    
    $
    7572012
    
    
    5492013
    
    
    5262014
    
    
    4862015
    
    
    466Thereafter
    
    
    1,118Total
    
    $
    3,902
 NOTE 6  INTEREST-BEARING DEPOSITS
  2010
    
    
    2009Interest-bearing demand
    
    $
    65,732
    
    
    $
    76,439Money market
    
    
    110,087
    
    
    
    133,790Savings deposits
    
    
    32,308
    
    
    
    32,279Time depositsIn denominations under $100,000
    
    
    63,675
    
    
    
    72,224In denominations of $100,000 or more
    
    
    129,579
    
    
    
    182,221Total
    
    $
    401,381
    
    
    $
    496,953
  60




---



##### 



NOTE 6  INTEREST-BEARING DEPOSITS
  2011
    
    $
    124,5712012
    
    
    54,4792013
    
    
    13,1722014
    
    
    9542015
    
    
    78Total
    
    $
    193,254
  NOTE 7  BORROWED FUNDS
   Interest
    
    Maturing yearrate range
    
    ending December 31,
    
    
    2010
    
    
    20094.44% - 5.50%
    

    2011
    
    
    $
    15,000
    
    
    $
    15,0003.36% - 4.68%
    

    2012
    
    
    
    29,500
    
    
    
    29,5002.59% - 3.67%
    

    2013
    
    
    
    2,240
    
    
    
    3,2882.97% - 4.27%
    

    2014
    
    
    
    2,027
    
    
    
    3,0504.03% - 5.72%
    

    2015
    
    
    
    6,499
    
    
    
    8,1413.47% - 5.44%
    
    Thereafter
    
    
    3,236
    
    
    
    4,169Total
    
    $
    58,502
    
    
    $
    63,148Weighted-average interest rate
    
    
    
    
    
    
    4.38
    %
    
    
    4.34
    %
   61




---



##### 



NOTE 7  BORROWED FUNDS
  2011
    
    $
    18,6742012
    
    
    32,5292013
    
    
    2,5402014
    
    
    1,4652015
    
    
    2,254Thereafter
    
    
    1,040Total
    
    $
    58,502
  NOTE 8  RETIREMENT PLANS
     62




---



##### 



NOTE 9  FEDERAL INCOME TAXES
  2010
    
    
    2009
    
    
    2008Valuation Allowance
    
    $
    8,083
    
    
    $
    
    
    
    $
    Current
    
    
    
    
    
    
    (567
    )
    
    
    (2,377
    )Deferred
    
    
    (2,973
    )
    
    
    (2,618
    )
    
    
    136Totals
    
    $
    5,110
    
    
    $
    (3,185
    )
    
    $
    (2,241
    )
  2010
    
    
    2009
    
    
    2008Income taxes (credits) computed at the statutory federal
income tax rate
    
    $
    (2,455
    )
    
    $
    (2,511
    )
    
    $
    (650
    )Tax exempt income
    
    
    (512
    )
    
    
    (564
    )
    
    
    (562
    )Credit for change in estimate
    
    
    
    
    
    
    
    
    
    
    (1,061
    )Change in Valuation Allowance
    
    
    8,083
    
    
    
    
    
    
    
    Other
    
    
    (6
    )
    
    
    (110
    )
    
    
    32Totals
    
    $
    5,110
    
    
    $
    (3,185
    )
    
    $
    (2,241
    )
  2010
    
    
    2009Deferred tax assetsAllowance for loan losses
    
    $
    4,164
    
    
    $
    3,563Depreciation
    
    
    202
    
    
    
    50Deferred compensation
    
    
    217
    
    
    
    190Deferred loan origination fees and costs
    
    
    
    
    
    
    Alternative minimum tax carry forward
    
    
    145
    
    
    
    143Other-than-temporary impairment losses
    
    
    1,334
    
    
    
    891Other
    
    
    43
    
    
    
    39Expenses on foreclosed real estate
    
    
    24
    
    
    
    120Unrealized loss on other-than-temporary impairment
on held-to-maturity securities
    
    
    950
    
    
    
    1,244NOL Carry forward
    
    
    2,026
    
    
    
    Dividend
    
    
    
    
    
    
    1099,105
    
    
    
    6,349Deferred tax liabilitiesFHLB stock dividends
    
    
    (455
    )
    
    
    (455
    )Unrealized gain on securities available-for-sale
    
    
    (559
    )
    
    
    (644
    )Mortgage servicing rights
    
    
    
    
    
    
    (11
    )Other
    
    
    (8
    )
    
    
    (1,022
    )
    
    
    (1,110
    )Net deferred tax asset
    
    
    8,083
    
    
    
    5,239Less: Valuation Allowance
    
    
    (8083
    )
    
    
    Total
    
    $
    
    
    
    $
    5,239
   63




---



##### 



NOTE 10  COMMITMENTS, CONTINGENCIES AND FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
    2010
    
    
    2009Fixed
    
    
    Variable
    
    
    Fixed
    
    
    VariableRate
    
    
    Rate
    
    
    Rate
    
    
    RateCommitments to extend credit
    
    $
    36
    
    
    $
    
    
    
    $
    
    
    
    $
    37,177Unused lines of credit and letters of credit
    
    $
    2,108
    
    
    $
    66,685
    
    
    $
    2,066
    
    
    $
    36,660
  Legal Proceedings
   64




---



##### 



NOTE 11  REGULATORY CAPITAL
         65




---



##### 



NOTE 11  REGULATORY CAPITAL
  To Be WellCapitalized UnderFor Capital
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio2010Total capital to risk-weighted assetsConsolidated
    
    $
    43,554
    
    
    
    10.3
    %
    
    $
    33,865
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    $
    43,422
    
    
    
    10.3
    %
    
    $
    33,861
    
    
    
    8.0
    %
    
    $
    42,327
    
    
    
    10.0
    %Tier 1 (core) capital to risk-weighted assetsConsolidated
    
    $
    38,177
    
    
    
    9.0
    %
    
    $
    16,933
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    $
    38,045
    
    
    
    9.0
    %
    
    $
    16,931
    
    
    
    4.0
    %
    
    $
    25,396
    
    
    
    6.0
    %Tier 1 (core) capital to average assetsConsolidated
    
    $
    38,177
    
    
    
    6.4
    %
    
    $
    23,802
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    $
    38,045
    
    
    
    6.4
    %
    
    $
    23,750
    
    
    
    4.0
    %
    
    $
    29,688
    
    
    
    5.0
    %2009Total capital to risk-weighted assetsConsolidated
    
    $
    57,314
    
    
    
    11.3
    %
    
    $
    40,725
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    $
    51,948
    
    
    
    10.2
    %
    
    $
    40,758
    
    
    
    8.0
    %
    
    $
    50,948
    
    
    
    10.0
    %Tier 1 (core) capital to risk-weighted assetsConsolidated
    
    $
    50,900
    
    
    
    10.0
    %
    
    $
    20,362
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    $
    45,529
    
    
    
    8.9
    %
    
    $
    20,379
    
    
    
    4.0
    %
    
    $
    30,569
    
    
    
    6.0
    %Tier 1 (core) capital to average assetsConsolidated
    
    $
    50,900
    
    
    
    7.4
    %
    
    $
    27,573
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    $
    45,529
    
    
    
    6.6
    %
    
    $
    27,573
    
    
    
    4.0
    %
    
    $
    34,466
    
    
    
    5.0
    %
   66




---



##### 



NOTE 12  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
  2010
    
    
    2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assetsCash and cash equivalents
    
    $
    33,521
    
    
    $
    33,521
    
    
    $
    41,453
    
    
    $
    41,453Securities available for sale
    
    
    69,597
    
    
    
    69,597
    
    
    
    94,100
    
    
    
    94,100Securities held to maturity
    
    
    1,313
    
    
    
    1,680
    
    
    
    1,752
    
    
    
    2,130Loans held for sale
    
    
    753
    
    
    
    753
    
    
    
    2,442
    
    
    
    2,442Loans (Net of Allowance)
    
    
    412,617
    
    
    
    401,967
    
    
    
    479,003
    
    
    
    469,488FHLB stock
    
    
    3,799
    
    
    
    3,799
    
    
    
    3,799
    
    
    
    3,799Accrued interest receivable
    
    
    1,673
    
    
    
    1,673
    
    
    
    2,348
    
    
    
    2,348Financial liabilitiesNoninterest-bearing deposits
    
    $
    63,695
    
    
    $
    63,695
    
    
    $
    60,502
    
    
    $
    60,502Interest-bearing deposits
    
    
    401,381
    
    
    
    402,131
    
    
    
    496,953
    
    
    
    497,434Federal
funds purchased and other short-term borrowings
    
    
    1,265
    
    
    
    1,265
    
    
    
    3,011
    
    
    
    3,011FHLB advances
    
    
    58,502
    
    
    
    60,581
    
    
    
    63,148
    
    
    
    64,040Accrued interest payable
    
    
    336
    
    
    
    336
    
    
    
    654
    
    
    
    654
   67




---



##### 



NOTE 12  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
 Fair Value Measurements
    Level 1Quoted prices in active markets for identical assets or
liabilities
 Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities
 Level 3 Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities
  Securities
 Where quoted market prices are available in an active market, securities are classified within
Level 1 of the valuation hierarchy. Level 1 securities include equity and certain municipal
securities. If quoted market prices are not available, then fair values are estimated by using
pricing models, quoted prices of securities with similar characteristics or discounted cash
flows. Level 2 securities include U.S. Government and agency obligations, state and municipal
obligations, corporate bonds and mortgage-backed securities. In certain cases where Level 1 or
Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.
 The following table presents the fair value measurements of assets recognized in the
accompanying balance sheets measured at fair value on a recurring basis and the level within the
fair value hierarchy in which the fair value measurements fall at December 31, 2010 and 2009.
 Fair Value Measurements UsingQuoted Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableFair
    
    
    Assets
    
    
    Inputs
    
    
    InputsDecember 31, 2010
    
    Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)U.S. agency obligations
    
    $
    29,986
    
    
    $
    
    
    
    $
    29,986
    
    
    $
    State and municipal obligations
    
    
    12,262
    
    
    
    
    
    
    
    12,262
    
    
    
    Mortgage-backed and other securities
    
    
    27,349
    
    
    
    
    
    
    
    27,349
    
    
    
    Total
    
    $
    69,597
    
    
    $
    
    
    
    $
    65,597
    
    
    $
    
  68




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##### 



NOTE 12  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
 Fair Value Measurements UsingQuoted Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableFair
    
    
    Assets
    
    
    Inputs
    
    
    InputsDecember 31, 2009
    
    Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)U.S. agency obligations
    
    $
    27,455
    
    
    $
    998
    
    
    $
    26,457
    
    
    $
    State and municipal obligations
    
    
    25,952
    
    
    
    
    
    
    
    25,952
    
    
    
    Corporate
    
    
    1,039
    
    
    
    
    
    
    
    1,039
    
    
    
    Mortgage-backed and other securities
    
    
    39,654
    
    
    
    63
    
    
    
    39,591
    
    
    
    Total
    
    $
    94,100
    
    
    $
    1,061
    
    
    $
    93,039
    
    
    $
    
  Securities
 Collateralized debt obligations are classified as held to maturity. The Corporation
recognized other-than-temporary impairment on the securities as of December 31, 2010 and
2009, based upon a Level 3 estimate of fair value, including a discounted cash flows
calculation and a fair value estimate from an independent evaluation of the security.
 Impaired loans
 At December 31, 2010 and December 31, 2009, impaired loans consisted primarily of loans
secured by nonresidential and commercial real estate. Management has determined fair value
measurements on impaired loans primarily through evaluations of appraisals performed.
 Real Estate Owned
 Real estate acquired through, or in lieu of, loan foreclosure is held for sale and initially
recorded at fair value (based on current appraised value) at the date of foreclosure,
establishing a new cost basis. Subsequent to foreclosure, valuations are periodically
performed by management and the assets are carried at the lower of carrying amount or fair
value less estimated costs to sell. Management has determined fair value measurements on
real estate owned primarily through evaluations of appraisals performed.
  69




---



##### 



NOTE 12  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
 The following table presents the fair value measurements of assets measured at fair
value on a nonrecurring basis and the level within the fair value hierarchy in which
the fair value measurements fall at December 31, 2010 and December 31, 2009.
 Fair Value Measurements UsingQuoted Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    Unobservable
    
    
    Total LossesAssets
    
    
    Inputs
    
    
    Inputs
    
    
    RecognizedDecember 31, 2010
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    During the YearCollateralized debt
obligations
    
    $
    1,313
    
    
    $
    
    
    
    $
    
    
    
    $
    1,313
    
    
    $
    1,302Impaired loans
    
    
    24,187
    
    
    
    
    
    
    
    
    
    
    
    24,187
    
    
    
    5,904Real estate owned
    
    
    449
    
    
    
    
    
    
    
    
    
    
    
    449
    
    
    
    71December 31, 2009Collateralized debt
obligations
    
    $
    1,752
    
    
    $
    
    
    
    $
    
    
    
    $
    1,752
    
    
    $
    1,302Impaired loans
    
    
    6,326
    
    
    
    
    
    
    
    
    
    
    
    6,326
    
    
    
    5,879Real Estate Owned
    
    
    1,470
    
    
    
    
    
    
    
    
    
    
    
    1,470
    
    
    
    167
  70




---



##### 



NOTE 13  PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
  CONDENSED BALANCE SHEETS
 2010
    
    
    2009AssetsCash and cash equivalents
    
    $
    75
    
    
    $
    1,321Investment in subsidiaries
    
    
    37,442
    
    
    
    52,719Investment securities
    
    
    
    
    
    
    63Investment in affiliates
    
    
    
    
    
    
    507Other assets
    
    
    
    
    
    
    867Total assets
    
    $
    37,517
    
    
    $
    55,477LiabilitiesShort term borrowings
    
    $
    80
    
    
    $
    2,370Other liabilities
    
    
    3,758
    
    
    
    3,764Shareholders Equity
    
    
    33,679
    
    
    
    49,343Total liabilities and shareholders equity
    
    $
    37,517
    
    
    $
    55,477
  CONDENSED STATEMENTS OF OPERATIONS
 2010
    
    
    2009
    
    
    2008Dividends from Bank subsidiary
    
    $
    
    
    
    $
    
    
    
    $
    1,229Equity in
undistributed earnings (loss or excess distributions) of subsidiaries
    
    
    (12,547
    )
    
    
    (3,709
    )
    
    
    (501
    )Other
    
    
    (70
    )
    
    
    73
    
    
    
    889Total income (loss)
    
    
    (12,617
    )
    
    
    (3,636
    )
    
    
    1,617Operating expenses
    
    
    127
    
    
    
    817
    
    
    
    1,288Federal income tax expense (credit)
    
    
    (414
    )
    
    
    (253
    )
    
    
    Net income (loss)
    
    $
    (12,330
    )
    
    $
    (4,200
    )
    
    $
    329
  71




---



##### 



NOTE 13  PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
 CONDENSED STATEMENTS OF CASH FLOWS
 2010
    
    
    2009
    
    
    2008Cash flows from operating activitiesNet income (loss)
    
    $
    (12,330
    )
    
    $
    (4,200
    )
    
    $
    329Adjustments to reconcile net income
to cash provided by operating activities:(Undistributed earnings of) excess distributions
from subsidiaries
    
    
    12,547
    
    
    
    3,709
    
    
    
    501Net change in other assets and liabilities
    
    
    401
    
    
    
    (90
    )
    
    
    638Net cash from operating activities
    
    
    618
    
    
    
    (581
    )
    
    
    1,468Cash flows used in investing activitiesInvestment in unconsolidated affiliates
    
    
    426
    
    
    
    1,034
    
    
    
    (242
    )(Issuance) repayment of subordinated note to Bank
    
    
    
    
    
    
    
    
    
    
    16,510Investment in Bank
    
    
    
    
    
    
    
    
    
    
    (13,000
    )Net cash from investing activities
    
    
    426
    
    
    
    1,034
    
    
    
    3,268Cash flows from financing activitiesRepayment of short-term borrowings
    
    
    (2,290
    )
    
    
    (1,000
    )
    
    
    Cash dividends paid
    
    
    
    
    
    
    (520
    )
    
    
    (2,384
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock, net
    
    
    
    
    
    
    
    
    
    
    Net cash from financing activities
    
    
    (2,290
    )
    
    
    (1,520
    )
    
    
    (2,384
    )Net change in cash and cash equivalents
    
    
    (1,246
    )
    
    
    (1,067
    )
    
    
    2,352Cash and cash equivalents at beginning of year
    
    
    1,321
    
    
    
    2,388
    
    
    
    36Cash and cash equivalents at end of year
    
    $
    75
    
    
    $
    1,321
    
    
    $
    2,388
  72




---



##### 



NOTE 15  SIGNIFICANT ESTIMATES AND CONCENTRATIONS
  Deposit Concentration
  Investments
  Current Economic Conditions
      73




---



##### 



NOTE 16  DETAILS OF OPERATING EXPENSES
  2010
    
    
    2009
    
    
    2008Bank premises rent
    
    $
    633
    
    
    $
    610
    
    
    $
    830Bank premises maintenance
    
    
    437
    
    
    
    451
    
    
    
    484Bank premises depreciation
    
    
    551
    
    
    
    639
    
    
    
    535Equipment lease
    
    
    199
    
    
    
    199
    
    
    
    250Depreciation
    
    
    1,019
    
    
    
    1,035
    
    
    
    967Software maintenance
    
    
    718
    
    
    
    858
    
    
    
    860Other
    
    
    480
    
    
    
    704
    
    
    
    526Total
    
    $
    4,037
    
    
    $
    4,496
    
    
    $
    4,452
  2010
    
    
    2009
    
    
    2008ATM and debit cards
    
    $
    647
    
    
    $
    549
    
    
    $
    546Telephone
    
    
    379
    
    
    
    470
    
    
    
    486Other
    
    
    3,128
    
    
    
    2,661
    
    
    
    2,228Total
    
    $
    4,154
    
    
    $
    3,680
    
    
    $
    3,260
  74




---



##### 



NOTE 17  QUARTERLY FINANCIAL DATA

(Unaudited)
  Three Months EndedDecember 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,2010:Total interest income
    
    $
    6,631
    
    
    $
    6,896
    
    
    $
    7,196
    
    
    $
    7,395Total interest expense
    
    
    1,448
    
    
    
    1,742
    
    
    
    1,834
    
    
    
    1,901Net interest income
    
    
    5,183
    
    
    
    5,154
    
    
    
    5,362
    
    
    
    5,494Provision for losses on loans
    
    
    1,162
    
    
    
    4,531
    
    
    
    3,386
    
    
    
    1,961Noninterest income
    
    
    2,175
    
    
    
    1,711
    
    
    
    1,793
    
    
    
    436Noninterest expense
    
    
    6,021
    
    
    
    6,242
    
    
    
    5,737
    
    
    
    5,488Loss before income tax expense (benefit)
    
    
    175
    
    
    
    (3,908
    )
    
    
    (1,968
    )
    
    
    (1,519
    )Federal income tax expense (benefit)
    
    
    530
    
    
    
    5,151
    
    
    
    60
    
    
    
    (631
    )Net loss
    
    $
    (355
    )
    
    $
    (9,059
    )
    
    $
    (2,028
    )
    
    $
    (888
    )Loss per share:Basic
    
    $
    (0.10
    )
    
    $
    (2.44
    )
    
    $
    (0.54
    )
    
    $
    (0.24
    )Diluted
    
    $
    (0.10
    )
    
    $
    (2.44
    )
    
    $
    (0.54
    )
    
    $
    (0.24
    )
  75




---



##### 



NOTE 17  QUARTERLY FINANCIAL DATA (Unaudited) (
 Three Months EndedDecember 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,2009:Total interest income
    
    $
    7,731
    
    
    $
    7,794
    
    
    $
    8,334
    
    
    $
    8,482Total interest expense
    
    
    2,147
    
    
    
    2,451
    
    
    
    2,755
    
    
    
    3,205Net interest income
    
    
    5,584
    
    
    
    5,343
    
    
    
    5,579
    
    
    
    5,277Provision for losses on loans
    
    
    2,490
    
    
    
    1,766
    
    
    
    1,707
    
    
    
    3,435Noninterest income
    
    
    1,042
    
    
    
    (326
    )
    
    
    1,105
    
    
    
    1,398Noninterest expense
    
    
    5,796
    
    
    
    5,844
    
    
    
    6,274
    
    
    
    5,075Income (loss) before income taxes (credits)
    
    
    (1,660
    )
    
    
    (2,593
    )
    
    
    (1,297
    )
    
    
    (1,835
    )Federal income tax expense (credit)
    
    
    (702
    )
    
    
    (1,143
    )
    
    
    (576
    )
    
    
    (764
    )Net income (loss)
    
    $
    (958
    )
    
    $
    (1,450
    )
    
    $
    (721
    )
    
    $
    (1,071
    )Earnings (loss) per share:Basic
    
    $
    (0.26
    )
    
    $
    (0.39
    )
    
    $
    (0.19
    )
    
    $
    (0.29
    )Diluted
    
    $
    (0.26
    )
    
    $
    (0.39
    )
    
    $
    (0.19
    )
    
    $
    (0.29
    )
  76




---



##### 



77




---



##### 



Report of Independent Registered Public Accounting Firm
 
     
  78