UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549










FORM
10-Q





x QUARTERLY REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For
the quarterly period ended September 30,
2010





OR





 ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For
the transition period from 
to





Commission
File No. 000-20827





CASS
INFORMATION SYSTEMS, INC.


(Exact
name of registrant as specified in its charter)





Missouri
              43-1265338(State
      or other jurisdiction of incorporation ororganization)
              (I.R.S.
      Employer Identification No.)





13001
      Hollenberg Drive
                    Bridgeton,
      Missouri
                  63044(Address
      of principal executive offices)
                  (Zip
      Code)





(314)
506-5500


(Registrant’s
telephone number, including area code)










Indicate
by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.


Yes           x                      No            ̈


Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes            ̈                      No            ̈


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





(Check
      one)
              Large
      Accelerated Filer  ̈
              Accelerated
      Filer xNon-Accelerated
      Filer  ̈
              Smaller
      Reporting Company  ̈





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes            ̈                      No           x


The
number of shares outstanding of registrant's only class of stock as of November
1, 2010: Common stock, par value $.50 per share – 9,394,547 shares
outstanding.









TABLE
OF CONTENTS




PART I – Financial
      InformationItem
      1.
                                    FINANCIAL
      STATEMENTSConsolidated
      Balance SheetsSeptember
      30, 2010 (unaudited) and December 31, 2009
                                    
                                    3Consolidated
      Statements of IncomeThree
      and Nine months ended September 30, 2010 and 2009
    (unaudited)
                                    
                                    4Consolidated
      Statements of Cash FlowsNine
      months ended September 30, 2010 and 2009 (unaudited)
                                    
                                    5Notes
      to Consolidated Financial Statements (unaudited)
                                    
                                    6Item
      2.
                                    MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND
      RESULTS OF OPERATIONS
                                    
                                    15Item
      3.
                                    QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                                    
                                    26Item
      4.
                                    CONTROLS
      AND PROCEDURES
                                    
                                    26PART
      II – Other Information – Items 1. –
6.
                                    
                                    27SIGNATURES
                                    
                                    28





Forward-looking
Statements - Factors That May Affect Future Results





This
report may contain or incorporate by reference forward-looking statements made
pursuant to the safe harbor provisions of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended.  Although we believe that, in making any such statements, our
expectations are based on reasonable assumptions, forward-looking statements are
not guarantees of future performance and involve risks, uncertainties, and other
factors beyond our control, which may cause future performance to be materially
different from expected performance summarized in the forward-looking
statements.  These risks, uncertainties and other factors are
discussed in the section Part I, Item 1A, “Risk Factors” of the Company’s 2009
Annual Report on Form 10-K, filed with the Securities and Exchange Commission
(“SEC”), which may be updated from time to time in our future filings with the
SEC.   We undertake no obligation to publicly update or revise
any forward-looking statements to reflect changed assumptions, the occurrence of
anticipated or unanticipated events, or changes to future results over time,
unless otherwise required by applicable rules.





-2-




PART
I.                      FINANCIAL
INFORMATION





ITEM
1.                      FINANCIAL
STATEMENTS





CASS
INFORMATION SYSTEMS, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(Dollars
in Thousands except Share and Per Share Data)





September 30,2010
                                    
                                    
                                    December 31,(Unaudited)
                                    
                                    
                                    2009AssetsCash
      and due from banks
                                    
                                    $
                                    10,435
                                    
                                    
                                    $
                                    5,763Interest-bearing
      deposits in other financial institutions
                                    
                                    
                                    73,434
                                    
                                    
                                    
                                    33,426Federal
      funds sold and other short-term investments
                                    
                                    
                                    125,599
                                    
                                    
                                    
                                    40,105Cash and cash
      equivalents
                                    
                                    
                                    209,468
                                    
                                    
                                    
                                    79,294Securities
      available-for-sale, at fair value
                                    
                                    
                                    238,262
                                    
                                    
                                    
                                    224,597Loans
                                    
                                    
                                    689,683
                                    
                                    
                                    
                                    641,957Less: Allowance for
      loan losses
                                    
                                    
                                    10,758
                                    
                                    
                                    
                                    8,284Loans,
      net
                                    
                                    
                                    678,925
                                    
                                    
                                    
                                    633,673Premises
      and equipment, net
                                    
                                    
                                    9,713
                                    
                                    
                                    
                                    10,451Investment
      in bank-owned life insurance
                                    
                                    
                                    14,055
                                    
                                    
                                    
                                    13,644Payments
      in excess of funding
                                    
                                    
                                    40,111
                                    
                                    
                                    
                                    22,637Goodwill
                                    
                                    
                                    7,471
                                    
                                    
                                    
                                    7,471Other
      intangible assets, net
                                    
                                    
                                    295
                                    
                                    
                                    
                                    375Other
      assets
                                    
                                    
                                    19,129
                                    
                                    
                                    
                                    20,839Total
      assets
                                    
                                    $
                                    1,217,429
                                    
                                    
                                    $
                                    1,012,981Liabilities
      and Shareholders’ EquityLiabilities:Deposits:Noninterest-bearing
                                    
                                    $
                                    121,028
                                    
                                    
                                    $
                                    113,151Interest-bearing
                                    
                                    
                                    380,231
                                    
                                    
                                    
                                    324,725Total
      deposits
                                    
                                    
                                    501,259
                                    
                                    
                                    
                                    437,876Accounts
      and drafts payable
                                    
                                    
                                    554,945
                                    
                                    
                                    
                                    430,251Short-term
      borrowings
                                    
                                    
                                    13
                                    
                                    
                                    
                                    26Other
      liabilities
                                    
                                    
                                    15,395
                                    
                                    
                                    
                                    15,260Total
      liabilities
                                    
                                    
                                    1,071,612
                                    
                                    
                                    
                                    883,413Shareholders’
      Equity:Preferred
      stock, par value $.50 per share; 2,000,000shares authorized and no
      shares issued
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —Common
      Stock, par value $.50 per share; 20,000,000 sharesauthorized and
      9,949,324 shares issued at September 30, 2010 and December 31,
      2009
                                    
                                    
                                    4,975
                                    
                                    
                                    
                                    4,975Additional
      paid-in capital
                                    
                                    
                                    46,439
                                    
                                    
                                    
                                    45,696Retained
      earnings
                                    
                                    
                                    103,685
                                    
                                    
                                    
                                    92,401Common
      shares in treasury, at cost (554,777 shares at September 30, 2010 and
      564,119 shares at December 31, 2009)
                                    
                                    
                                    (13,167
                                    )
                                    
                                    
                                    (13,323
                                    )Accumulated
      other comprehensive income (loss)
                                    
                                    
                                    3,885
                                    
                                    
                                    
                                    (181
                                    )Total shareholders’
      equity
                                    
                                    
                                    145,817
                                    
                                    
                                    
                                    129,568Total liabilities
      and shareholders’ equity
                                    
                                    $
                                    1,217,429
                                    
                                    
                                    $
                                    1,012,981





See
accompanying notes to unaudited consolidated financial statements.




-3-




CASS
INFORMATION SYSTEMS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF INCOME


(Unaudited)


(Dollars
in Thousands except Per Share Data)




Three Months EndedSeptember 30,
                                                                
                                                                
                                                                Nine Months EndedSeptember 30,2010
                                                                
                                                                
                                                                2009
                                                                
                                                                
                                                                2010
                                                                
                                                                
                                                                2009Fee
      Revenue and Other Income:Information
      services payment and processing revenue
                                                                
                                                                $
                                                                13,895
                                                                
                                                                
                                                                $
                                                                12,302
                                                                
                                                                
                                                                $
                                                                40,173
                                                                
                                                                
                                                                $
                                                                36,282Bank
      service fees
                                                                
                                                                
                                                                367
                                                                
                                                                
                                                                
                                                                292
                                                                
                                                                
                                                                
                                                                1,006
                                                                
                                                                
                                                                
                                                                1,037Gains
      on sales of securities
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                202Other
                                                                
                                                                
                                                                139
                                                                
                                                                
                                                                
                                                                140
                                                                
                                                                
                                                                
                                                                415
                                                                
                                                                
                                                                
                                                                413Total fee revenue
      and other income
                                                                
                                                                
                                                                14,401
                                                                
                                                                
                                                                
                                                                12,734
                                                                
                                                                
                                                                
                                                                41,594
                                                                
                                                                
                                                                
                                                                37,934Interest
      Income:Interest
      and fees on loans
                                                                
                                                                
                                                                10,182
                                                                
                                                                
                                                                
                                                                9,125
                                                                
                                                                
                                                                
                                                                29,480
                                                                
                                                                
                                                                
                                                                26,661Interest
      and dividends on securities:Taxable
                                                                
                                                                
                                                                3
                                                                
                                                                
                                                                
                                                                15
                                                                
                                                                
                                                                
                                                                28
                                                                
                                                                
                                                                
                                                                33Exempt from federal
      income taxes
                                                                
                                                                
                                                                2,154
                                                                
                                                                
                                                                
                                                                1,843
                                                                
                                                                
                                                                
                                                                6,403
                                                                
                                                                
                                                                
                                                                5,462Interest
      on federal funds sold andother
      short-term investments
                                                                
                                                                
                                                                150
                                                                
                                                                
                                                                
                                                                57
                                                                
                                                                
                                                                
                                                                337
                                                                
                                                                
                                                                
                                                                101Total interest
      income
                                                                
                                                                
                                                                12,489
                                                                
                                                                
                                                                
                                                                11,040
                                                                
                                                                
                                                                
                                                                36,248
                                                                
                                                                
                                                                
                                                                32,257Interest
      Expense:Interest
      on deposits
                                                                
                                                                
                                                                1,249
                                                                
                                                                
                                                                
                                                                1,372
                                                                
                                                                
                                                                
                                                                3,624
                                                                
                                                                
                                                                
                                                                3,541Interest
      on short-term borrowings
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                23Interest
      on subordinated convertible debentures
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                27
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                106Total interest
      expense
                                                                
                                                                
                                                                1,249
                                                                
                                                                
                                                                
                                                                1,399
                                                                
                                                                
                                                                
                                                                3,624
                                                                
                                                                
                                                                
                                                                3,670Net interest
      income
                                                                
                                                                
                                                                11,240
                                                                
                                                                
                                                                
                                                                9,641
                                                                
                                                                
                                                                
                                                                32,624
                                                                
                                                                
                                                                
                                                                28,587Provision
      for loan losses
                                                                
                                                                
                                                                950
                                                                
                                                                
                                                                
                                                                400
                                                                
                                                                
                                                                
                                                                3,000
                                                                
                                                                
                                                                
                                                                1,100Net interest income
      after provision for loanlosses
                                                                
                                                                
                                                                10,290
                                                                
                                                                
                                                                
                                                                9,241
                                                                
                                                                
                                                                
                                                                29,624
                                                                
                                                                
                                                                
                                                                27,487Total
      net revenue
                                                                
                                                                
                                                                24,691
                                                                
                                                                
                                                                
                                                                21,975
                                                                
                                                                
                                                                
                                                                71,218
                                                                
                                                                
                                                                
                                                                65,421Operating
      Expense:Salaries
      and employee benefits
                                                                
                                                                
                                                                13,026
                                                                
                                                                
                                                                
                                                                12,583
                                                                
                                                                
                                                                
                                                                38,199
                                                                
                                                                
                                                                
                                                                37,762Occupancy
                                                                
                                                                
                                                                658
                                                                
                                                                
                                                                
                                                                611
                                                                
                                                                
                                                                
                                                                1,841
                                                                
                                                                
                                                                
                                                                1,797Equipment
                                                                
                                                                
                                                                887
                                                                
                                                                
                                                                
                                                                835
                                                                
                                                                
                                                                
                                                                2,701
                                                                
                                                                
                                                                
                                                                2,509Amortization
      of intangible assets
                                                                
                                                                
                                                                26
                                                                
                                                                
                                                                
                                                                55
                                                                
                                                                
                                                                
                                                                80
                                                                
                                                                
                                                                
                                                                195Other
      operating
                                                                
                                                                
                                                                2,501
                                                                
                                                                
                                                                
                                                                2,282
                                                                
                                                                
                                                                
                                                                7,324
                                                                
                                                                
                                                                
                                                                7,190Total operating
      expense
                                                                
                                                                
                                                                17,098
                                                                
                                                                
                                                                
                                                                16,366
                                                                
                                                                
                                                                
                                                                50,145
                                                                
                                                                
                                                                
                                                                49,453Income
      before income tax expense
                                                                
                                                                
                                                                7,593
                                                                
                                                                
                                                                
                                                                5,609
                                                                
                                                                
                                                                
                                                                21,073
                                                                
                                                                
                                                                
                                                                15,968Income
      tax expense
                                                                
                                                                
                                                                2,013
                                                                
                                                                
                                                                
                                                                1,291
                                                                
                                                                
                                                                
                                                                5,844
                                                                
                                                                
                                                                
                                                                4,066Net
      Income
                                                                
                                                                $
                                                                5,580
                                                                
                                                                
                                                                $
                                                                4,318
                                                                
                                                                
                                                                $
                                                                15,229
                                                                
                                                                
                                                                $
                                                                11,902Basic
      Earnings Per Share
                                                                
                                                                $
                                                                .60
                                                                
                                                                
                                                                $
                                                                .47
                                                                
                                                                
                                                                $
                                                                1.63
                                                                
                                                                
                                                                $
                                                                1.30Diluted
      Earnings Per Share
                                                                
                                                                $
                                                                .59
                                                                
                                                                
                                                                $
                                                                .46
                                                                
                                                                
                                                                $
                                                                1.61
                                                                
                                                                
                                                                $
                                                                1.27




See
accompanying notes to unaudited consolidated financial statements.





-4-




CASS
INFORMATION SYSTEMS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)


(Dollars
in Thousands)





Nine Months Ended
                                              September 30,2010
                                            
                                            
                                            2009Cash
      Flows From Operating Activities:Net
      income
                                            
                                            $
                                            15,229
                                            
                                            
                                            $
                                            11,902Adjustments
      to reconcile net income to net cash providedby
      operating activities:Depreciation and
      amortization
                                            
                                            
                                            3,077
                                            
                                            
                                            
                                            3,218Gains on sales of
      securities
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (202
                                            )Provision for loan
      losses
                                            
                                            
                                            3,000
                                            
                                            
                                            
                                            1,100Stock-based compensation
      expense
                                            
                                            
                                            1,133
                                            
                                            
                                            
                                            1,382Deferred income tax
      expense
                                            
                                            
                                            —
                                            
                                            
                                            
                                            649Decrease in income tax
      liability
                                            
                                            
                                            (1,751
                                            )
                                            
                                            
                                            (994
                                            )Increase in pension
      liability
                                            
                                            
                                            640
                                            
                                            
                                            
                                            728Other operating activities,
      net
                                            
                                            
                                            355
                                            
                                            
                                            
                                            (812
                                            )Net cash provided by operating
      activities
                                            
                                            
                                            21,683
                                            
                                            
                                            
                                            16,971Cash
      Flows From Investing Activities:Proceeds
      from sales of securities available-for-sale
                                            
                                            
                                            —
                                            
                                            
                                            
                                            14,591Proceeds
      from maturities of securities available-for-sale
                                            
                                            
                                            2,770
                                            
                                            
                                            
                                            5,655Purchase
      of securities available-for-sale
                                            
                                            
                                            (11,548
                                            )
                                            
                                            
                                            (37,994
                                            )Net
      increase in loans
                                            
                                            
                                            (48,252
                                            )
                                            
                                            
                                            (29,186
                                            )(Increase)
      decrease in payments in excess of funding
                                            
                                            
                                            (17,474
                                            )
                                            
                                            
                                            3,470Purchases
      of premises and equipment, net
                                            
                                            
                                            (890
                                            )
                                            
                                            
                                            (1,043
                                            )Net cash used in investing
      activities
                                            
                                            
                                            (75,394
                                            )
                                            
                                            
                                            (44,507
                                            )Cash
      Flows From Financing Activities:Net
      increase in noninterest-bearing demand deposits
                                            
                                            
                                            7,877
                                            
                                            
                                            
                                            3,639Net
      increase in interest-bearing demand and savings deposits
                                            
                                            
                                            19,729
                                            
                                            
                                            
                                            102,360Net
      increase in time deposits
                                            
                                            
                                            35,777
                                            
                                            
                                            
                                            66,916Net
      increase (decrease) in accounts and drafts payable
                                            
                                            
                                            124,694
                                            
                                            
                                            
                                            (41,835
                                            )Net
      decrease in short-term borrowings
                                            
                                            
                                            (13
                                            )
                                            
                                            
                                            (300
                                            )Cash
      dividends paid
                                            
                                            
                                            (3,945
                                            )
                                            
                                            
                                            (3,611
                                            )Distribution
      of stock awards, net
                                            
                                            
                                            (251
                                            )
                                            
                                            
                                            —Other
      financing activities, net
                                            
                                            
                                            17
                                            
                                            
                                            
                                            17Net cash provided by financing
      activities
                                            
                                            
                                            183,885
                                            
                                            
                                            
                                            127,186Net
      increase in cash and cash equivalents
                                            
                                            
                                            130,174
                                            
                                            
                                            
                                            99,650Cash
      and cash equivalents at beginning of period
                                            
                                            
                                            79,294
                                            
                                            
                                            
                                            29,485Cash
      and cash equivalents at end of period
                                            
                                            $
                                            209,468
                                            
                                            
                                            $
                                            129,135Supplemental
      information:Cash paid for
      interest
                                            
                                            $
                                            3,568
                                            
                                            
                                            $
                                            3,641Cash paid for income
      taxes
                                            
                                            
                                            7,621
                                            
                                            
                                            
                                            4,456





See
accompanying notes to unaudited consolidated financial statements.





-5-




CASS
INFORMATION SYSTEMS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


Note 1 -
Basis of Presentation





The
accompanying unaudited consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X.  Accordingly, they do not include all of the
information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements.  In the opinion of
management, all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included.  Certain amounts
in the 2009 consolidated financial statements have been reclassified to conform
to the 2010 presentation.  Such reclassifications have no effect on
previously reported net income or shareholders’ equity.  For further
information, refer to the audited consolidated financial statements and related
footnotes included in Cass Information System, Inc.’s (“the Company” or “Cass”)
Annual Report on Form 10-K for the year ended December 31, 2009.





Note 2 –
Intangible Assets





The
Company accounts for intangible assets in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350,
“Goodwill and Other Intangible Assets,” which requires that intangibles with
indefinite useful lives be tested annually for impairment and those with finite
useful lives be amortized over their useful lives.  Details of the
Company’s intangible assets are as follows:





September 30, 2010
                                    
                                    
                                    December 31, 2009(In thousands)
                                    
                                    Gross Carrying
                                      Amount
                                    
                                    
                                    Accumulated
                                      Amortization
                                    
                                    
                                    Gross Carrying
                                      Amount
                                    
                                    
                                    Accumulated
                                      AmortizationAssets
      eligible for amortization:Software
                                    
                                    $
                                    862
                                    
                                    
                                    $
                                    (862
                                    )
                                    
                                    $
                                    862
                                    
                                    
                                    $
                                    (862
                                    )Customer List
                                    
                                    
                                    750
                                    
                                    
                                    
                                    (455
                                    )
                                    
                                    
                                    750
                                    
                                    
                                    
                                    (375
                                    )Total
                                    
                                    
                                    1,612
                                    
                                    
                                    
                                    (1,317
                                    )
                                    
                                    
                                    1,612
                                    
                                    
                                    
                                    (1,237
                                    )Unamortized
      intangible assets:Goodwill
                                    
                                    
                                    7,698
                                    
                                    
                                    
                                    (227
                                    )
                                    
                                    
                                    7,698
                                    
                                    
                                    
                                    (227
                                    )Total unamortized
      intangibles
                                    
                                    
                                    7,698
                                    
                                    
                                    
                                    (227
                                    )
                                    
                                    
                                    7,698
                                    
                                    
                                    
                                    (227
                                    )Total
      intangible assets
                                    
                                    $
                                    9,310
                                    
                                    
                                    $
                                    (1,544
                                    )
                                    
                                    $
                                    9,310
                                    
                                    
                                    $
                                    (1,464
                                    )





Software
is amortized over four to five years and the customer list is amortized over
seven years.  Amortization of intangible assets amounted to $80,000
and $195,000 for the nine-month periods ended September 30, 2010 and 2009,
respectively.  Estimated amortization of intangibles over the next
five years is as follows:  $107,000 in 2010, 2011 and 2012, $54,000 in
2013 and $0 in 2014.





Note 3 -
Equity Investments in Non-Marketable Securities





Non-marketable
equity investments in low-income housing projects are included in other assets
on the Company’s consolidated balance sheets.  The total balance of
these investments at September 30, 2010 and December 31, 2009 were $456,000 and
$520,000, respectively.





Note 4 –
Earnings Per Share





Basic
earnings per share is computed by dividing net income by the weighted-average
number of common shares outstanding.  Diluted earnings per share is
computed by dividing net income, adjusted for the net income effect of the
interest expense on the outstanding convertible debentures, by the sum of the
weighted-average number of common shares outstanding and the weighted-average
number of potential common shares outstanding.  There were no
antidilutive shares in the three-month and nine-month periods ended September
30, 2010 and 2009.  The calculations of basic and diluted earnings per
share are as follows:





-6-




Three Months EndedSeptember 30,
                                          
                                          
                                          Nine Months EndedSeptember 30,(In
      thousands except share and per share data)
                                          
                                          2010
                                          
                                          
                                          2009
                                          
                                          
                                          2010
                                          
                                          
                                          2009BasicNet
      income
                                          
                                          $
                                          5,580
                                          
                                          
                                          $
                                          4,318
                                          
                                          
                                          $
                                          15,229
                                          
                                          
                                          $
                                          11,902Weighted-average
      common shares outstanding
                                          
                                          
                                          9,338,006
                                          
                                          
                                          
                                          9,157,055
                                          
                                          
                                          
                                          9,333,884
                                          
                                          
                                          
                                          9,144,521Basic
      earnings per share
                                          
                                          $
                                          .60
                                          
                                          
                                          $
                                          .47
                                          
                                          
                                          $
                                          1.63
                                          
                                          
                                          $
                                          1.30DilutedBasic
      net income
                                          
                                          $
                                          5,580
                                          
                                          
                                          $
                                          4,318
                                          
                                          
                                          $
                                          15,229
                                          
                                          
                                          $
                                          11,902Net
      income effect of 5.33% convertibledebentures
                                          
                                          
                                          —
                                          
                                          
                                          
                                          14
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          55Diluted
      net income
                                          
                                          
                                          5,580
                                          
                                          
                                          
                                          4,332
                                          
                                          
                                          
                                          15,229
                                          
                                          
                                          
                                          11,957Weighted-average
      common shares outstanding
                                          
                                          
                                          9,338,006
                                          
                                          
                                          
                                          9,157,055
                                          
                                          
                                          
                                          9,333,884
                                          
                                          
                                          
                                          9,144,521Effect
      of dilutive restricted stock, stockoptions
      and stock appreciation rights
                                          
                                          
                                          116,960
                                          
                                          
                                          
                                          141,907
                                          
                                          
                                          
                                          105,825
                                          
                                          
                                          
                                          124,512Effect
      of convertible debentures
                                          
                                          
                                          —
                                          
                                          
                                          
                                          66,622
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          124,309Weighted-average
      common shares outstandingassuming
      dilution
                                          
                                          
                                          9,454,966
                                          
                                          
                                          
                                          9,365,584
                                          
                                          
                                          
                                          9,439,709
                                          
                                          
                                          
                                          9,393,342Diluted
      earnings per share
                                          
                                          $
                                          .59
                                          
                                          
                                          $
                                          .46
                                          
                                          
                                          $
                                          1.61
                                          
                                          
                                          $
                                          1.27





Note 5 –
Stock Repurchases





The
Company maintains a treasury stock buyback program pursuant to which the Board
of Directors has authorized the repurchase of up to 300,000 shares of the
Company’s Common Stock.  The Company did not repurchase any shares
during the nine-month periods ended September 30, 2010 and 2009.  As
of September 30, 2010, 180,000 shares remained available for repurchase under
the program.  Repurchases are made in the open market or through
negotiated transactions from time to time depending on market
conditions.





Note 6 -
Comprehensive Income





For the
three and nine-month periods ended September 30, 2010 and 2009, unrealized gains
and losses on securities available-for-sale and reclassification adjustments for
gains included in net income were the Company’s other comprehensive income
components.  Comprehensive income is summarized as
follows:





Three Months Ended
                                  September 30,
                                
                                
                                Nine Months Ended
                                  September 30,(In
      thousands)
                                
                                2010
                                
                                
                                2009
                                
                                
                                2010
                                
                                
                                2009Net
      income
                                
                                $
                                5,580
                                
                                
                                $
                                4,318
                                
                                
                                $
                                15,229
                                
                                
                                $
                                11,902Other
      comprehensive income:Reclassification
      adjustments for gains included in net income, net of tax
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                (131
                                )Net
      unrealized gain  on securitiesavailable-for-sale,
      net of tax
                                
                                
                                3,558
                                
                                
                                
                                4,108
                                
                                
                                
                                4,066
                                
                                
                                
                                7,981Total
      comprehensive income
                                
                                $
                                9,138
                                
                                
                                $
                                8,426
                                
                                
                                $
                                19,295
                                
                                
                                $
                                19,752





Note 7 –
Industry Segment Information





The
services provided by the Company are classified into two reportable segments:
Information Services and Banking Services.  Each of these segments
provides distinct services that are marketed through different
channels.  They are managed separately due to their unique service,
processing and capital requirements.





The
Information Services segment provides freight, utility and telecommunication
invoice processing and payment services to large corporations.  The
Banking Services segment provides banking services primarily to privately-held
businesses and churches.




-7-




The
Company’s accounting policies for segments are the same as those described in
the summary of significant accounting policies in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2009.  Management evaluates
segment performance based on net income after allocations for corporate expenses
and income taxes.  Transactions between segments are accounted for at
what management believes to be fair value.





All
revenue originates from and all long-lived assets are located within North
America, and no revenue from any customer of any segment exceeds 10% of the
Company’s consolidated revenue.





Summarized
information about the Company’s operations in each industry segment is as
follows:





(In
      thousands)
                          
                          InformationServices
                          
                          
                          BankingServices
                          
                          
                          Corporate,Eliminationsand
      other
                          
                          
                          TotalThree
      Months Ended September 30, 2010Total Revenues:Revenue from
      customers
                          
                          $
                          19,034
                          
                          
                          $
                          5,657
                          
                          
                          $
                          —
                          
                          
                          $
                          24,691Intersegment
      revenue
                          
                          
                          2,326
                          
                          
                          
                          416
                          
                          
                          
                          (2,742
                          )
                          
                          
                          —Net income
                          
                          
                          3,776
                          
                          
                          
                          1,804
                          
                          
                          
                          —
                          
                          
                          
                          5,580Total assets
                          
                          
                          664,112
                          
                          
                          
                          564,554
                          
                          
                          
                          (11,237
                          )
                          
                          
                          1,217,429Goodwill
                          
                          
                          7,335
                          
                          
                          
                          136
                          
                          
                          
                          —
                          
                          
                          
                          7,471Other intangible assets,
      net
                          
                          
                          295
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          295Three
      Months Ended September 30, 2009Total Revenues:Revenue from
      customers
                          
                          $
                          17,152
                          
                          
                          $
                          4,823
                          
                          
                          $
                          —
                          
                          
                          $
                          21,975Intersegment
      revenue
                          
                          
                          1,911
                          
                          
                          
                          414
                          
                          
                          
                          (2,325
                          )
                          
                          
                          —Net income
                          
                          
                          2,859
                          
                          
                          
                          1,459
                          
                          
                          
                          —
                          
                          
                          
                          4,318Total assets
                          
                          
                          536,063
                          
                          
                          
                          503,744
                          
                          
                          
                          (6,412
                          )
                          
                          
                          1,033,395Goodwill
                          
                          
                          7,335
                          
                          
                          
                          136
                          
                          
                          
                          —
                          
                          
                          
                          7,471Other intangible assets,
      net
                          
                          
                          402
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          402Nine
      Months Ended September 30, 2010Total Revenues:Revenue from
      customers
                          
                          $
                          54,813
                          
                          
                          $
                          16,405
                          
                          
                          $
                          —
                          
                          
                          $
                          71,218Intersegment
      revenue
                          
                          
                          6,585
                          
                          
                          
                          1,209
                          
                          
                          
                          (7,794
                          )
                          
                          
                          —Net income
                          
                          
                          10,033
                          
                          
                          
                          5,196
                          
                          
                          
                          —
                          
                          
                          
                          15,229Total assets
                          
                          
                          664,112
                          
                          
                          
                          564,554
                          
                          
                          
                          (11,237
                          )
                          
                          
                          1,217,429Goodwill
                          
                          
                          7,335
                          
                          
                          
                          136
                          
                          
                          
                          —
                          
                          
                          
                          7,471Other intangible assets,
      net
                          
                          
                          295
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          295Nine
      Months Ended September 30, 2009Total Revenues:Revenue from
      customers
                          
                          $
                          51,526
                          
                          
                          $
                          13,895
                          
                          
                          $
                          —
                          
                          
                          $
                          65,421Intersegment
      revenue
                          
                          
                          5,259
                          
                          
                          
                          1,159
                          
                          
                          
                          (6,418
                          )
                          
                          
                          —Net income
                          
                          
                          8,124
                          
                          
                          
                          3,778
                          
                          
                          
                          —
                          
                          
                          
                          11,902Total assets
                          
                          
                          536,063
                          
                          
                          
                          503,744
                          
                          
                          
                          (6,412
                          )
                          
                          
                          1,033,395Goodwill
                          
                          
                          7,335
                          
                          
                          
                          136
                          
                          
                          
                          —
                          
                          
                          
                          7,471Other intangible assets,
      net
                          
                          
                          402
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          402





Note 8 -
Loans by Type





(In
      thousands)
                          
                          September 30, 2010
                          
                          
                          December 31, 2009Commercial
      and industrial
                          
                          $
                          127,659
                          
                          
                          $
                          93,371Real
      estate:  (Commercial and church)Mortgage
                          
                          
                          501,536
                          
                          
                          
                          469,097Construction
                          
                          
                          58,547
                          
                          
                          
                          74,407Industrial
      revenue bonds
                          
                          
                          1,078
                          
                          
                          
                          2,676Other
                          
                          
                          863
                          
                          
                          
                          2,406Total
      loans
                          
                          $
                          689,683
                          
                          
                          $
                          641,957




-8-




Note 9 –
Commitments and Contingencies





In the
normal course of business, the Company is party to activities that contain
credit, market and operational risks that are not reflected in whole or in part
in the Company’s consolidated financial statements.  Such activities
include traditional off-balance sheet credit-related financial instruments and
commitments under operating leases.  These financial instruments
include commitments to extend credit, commercial letters of credit and standby
letters of credit. The Company’s maximum potential exposure to credit loss in
the event of nonperformance by the other party to the financial instrument for
commitments to extend credit, commercial letters of credit and standby letters
of credit is represented by the contractual amounts of those
instruments.  At September 30, 2010 and December 31, 2009, no amounts
have been accrued for any estimated losses for these instruments.





Commitments
to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract.  Commercial
and standby letters of credit are conditional commitments issued by the Company
or its subsidiaries to guarantee the performance of a customer to a third party.
These off-balance sheet financial instruments generally have fixed expiration
dates or other termination clauses and may require payment of a
fee.  At September 30, 2010, the balance of unused loan commitments,
standby and commercial letters of credit were $38,845,000, $18,738,000 and
$3,571,000, respectively.  Since some of the financial instruments may
expire without being drawn upon, the total amounts do not necessarily represent
future cash requirements. Commitments to extend credit and letters of credit are
subject to the same underwriting standards as those financial instruments
included on the consolidated balance sheets. The Company evaluates each
customer’s credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary upon extension of the credit, is based on
management’s credit evaluation of the borrower. Collateral held varies, but is
generally accounts receivable, inventory, residential or income-producing
commercial property or equipment.  In the event of nonperformance, the
Company or its subsidiaries may obtain and liquidate the collateral to recover
amounts paid under its guarantees on these financial instruments.





The
following table summarizes contractual cash obligations of the Company related
to operating lease commitments and time deposits at September 30,
2010:





Amount of Commitment Expiration per Period(In thousands)
                              
                              Total
                              
                              
                              Less than
                                1 Year
                              
                              
                              1-3
                                Years
                              
                              
                              3-5
                                Years
                              
                              
                              Over 5
                                YearsOperating
      lease commitments
                              
                              $
                              2,480
                              
                              
                              $
                              702
                              
                              
                              $
                              903
                              
                              
                              $
                              456
                              
                              
                              $
                              419Time
      deposits
                              
                              
                              151,519
                              
                              
                              
                              130,093
                              
                              
                              
                              19,164
                              
                              
                              
                              2,262
                              
                              
                              
                              3⁄4Total
                              
                              $
                              153,999
                              
                              
                              $
                              130,795
                              
                              
                              $
                              20,067
                              
                              
                              $
                              2,718
                              
                              
                              $
                              419





The
Company and its subsidiaries are involved in various pending legal actions and
proceedings in which claims for damages are asserted. Management, after
discussion with legal counsel, believes the ultimate resolution of these legal
actions and proceedings will not have a material effect upon the Company’s
consolidated financial position or results of operations.





Note 10 –
Stock-Based Compensation





In 2007,
the Board and the Company’s shareholders approved the 2007 Omnibus Incentive
Stock Plan (the “Omnibus Plan”).  The Omnibus Plan permits the
issuance of up to 880,000 shares of the Company’s common stock in the form of
stock options, stock appreciation rights (“SARs”), restricted stock, restricted
stock units and performance awards.  The Company issues shares out of
treasury stock for these awards.  During the nine months ended
September 30, 2010, 15,149 restricted shares and 23,311 SARs were granted under
the Omnibus Plan.





The
Company also continues to maintain its other stock-based incentive plans for the
restricted common stock previously awarded and the options previously issued and
still outstanding.  These plans have been superseded by the Omnibus
Plan and accordingly, any available restricted stock and stock option grants not
yet issued have been cancelled.





Restricted
Stock


Restricted
shares are amortized to expense over the three-year vesting period. As of
September 30, 2010, the total unrecognized compensation expense related to
non-vested common stock was $924,000 and the related weighted-average period
over which it is expected to be recognized is approximately .9
years.




-9-




Following
is a summary of the activity of the restricted stock:





Nine Months Ended
                            September 30, 2010Shares
                          
                          
                          Fair ValueBalance
      at December 31, 2009
                          
                          
                          75,965
                          
                          
                          $
                          28.97Granted
                          
                          
                          15,149
                          
                          
                          
                          30.91Vested
                          
                          
                          (40,838
                          )
                          
                          
                          30.25Balance
      at September 30, 2010
                          
                          
                          50,276
                          
                          
                          $
                          28.51





Stock
Options


Stock
options vest and expire over a period not to exceed seven years.  As
of September 30, 2010, the total unrecognized compensation expense related to
non-vested stock options was $39,000, and the related weighted-average period
over which it is expected to be recognized is approximately 2.0
years.  Following is a summary of the activity of the stock options
during the nine-month period ended September 30, 2010:





Shares
                                
                                
                                Weighted-Average
                                  Exercise
                                  Price
                                
                                
                                Average
                                  Remaining
                                  Contractual
                                  Term Years
                                
                                
                                Aggregate
                                  Intrinsic
                                  Value
                                  (In thousands)Outstanding
      at December 31, 2009
                                
                                
                                44,120
                                
                                
                                $
                                17.65Exercised
                                
                                
                                (3,302
                                )
                                
                                
                                14.10Outstanding
      at September 30, 2010
                                
                                
                                40,818
                                
                                
                                
                                17.93
                                
                                
                                
                                1.7
                                
                                
                                $
                                830Exercisable
      at September 30, 2010
                                
                                
                                28,378
                                
                                
                                $
                                17.12
                                
                                
                                
                                1.5
                                
                                
                                $
                                519





The total
intrinsic value of options exercised was $60,000 and $279,000 for the nine-month
periods ended September 30, 2010 and 2009, respectively.  Following is
a summary of the activity of the non-vested stock options during the nine-month
period ended September 30, 2010:





Weighted-AverageGrant DateShares
                          
                          
                          Fair ValueNonvested
      at December 31, 2009
                          
                          
                          27,586
                          
                          
                          $
                          2.81Vested
                          
                          
                          (15,146
                          )
                          
                          
                          2.70Nonvested
      at September 30, 2010
                          
                          
                          12,440
                          
                          
                          $
                          2.94





SARs


SARs vest
over a three-year period with one-third of the shares vesting and becoming
exercisable each year on the anniversary date of the grant and they expire 10
years from the original grant date.  As of September 30, 2010, the
total unrecognized compensation expense was $653,000 and the related
weighted-average period over which it is expected to be recognized is 1.0
year.  Following is a summary of the activity of the Company’s SARs
program for the nine-month period ended September 30, 2010:





Shares
                              
                              
                              Weighted-Average
                                Exercise
                                Price
                              
                              
                              Average
                                Remaining
                                Contractual
                                Term Years
                              
                              
                              Aggregate
                                Intrinsic
                                Value
                                (In thousands)Outstanding
      at December 31, 2009
                              
                              
                              231,262
                              
                              
                              $
                              27.02Granted
                              
                              
                              23,311
                              
                              
                              
                              30.16Exercised
                              
                              
                              (1,012
                              )
                              
                              
                              33.29Outstanding
      at September 30, 2010
                              
                              
                              253,561
                              
                              
                              
                              27.31
                              
                              
                              
                              8.09
                              
                              
                              
                              1,776Exercisable
      at September 30, 2010
                              
                              
                              112,360
                              
                              
                              $
                              27.47
                              
                              
                              
                              5.02
                              
                              
                              
                              769





-10-




Following
is a summary of the activity of the nonvested SARs during the nine-month period
ended September 30, 2010:





Weighted-AverageGrant DateShares
                          
                          
                          Fair ValueNonvested
      at December 31, 2009
                          
                          
                          195,119
                          
                          
                          $
                          6.74Granted
                          
                          
                          23,311
                          
                          
                          
                          9.12Vested
                          
                          
                          (77,229
                          )
                          
                          
                          6.89Nonvested
      at September 30, 2010
                          
                          
                          141,201
                          
                          
                          $
                          7.06





The
Company uses the Black-Scholes pricing model to determine the fair value of the
SARs at the date of grant.  Following are the assumptions used to
estimate the per share fair value of SARs granted:





Nine Months EndedSeptember 30,2010
                        
                        
                        2009Risk-free
      interest rate
                        
                        
                        3.33
                        %
                        
                        
                        1.94
                        %Expected
      life
                        
                        7
      yrs.
                        
                        
                        7
      yrs.Expected
      volatility
                        
                        
                        30.00
                        %
                        
                        
                        27.00
                        %Expected
      dividend yield
                        
                        
                        1.86
                        %
                        
                        
                        2.02
                        %





The
risk-free interest rate is based on the zero-coupon U.S. Treasury yield for the
period equal to the expected life of the SARs at the time of the
grant.  The expected life was derived using the historical exercise
activity.  The Company uses historical volatility for a period equal
to the expected life of the rights using average monthly closing market prices
of the Company’s stock as reported on The Nasdaq Global Market.  The
expected dividend yield is based on the Company’s current rate of annual
dividends.





Note 11 –
Defined Pension Plans





The
Company has a noncontributory defined benefit pension plan, which covers most of
its employees. The Company accrues and makes contributions designed to fund
normal service costs on a current basis using the projected unit credit with
service proration method to amortize prior service costs arising from
improvements in pension benefits and qualifying service prior to the
establishment of the plan over a period of approximately 30
years.  Disclosure information is based on a measurement date of
December 31 of the corresponding year.  The following table represents
the components of the net periodic pension costs:





(In
      thousands)
                      
                      Estimated
                        2010
                      
                      
                      Actual
                        2009Service
      cost – benefits earned during the year
                      
                      $
                      1,771
                      
                      
                      $
                      1,606Interest
      cost on projected benefit obligation
                      
                      
                      2,291
                      
                      
                      
                      2,080Expected
      return on plan assets
                      
                      
                      (2,440
                      )
                      
                      
                      (1,880
                      )Net
      amortization
                      
                      
                      615
                      
                      
                      
                      873Net
      periodic pension cost
                      
                      $
                      2,237
                      
                      
                      $
                      2,679





Pension
costs recorded to expense were $594,000 and $668,000 for the three-month periods
ended September 30, 2010 and 2009, respectively, and totaled $1,678,000 and
$2,009,000 for the nine-month periods ended September 30, 2010 and 2009,
respectively.  The Company made a contribution of $450,000 to the plan
during the three-month period ended September 30, 2010, for a total of
$1,350,000 for the nine-month period ending September 30, 2010 and expects to
contribute at least an additional $450,000 in 2010.





In
addition to the above funded benefit plan, the Company has an unfunded
supplemental executive retirement plan which covers key executives of the
Company. This is a noncontributory plan in which the Company and its
subsidiaries make accruals designed to fund normal service costs on a current
basis using the same method and criteria as its defined benefit
plan.  The following table represents the components of the net
periodic pension costs for 2009 and an estimate for 2010:





-11-




(In
      thousands)
                  
                  Estimated
                    2010
                  
                  
                  Actual
                    2009Service
      cost – benefits earned during the year
                  
                  $
                  78
                  
                  
                  $
                  33Interest
      cost on projected benefit obligation
                  
                  
                  315
                  
                  
                  
                  278Net
      amortization
                  
                  
                  257
                  
                  
                  
                  130Net
      periodic pension cost
                  
                  $
                  650
                  
                  
                  $
                  441





Pension
costs recorded to expense were $158,000 and $103,000 for the three-month periods
ended September 30, 2010 and 2009, respectively, and were $488,000 and $330,000
for the nine-month periods ended September 30, 2010 and 2009,
respectively.





Note 12 –
Income Taxes





During
the nine months ended September 30, 2010, unrecognized tax benefits
increased by $63,000 and related accrued interest increased by $37,000. As of
December 31, 2009, the Company's unrecognized tax benefits were approximately
$1,750,000, of which $1,466,000 would, if recognized, affect the Company's
effective tax rate. During the next twelve months, the Company may realize a
reduction of its unrecognized tax benefits of approximately $497,000 due to the
lapse of federal and state statutes of limitations.





The
Company recognizes interest and penalties related to uncertain tax positions in
income tax expense. At December 31, 2009, before any tax benefits, the Company
had $147,000 of accrued interest on unrecognized tax benefits. There were no
penalties for unrecognized tax benefits accrued at December 31,
2009.





The
Company is subject to income tax in the U.S. federal jurisdiction and numerous
state jurisdictions. U.S. federal income tax returns for tax years 2007 and 2008
remain subject to examination by the Internal Revenue Service. In addition, the
Company is subject to state tax examinations for the tax years 2005 through
2008.





Note 13 –
Investment Securities Available-for-Sale





Effective
July 1, 2009, the Company adopted FASB ASC 820, “Fair Value Measurements and
Disclosures.”  Investment securities available-for-sale are recorded
at fair value on a recurring basis.  The Company’s investment
securities available-for-sale are measured at fair value using Level 2
valuations.  The market evaluation utilizes several sources which
include “observable inputs” rather than “significant unobservable inputs” and
therefore falls into the Level 2 category.  The amortized cost, gross
unrealized gains, gross unrealized losses and fair value of investment
securities are summarized as follows:





September
      30, 2010(In
      thousands)
                        
                        AmortizedCost
                        
                        
                        GrossUnrealizedGains
                        
                        
                        GrossUnrealizedLosses
                        
                        
                        Fair
      ValueState
      and political subdivisions
                        
                        $
                        220,060
                        
                        
                        $
                        18,202
                        
                        
                        $
                        —
                        
                        
                        $
                        238,262





December 31, 2009(In thousands)
                        
                        AmortizedCost
                        
                        
                        GrossUnrealizedGains
                        
                        
                        GrossUnrealizedLosses
                        
                        
                        Fair ValueState
      and political subdivisions
                        
                        $
                        212,651
                        
                        
                        $
                        11,970
                        
                        
                        $
                        24
                        
                        
                        $
                        224,597





The fair
values of securities with unrealized losses are as follows:





September 30, 2010Less than 12 months
                                
                                
                                12 months or more
                                
                                
                                TotalEstimated
                                
                                
                                Unrealized
                                
                                
                                Estimated
                                
                                
                                Unrealized
                                
                                
                                Estimated
                                
                                
                                Unrealized(In thousands)
                                
                                fair value
                                
                                
                                losses
                                
                                
                                fair value
                                
                                
                                losses
                                
                                
                                Fair value
                                
                                
                                lossesState
      and political  subdivisions
                                
                                $
                                3⁄4
                                
                                
                                $
                                3⁄4
                                
                                
                                $
                                3⁄4
                                
                                
                                $
                                3⁄4
                                
                                
                                $
                                3⁄4
                                
                                
                                $
                                3⁄4




-12-




December 31, 2009Less than 12 months
                      
                      
                      12 months or more
                      
                      
                      TotalEstimated
                      
                      
                      Unrealized
                      
                      
                      Estimated
                      
                      
                      Unrealized
                      
                      
                      Estimated
                      
                      
                      Unrealized(In thousands)
                      
                      fair value
                      
                      
                      losses
                      
                      
                      fair value
                      
                      
                      losses
                      
                      
                      Fair value
                      
                      
                      lossesState
      and political  subdivisions
                      
                      $
                      1,415
                      
                      
                      $
                      24
                      
                      
                      $
                      3⁄4
                      
                      
                      $
                      3⁄4
                      
                      
                      $
                      1,415
                      
                      
                      $
                      24





There
were no securities in an unrealized loss position as of September 30,
2010.   There were two securities (none greater than 12 months)
in an unrealized loss position as of December 31, 2009.   All
unrealized losses were reviewed to determine whether the losses were other than
temporary.





The
amortized cost and fair value of investment securities by contractual maturity
are shown in the following table. Expected maturities may differ from
contractual maturities because borrowers have the right to prepay obligations
with or without prepayment penalties.





September 30, 2010(In thousands)
                            
                            Amortized Cost
                            
                            
                            Fair ValueDue
      in 1 year or less
                            
                            $
                            7,194
                            
                            
                            $
                            7,282Due
      after 1 year through 5 years
                            
                            
                            39,371
                            
                            
                            
                            41,792Due
      after 5 years through 10 years
                            
                            
                            112,089
                            
                            
                            
                            123,753Due
      after 10 years
                            
                            
                            61,406
                            
                            
                            
                            65,435Total
                            
                            $
                            220,060
                            
                            
                            $
                            238,262





The
amortized cost of investment securities pledged to secure public deposits and
for other purposes at September 30, 2010 was $18,090,000.





There
were no sales of investment securities for the three months ended September 30,
2010 and 2009.  Proceeds from sales of investment securities were $0
and $14,591,000 for the nine months ended September 30, 2010 and 2009,
respectively.  Gross realized gains were $202,000 for the nine months
ended September 30, 2009.





Note 14 –
Fair Value of Financial Instruments





Effective
July 1, 2009, the Company adopted FASB ASC 270, “Interim
Reporting.”  Following is a summary of the carrying amounts and fair
values of the Company’s financial instruments:





September 30, 2010
                                
                                
                                December 31, 2009(In thousands)
                                
                                CarryingAmount
                                
                                
                                Fair Value
                                
                                
                                CarryingAmount
                                
                                
                                Fair ValueBalance
      sheet assets:Cash and cash
      equivalents
                                
                                $
                                209,468
                                
                                
                                $
                                209,468
                                
                                
                                $
                                79,294
                                
                                
                                $
                                79,294Investment
    securities
                                
                                
                                238,262
                                
                                
                                
                                238,262
                                
                                
                                
                                224,597
                                
                                
                                
                                224,597Loans, net
                                
                                
                                678,925
                                
                                
                                
                                693,150
                                
                                
                                
                                633,673
                                
                                
                                
                                634,598Accrued interest
      receivable
                                
                                
                                5,366
                                
                                
                                
                                5,366
                                
                                
                                
                                5,294
                                
                                
                                
                                5,294Total
                                
                                $
                                1,132,021
                                
                                
                                $
                                1,146,246
                                
                                
                                $
                                942,858
                                
                                
                                $
                                943,783Balance
      sheet liabilities:Deposits
                                
                                $
                                501,259
                                
                                
                                $
                                501,259
                                
                                
                                $
                                437,876
                                
                                
                                $
                                437,876Accounts and drafts
      payable
                                
                                
                                554,945
                                
                                
                                
                                554,945
                                
                                
                                
                                430,251
                                
                                
                                
                                430,251Short-term
    borrowings
                                
                                
                                13
                                
                                
                                
                                13
                                
                                
                                
                                26
                                
                                
                                
                                26Accrued interest
      payable
                                
                                
                                283
                                
                                
                                
                                283
                                
                                
                                
                                227
                                
                                
                                
                                227Total
                                
                                $
                                1,056,500
                                
                                
                                $
                                1,056,500
                                
                                
                                $
                                868,380
                                
                                
                                $
                                868,380





The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments for which it is practicable to estimate that
value:





Cash and Other Short-term
Instruments – For cash and cash equivalents, accrued interest receivable,
accounts and drafts payable, short-term borrowings and accrued interest payable,
the carrying amount is a reasonable estimate of fair value because of the demand
nature or short maturities of these instruments.




-13-




Loans – The Company does not
record loans at fair value on a recurring basis other than loans that are
considered impaired.  Once a loan is identified as impaired,
management measures impairment in accordance with FASB ASC 310, “Allowance for
Credit Losses.”  At September 30, 2010, all impaired loans were
evaluated based on the fair value of the collateral.  The fair value
of the collateral is based upon an observable market price or current appraised
value and therefore, the Company classifies these assets as nonrecurring Level
2.  The total principal balance of impaired loans measured at fair
value at September 30, 2010 and December 31, 2009 were $618,000 and $1,115,000,
respectively.  The fair value of loans in the above table is estimated
by discounting the future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit ratings and for the same
remaining maturities.





Deposits – The fair value of
demand deposits, savings deposits and certain money market deposits is the
amount payable on demand at the reporting date. The fair value of fixed-maturity
certificates of deposit is estimated using the rates currently offered for
deposits of similar remaining maturities. The fair value estimates above do not
include the benefit that results from the low-cost funding provided by the
deposit liabilities compared to the cost of borrowing funds in the market or the
benefit derived from the customer relationship inherent in existing
deposits.





Note 15 –
Subsequent Events





In
accordance with FASB ASC 855, “Subsequent Events,” the Company has evaluated
subsequent events after the consolidated balance sheet date of September 30,
2010 and there were no events identified that would require additional
disclosures to prevent the Company’s consolidated financial statements from
being misleading.





-14-





ITEM
      2.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





Overview





Cass
provides payment and information processing services to large manufacturing,
distribution and retail enterprises from its processing centers in St. Louis,
Missouri, Columbus, Ohio, Boston, Massachusetts, Greenville, South Carolina and
Wellington, Kansas.  The Company’s services include freight invoice
rating, payment processing, auditing, and the generation of accounting and
transportation information.  Cass also processes and pays utility
invoices, which includes electricity, gas and telecommunications expenses and is
a provider of telecom expense management solutions.  Cass extracts,
stores and presents information from freight, utility and telecommunication
invoices, assisting its customers’ transportation, energy and information
technology managers in making decisions that will enable them to improve
operating performance.  The Company receives data from multiple
sources, electronic and otherwise, and processes the data to accomplish the
specific operating requirements of its customers.  It then provides
the data in a central repository for access and archiving.  The data
is finally transformed into information through the Company’s databases that
allow client interaction as required and provides Internet-based tools for
analytical processing.  The Company also, through Cass Commercial
Bank, its St. Louis, Missouri based bank subsidiary (the “Bank”), provides
banking services in the St. Louis metropolitan area, Orange County, California
and other selected cities in the United States.  In addition to
supporting the Company’s payment operations, the Bank provides banking services
to its target markets, which include privately-owned businesses and churches and
church-related ministries.





The
specific payment and information processing services provided to each customer
are developed individually to meet each customer’s requirements, which can vary
greatly.  In addition, the degree of automation such as electronic
data interchange, imaging, and web-based solutions varies greatly among
customers and industries.  These factors combine so that pricing
varies greatly among the customer base.  In general, however, Cass is
compensated for its processing services through service fees and investment of
account balances generated during the payment process.  The amount,
type and calculation of service fees vary greatly by service offering, but
generally follow the volume of transactions processed.  Interest
income from the balances generated during the payment processing cycle is
affected by the amount of time Cass holds the funds prior to payment and the
dollar volume processed.  Both the number of transactions processed
and the dollar volume processed are therefore key metrics followed by
management.  Other factors will also influence revenue and
profitability, such as changes in the general level of interest rates, which
have a significant effect on net interest income.  The funds generated
by these processing activities are invested in overnight investments, investment
grade securities and loans generated by the Bank.  The Bank earns most
of its revenue from net interest income, or the difference between the interest
earned on its loans and investments and the interest paid on its deposits and
other borrowings.  The Bank also assesses fees on other services such
as cash management services.





Industry-wide
factors that impact the Company include the willingness of large corporations to
outsource key business functions such as freight, utility and telecommunication
payment and audit.  The benefits that can be achieved by outsourcing
transaction processing and the management information generated by Cass’ systems
can be influenced by factors such as the competitive pressures within industries
to improve profitability, the general level of transportation costs,
deregulation of energy costs and consolidation of telecommunication
providers.  Economic factors that impact the Company include the
general level of economic activity that can affect the volume and size of
invoices processed, the ability to hire and retain qualified staff and the
growth and quality of the loan portfolio. As lower levels of economic activity
are encountered, such as those experienced in 2009, the number and total dollar
amount of transactions processed by the Company may decline, thereby reducing
fee revenue, interest income, and possibly liquidity.  Conversely,
improving economic conditions, as those experienced in 2010, will tend to
increase fee revenue, interest income and liquidity.  The general
level of interest rates also has a significant effect on the revenue of the
Company.  As discussed in greater detail in Item 7A, “Quantitative and
Qualitative Disclosures about Market Risk,” in the Company’s 2009 Annual Report
on Form 10-K, a decline in the general level of interest rates can have a
negative impact on net interest income.





Currently,
management views Cass’ major opportunity as the continued expansion of its
payment and information processing service offering and customer base. While the
economic slow-down in 2009 reduced the short-term growth rate, management
remains optimistic about the long-term prospects for growth.





-15-




Critical
Accounting Policies





The
Company has prepared all of the consolidated financial information in this
report in accordance with U.S. generally accepted accounting principles (“U.S.
GAAP”).  In preparing the consolidated financial statements in
accordance with U.S. GAAP, management makes estimates and assumptions that
affect the reported amount of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenue and expenses during the reporting period.  These
estimates have been generally accurate in the past, have been consistent and
have not required any material changes.  There can be no assurances
that actual results will not differ from those estimates.  Certain
accounting policies that require significant management estimates and are deemed
critical to our results of operations or financial position have been discussed
with the Audit Committee of the Board of Directors and are described
below.





Allowance for Loan
Losses.  The Company performs periodic and systematic detailed
reviews of its loan portfolio to assess overall collectability.  The
level of the allowance for loan losses reflects management’s estimate of the
collectability of the loan portfolio.  Although these estimates are
based on established methodologies for determining allowance requirements,
actual results can differ significantly from estimated results.  These
policies affect both segments of the Company.  The impact and
associated risks related to these policies on the Company’s business operations
are discussed in the “Provision and Allowance for Loan Losses” section of this
report.  The Company’s estimates have been materially accurate in the
past, and accordingly, we expect to continue to utilize the present
processes.





Impairment of
Assets.  The Company periodically evaluates certain long-term
assets such as intangible assets including goodwill, foreclosed assets and
investments in private equity securities and assets held for sale for
impairment.  Generally, these assets are initially recorded at cost,
and recognition of impairment is required when events and circumstances indicate
that the carrying amounts of these assets will not be recoverable in the
future.  If impairment occurs, various methods of measuring impairment
may be called for depending on the circumstances and type of asset, including
quoted market prices, estimates based on similar assets, and estimates based on
valuation techniques such as discounted projected cash flows.  The
Company had no impairment of goodwill and intangible assets for the three or
nine month periods ended September 30, 2010 or for the fiscal year ended
December 31, 2009, and management does not anticipate any future impairment
loss.  Investment securities available-for-sale are measured at fair
value using Level 2 valuations calculated by an independent research
firm.  The market evaluation utilizes several sources which include
“observable inputs” rather than “significant unobservable inputs.” These
policies affect both segments of the Company and require significant management
assumptions and estimates that could result in materially different results if
conditions or underlying circumstances change.





Income Taxes.  The
objectives of accounting for income taxes are to recognize the amount of taxes
payable or refundable for the current year and deferred tax liabilities and
assets for the future tax consequences of events that have been recognized in an
entity's financial statements or tax returns.  Judgment is required in
addressing the future tax consequences of events that have been recognized in
the Company’s financial statements or tax returns such as the realization of
deferred tax assets or changes in tax laws or interpretations
thereof.  In addition, the Company is subject to the continuous
examination of its income tax returns by the Internal Revenue Service and other
taxing authorities.  In accordance with ASC 740, “Income Taxes,” the
Company has unrecognized tax benefits related to tax positions taken or expected
to be taken.  See Note 12 to the financial statements.





Pension Plans.The
amounts recognized in the consolidated financial statements related to pension
plans are determined from actuarial valuations.  Inherent in these
valuations are assumptions, including expected return on plan assets, discount
rates at which the liabilities could be settled, rate of increase in future
compensation levels and mortality rates.  These assumptions are
updated annually and are disclosed in Note 11 to the consolidated financial
statements filed with the Company’s Annual Report on Form 10-K for the year
ended December 31, 2009.   There have been no significant changes
in the Company’s long-term rate of return assumptions for the past three fiscal
years ended December 31 and management believes they are not reasonably likely
to change in the future. Pursuant to ASC 715, “Compensation – Retirement
Benefits,” the Company has recognized the funded status of its defined benefit
postretirement plan in its statement of financial position and has recognized
changes in that funded status through comprehensive income.  The
funded status is measured as the difference between the fair value of the plan
assets and the benefit obligation as of the date of its fiscal
year-end.





-16-







Results
of Operations





The
following paragraphs discuss the results of operations and changes in financial
condition for the three-month period ended September 30, 2010 (“Third Quarter of
2010”) compared to the three-month period ended September 30, 2009 (“Third
Quarter of 2009”) and the nine-month period ended September 30, 2010 (“Nine
Months Ended September 30, 2010”) compared to the nine-month period ended
September 30, 2009 (“Nine Months Ended September 30,
2009”).   The following discussion and analysis should be read in
conjunction with the consolidated financial statements and related notes and
with the statistical information and financial data appearing in this report as
well as the Company's 2009 Annual Report on Form 10-K. Results of operations for
the Third Quarter of 2010 are not necessarily indicative of the results to be
attained for any other period.





Net
Income





The
following table summarizes the Company’s operating results:





Third Quarter
                        
                        
                        Nine Months Ended(In thousands except per sharedata)
                        
                        2010
                        
                        
                        2009
                        
                        
                        %
                          Change
                        
                        
                        2010
                        
                        
                        2009
                        
                        
                        %
                          ChangeNet
      income
                        
                        $
                        5,580
                        
                        
                        $
                        4,318
                        
                        
                        
                        29.2
                        %
                        
                        $
                        15,229
                        
                        
                        $
                        11,902
                        
                        
                        
                        28.0
                        %Diluted
      earnings per share
                        
                        $
                        .59
                        
                        
                        $
                        .46
                        
                        
                        
                        28.3
                        %
                        
                        $
                        1.61
                        
                        
                        $
                        1.27
                        
                        
                        
                        26.8
                        %Return
      on average assets
                        
                        
                        1.84
                        %
                        
                        
                        1.68
                        %
                        
                        
                        —
                        
                        
                        
                        1.80
                        %
                        
                        
                        1.69
                        %
                        
                        
                        —Return
      on average equity
                        
                        
                        15.72
                        %
                        
                        
                        14.44
                        %
                        
                        
                        —
                        
                        
                        
                        15.03
                        %
                        
                        
                        13.84
                        %
                        
                        
                        —





Fee
Revenue and Other Income





The
Company’s fee revenue is derived mainly from transportation and utility
processing and payment fees.  As the Company provides its processing
and payment services, it is compensated by service fees which are typically
calculated on a per-item basis and by the accounts and drafts payable balances
generated in the payment process which can be used to generate interest
income.  Processing volumes related to fees and accounts and drafts
payable were as follows:





Third
      Quarter
                      
                      
                      Nine
      Months Ended(In
      thousands)
                      
                      2010
                      
                      
                      2009
                      
                      
                      %
                        Change
                      
                      
                      2010
                      
                      
                      2009
                      
                      
                      %
                        ChangeTransportation
      Invoice Volume
                      
                      
                      6,886
                      
                      
                      
                      5,962
                      
                      
                      
                      15.5
                      %
                      
                      
                      19,619
                      
                      
                      
                      17,073
                      
                      
                      
                      14.9
                      %Transportation
      Dollar Volume
                      
                      $
                      4,534,235
                      
                      
                      $
                      3,573,371
                      
                      
                      
                      26.9
                      %
                      
                      $
                      12,497,079
                      
                      
                      $
                      10,351,933
                      
                      
                      
                      20.7
                      %Utility
      Transaction Volume
                      
                      
                      3,061
                      
                      
                      
                      2,903
                      
                      
                      
                      5.4
                      %
                      
                      
                      9,161
                      
                      
                      
                      8,556
                      
                      
                      
                      7.1
                      %Utility
      Dollar Volume
                      
                      $
                      2,878,647
                      
                      
                      $
                      2,546,747
                      
                      
                      
                      13.0
                      %
                      
                      $
                      7,938,521
                      
                      
                      $
                      7,305,848
                      
                      
                      
                      8.7
                      %Payment
      and Processing Fees
                      
                      $
                      13,895
                      
                      
                      $
                      12,302
                      
                      
                      
                      12.9
                      %
                      
                      $
                      40,173
                      
                      
                      $
                      36,282
                      
                      
                      
                      10.7
                      %





Third
Quarter of 2010 compared to Third Quarter of 2009:





Transportation
and utility transaction volumes were up 16% and 5%, respectively, and dollar
volumes were up 27% and 13%, respectively, due to new business and improved
activity for existing customers.





Bank
service fees increased $75,000, or 26%, due to an increase in letter of credit
fees and higher bank commission and foreign exchange fees.  Other
income was approximately the same as the prior period. There were no gains on
sales of securities in the Third Quarter of 2010.





Nine
Months Ended September 30, 2010 compared to Nine Months Ended September 30,
2009:





Transportation
and utility transaction volumes were up 15% and 7%, respectively, and dollar
volumes were up 21% and 9%, respectively, due to new business and improved
activity for existing customers.





Bank
service fees decreased $31,000, or 3%, due to a decrease in account analysis
fees as more customers chose to pay for services with compensating balances
rather than fees partially offset by higherletter of credit fees
and bank commission and foreign exchange fees.  Other income was
approximately the same as the prior period.  There were no gains on
sales of securities in the Nine Months Ended September 30,
2010.


-17-


Net
Interest Income





Net
interest income is the difference between interest earned on loans, investments,
and other earning assets and interest expense on deposits and other
interest-bearing liabilities.  Net interest income is a significant
source of the Company’s revenues.  The following table summarizes the
changes in net interest income and related factors:





Third
      Quarter
                      
                      
                      Nine
      Months Ended(In
      thousands)
                      
                      2010
                      
                      
                      2009
                      
                      
                      %
                        Change
                      
                      
                      2010
                      
                      
                      2009
                      
                      
                      %
                        ChangeAverage
      earnings assets
                      
                      $
                      1,102,218
                      
                      
                      $
                      938,566
                      
                      
                      
                      7.8
                      %
                      
                      $
                      1,035,345
                      
                      
                      $
                      858,557
                      
                      
                      
                      20.6
                      %Average
      interest-bearing liabilities
                      
                      
                      367,571
                      
                      
                      
                      308,980
                      
                      
                      
                      19.0
                      %
                      
                      
                      342,063
                      
                      
                      
                      255,875
                      
                      
                      
                      33.7
                      %Net
      interest income*
                      
                      
                      12,405
                      
                      
                      
                      10,652
                      
                      
                      
                      16.4
                      %
                      
                      
                      36,103
                      
                      
                      
                      31,584
                      
                      
                      
                      14.3
                      %Net
      interest margin*
                      
                      
                      4.47
                      %
                      
                      
                      4.50
                      %
                      
                      
                      —
                      
                      
                      
                      4.66
                      %
                      
                      
                      4.92
                      %
                      
                      
                      —Yield
      on earning assets*
                      
                      
                      4.91
                      %
                      
                      
                      5.09
                      %
                      
                      
                      —
                      
                      
                      
                      5.13
                      %
                      
                      
                      5.49
                      %
                      
                      
                      —Rate
      on interest-bearing liabilities
                      
                      
                      1.35
                      %
                      
                      
                      1.80
                      %
                      
                      
                      —
                      
                      
                      
                      1.42
                      %
                      
                      
                      1.92
                      %
                      
                      
                      —


*Presented on a tax-equivalent
basis assuming a tax rate of 35%.





Third
Quarter of 2010 compared to Third Quarter of 2009:





Third
Quarter 2010 average earning assets increased 8% compared to the same period in
the prior year (see discussion in the following paragraphs). The yield on
earning assets and the tax equivalent net interest margin both decreased in 2010
as the general level of interest rates declined; however, the significant
increase in average earning assets caused net interest income to increase
16%.





Total
average loans increased $57,293,000, or 9%, to $677,715,000 for the Third
Quarter of 2010 as compared to the Third Quarter of 2009. This increase was
attributable to successful marketing efforts by the Company’s lending
staff.  Average investment securities increased $31,695,000, or 17%,
to $219,432,000, as the Company took advantage of buying opportunities in the
market.





Total
average interest-bearing deposits for the Third Quarter of 2010 increased
$60,515,000, or 20%, to $367,507,000 compared to the Third Quarter of 2009,
primarily due to customers transferring funds from lower-yielding investments at
other institutions.  Accounts and drafts payable increased
$100,308,000, or 22%, as freight and utility payment processing activities
increased.





Nine
Months Ended September 30, 2010 compared to Nine Months Ended September 30,
2009:





Average
earning assets for the Nine months Ended September 30, 2010 increased 21%
compared to the same period in the prior year (see discussion in the following
paragraphs). The yield on earning assets and the tax equivalent net interest
margin both decreased in 2010 as the general level of interest rates declined;
however, the significant increase in average earning assets caused net interest
income to increase 14%.





Total
average loans increased $59,570,000, or 10%, to $667,167,000 for the Nine Months
Ended September 30, 2010 as compared to the Nine Months Ended September 30,
2009. This increase was attributable to successful marketing efforts by the
Company’s lending staff.  Average investment securities increased
$30,713,000, or 16%, to $217,048,000, as the Company took advantage of buying
opportunities in the market.





Total
average interest-bearing deposits for the Nine Months Ended September 30, 2010
increased $93,798,000, or 38%, to $342,024,000 compared to the Nine Months Ended
September 30, 2009, primarily due to customers transferring funds from
lower-yielding investments at other institutions. Accounts and drafts payable
increased $72,099,000, or 16%, as freight and utility payment processing
activities increased.





For more
information on the changes in net interest income, please refer to the tables
that follow.





Distribution
of Assets, Liabilities and Shareholders' Equity; Interest Rate and Interest
Differential





The
following table shows the condensed average balance sheets for each of the
periods reported, the tax-equivalent interest income and expense on each
category of interest-earning assets and interest-bearing liabilities, and the
average yield on such categories of interest-earning assets and the average
rates paid on such categories of interest-bearing liabilities for each of the
periods reported.


-18-





Third
      Quarter of 2010
                                                                  
                                                                  
                                                                  Third
      Quarter of 2009(In
      thousands)
                                                                  
                                                                  Average
                                                                    Balance
                                                                  
                                                                  
                                                                  Interest
                                                                    Income/
                                                                    Expense
                                                                  
                                                                  
                                                                  Yield/
                                                                    Rate
                                                                  
                                                                  
                                                                  Average
                                                                    Balance
                                                                  
                                                                  
                                                                  Interest
                                                                    Income/
                                                                    Expense
                                                                  
                                                                  
                                                                  Yield/
                                                                    RateAssets1Earning
      assets:Loans2,
      3:Taxable
                                                                  
                                                                  $
                                                                  676,406
                                                                  
                                                                  
                                                                  $
                                                                  10,173
                                                                  
                                                                  
                                                                  
                                                                  5.97
                                                                  %
                                                                  
                                                                  $
                                                                  617,368
                                                                  
                                                                  
                                                                  $
                                                                  9,093
                                                                  
                                                                  
                                                                  
                                                                  5.84
                                                                  %Tax-exempt4
                                                                  
                                                                  
                                                                  1,309
                                                                  
                                                                  
                                                                  
                                                                  14
                                                                  
                                                                  
                                                                  
                                                                  4.24
                                                                  
                                                                  
                                                                  
                                                                  3,054
                                                                  
                                                                  
                                                                  
                                                                  49
                                                                  
                                                                  
                                                                  
                                                                  6.37Debt
      and equity securities5:Taxable
                                                                  
                                                                  
                                                                  928
                                                                  
                                                                  
                                                                  
                                                                  3
                                                                  
                                                                  
                                                                  
                                                                  1.28
                                                                  
                                                                  
                                                                  
                                                                  3,425
                                                                  
                                                                  
                                                                  
                                                                  15
                                                                  
                                                                  
                                                                  
                                                                  1.74Tax-exempt4
                                                                  
                                                                  
                                                                  218,504
                                                                  
                                                                  
                                                                  
                                                                  3,314
                                                                  
                                                                  
                                                                  
                                                                  6.02
                                                                  
                                                                  
                                                                  
                                                                  184,312
                                                                  
                                                                  
                                                                  
                                                                  2,837
                                                                  
                                                                  
                                                                  
                                                                  6.11Interest-bearing
      deposits in other financial institutions
                                                                  
                                                                  
                                                                  45,982
                                                                  
                                                                  
                                                                  
                                                                  42
                                                                  
                                                                  
                                                                  
                                                                  .36
                                                                  
                                                                  
                                                                  
                                                                  43,016
                                                                  
                                                                  
                                                                  
                                                                  24
                                                                  
                                                                  
                                                                  
                                                                  .22Federal
      funds sold and other short-term investments
                                                                  
                                                                  
                                                                  159,089
                                                                  
                                                                  
                                                                  
                                                                  108
                                                                  
                                                                  
                                                                  
                                                                  .27
                                                                  
                                                                  
                                                                  
                                                                  87,391
                                                                  
                                                                  
                                                                  
                                                                  33
                                                                  
                                                                  
                                                                  
                                                                  .15Total
      earning assets
                                                                  
                                                                  
                                                                  1,102,218
                                                                  
                                                                  
                                                                  
                                                                  13,654
                                                                  
                                                                  
                                                                  
                                                                  4.91
                                                                  
                                                                  
                                                                  
                                                                  938,566
                                                                  
                                                                  
                                                                  
                                                                  12,051
                                                                  
                                                                  
                                                                  
                                                                  5.09Non-earning
      assets:Cash
      and due from banks
                                                                  
                                                                  
                                                                  10,837
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  10,028Premise
      and equipment, net
                                                                  
                                                                  
                                                                  9,839
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  10,996Bank
      owned life insurance
                                                                  
                                                                  
                                                                  13,993
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  13,446Goodwill
      and otherintangibles
                                                                  
                                                                  
                                                                  7,781
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  7,901Other
      assets
                                                                  
                                                                  
                                                                  68,351
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  45,167Allowance
      for loan losses
                                                                  
                                                                  
                                                                  (10,316
                                                                  )
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  (7,075
                                                                  )Total
      assets
                                                                  
                                                                  $
                                                                  1,202,703
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  $
                                                                  1,019,029Liabilities
      and Shareholders’ Equity1Interest-bearing
      liabilities:Interest-bearing
      demanddeposits
                                                                  
                                                                  $
                                                                  183,806
                                                                  
                                                                  
                                                                  $
                                                                  521
                                                                  
                                                                  
                                                                  
                                                                  1.12
                                                                  %
                                                                  
                                                                  $
                                                                  141,077
                                                                  
                                                                  
                                                                  $
                                                                  499
                                                                  
                                                                  
                                                                  
                                                                  1.40
                                                                  %Savings
      deposits
                                                                  
                                                                  
                                                                  29,252
                                                                  
                                                                  
                                                                  
                                                                  83
                                                                  
                                                                  
                                                                  
                                                                  1.13
                                                                  
                                                                  
                                                                  
                                                                  30,356
                                                                  
                                                                  
                                                                  
                                                                  104
                                                                  
                                                                  
                                                                  
                                                                  1.36Time
      deposits >= $100
                                                                  
                                                                  
                                                                  53,591
                                                                  
                                                                  
                                                                  
                                                                  207
                                                                  
                                                                  
                                                                  
                                                                  1.53
                                                                  
                                                                  
                                                                  
                                                                  46,503
                                                                  
                                                                  
                                                                  
                                                                  264
                                                                  
                                                                  
                                                                  
                                                                  2.25Other
      time deposits
                                                                  
                                                                  
                                                                  100,858
                                                                  
                                                                  
                                                                  
                                                                  438
                                                                  
                                                                  
                                                                  
                                                                  1.72
                                                                  
                                                                  
                                                                  
                                                                  89,056
                                                                  
                                                                  
                                                                  
                                                                  505
                                                                  
                                                                  
                                                                  
                                                                  2.25Total
      interest-bearing deposits
                                                                  
                                                                  
                                                                  367,507
                                                                  
                                                                  
                                                                  
                                                                  1,249
                                                                  
                                                                  
                                                                  
                                                                  1.35
                                                                  
                                                                  
                                                                  
                                                                  306,992
                                                                  
                                                                  
                                                                  
                                                                  1,372
                                                                  
                                                                  
                                                                  
                                                                  1.77Short-term
      borrowings &
      other
                                                                  
                                                                  
                                                                  64
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  13
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —Subordinated
      debentures
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  1,975
                                                                  
                                                                  
                                                                  
                                                                  27
                                                                  
                                                                  
                                                                  
                                                                  5.42Total
      interest bearing liabilities
                                                                  
                                                                  
                                                                  367,571
                                                                  
                                                                  
                                                                  
                                                                  1,249
                                                                  
                                                                  
                                                                  
                                                                  1.35
                                                                  
                                                                  
                                                                  
                                                                  308,980
                                                                  
                                                                  
                                                                  
                                                                  1,399
                                                                  
                                                                  
                                                                  
                                                                  1.80Non-interest
      bearing liabilities:Demand
      deposits
                                                                  
                                                                  
                                                                  113,835
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  106,685Accounts
      and drafts payable
                                                                  
                                                                  
                                                                  565,241
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  464,933Other
      liabilities
                                                                  
                                                                  
                                                                  15,194
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  19,804Total
      liabilities
                                                                  
                                                                  
                                                                  1,061,841
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  900,402Shareholders’
      equity
                                                                  
                                                                  
                                                                  140,862
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  118,627Total
      liabilities andshareholders’
      equity
                                                                  
                                                                  $
                                                                  1,202,703
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  $
                                                                  1,019,029Net
      interest income
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  $
                                                                  12,405
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  $
                                                                  10,652Interest
      spread
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  3.56
                                                                  %
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  3.29
                                                                  %Net
      interest margin
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  4.47
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  4.50


1.
            Balances
      shown are daily averages.


2.
            For
      purposes of these computations, nonaccrual loans are included in the
      average loan amounts outstanding.  Interest on nonaccrual loans
      is recorded when received as discussed further in Note 1 to the Company's
      2009 consolidated financial statements, filed with the Company’s 2009
      Annual Report on Form 10-K.


3.
            Interest
      income on loans includes net loan fees of $179,000 and $81,000 for the
      Third Quarter of 2010 and 2009,
respectively.


4.
            Interest
      income is presented on a tax-equivalent basis assuming a tax rate of
      35%.  The tax-equivalent adjustment was approximately $1,165,000
      and $1,011,000 for the Third Quarter of 2010 and 2009,
      respectively.


5.
              For
      purposes of these computations, yields on investment securities are
      computed as interest income divided by the average amortized cost of the
      investments.


-19-





Nine
      Months Ended September 30, 2010
                                                                          
                                                                          
                                                                          Nine
      Months Ended September 30, 2009(In
      thousands)
                                                                          
                                                                          Average
                                                                            Balance
                                                                          
                                                                          
                                                                          Interest
                                                                            Income/
                                                                            Expense
                                                                          
                                                                          
                                                                          Yield/
                                                                            Rate
                                                                          
                                                                          
                                                                          Average
                                                                            Balance
                                                                          
                                                                          
                                                                          Interest
                                                                            Income/
                                                                            Expense
                                                                          
                                                                          
                                                                          Yield/
                                                                            RateAssets1Earning
      assets:Loans2,
      3:Taxable
                                                                          
                                                                          $
                                                                          665,009
                                                                          
                                                                          
                                                                          $
                                                                          29,423
                                                                          
                                                                          
                                                                          
                                                                          5.92
                                                                          %
                                                                          
                                                                          $
                                                                          604,413
                                                                          
                                                                          
                                                                          $
                                                                          26,557
                                                                          
                                                                          
                                                                          
                                                                          5.87
                                                                          %Tax-exempt4
                                                                          
                                                                          
                                                                          2,158
                                                                          
                                                                          
                                                                          
                                                                          88
                                                                          
                                                                          
                                                                          
                                                                          5.45
                                                                          
                                                                          
                                                                          
                                                                          3,184
                                                                          
                                                                          
                                                                          
                                                                          160
                                                                          
                                                                          
                                                                          
                                                                          6.72Debt
      and equity securities5:Taxable
                                                                          
                                                                          
                                                                          870
                                                                          
                                                                          
                                                                          
                                                                          28
                                                                          
                                                                          
                                                                          
                                                                          4.30
                                                                          
                                                                          
                                                                          
                                                                          3,490
                                                                          
                                                                          
                                                                          
                                                                          33
                                                                          
                                                                          
                                                                          
                                                                          1.26Tax-exempt4
                                                                          
                                                                          
                                                                          216,178
                                                                          
                                                                          
                                                                          
                                                                          9,851
                                                                          
                                                                          
                                                                          
                                                                          6.09
                                                                          
                                                                          
                                                                          
                                                                          182,845
                                                                          
                                                                          
                                                                          
                                                                          8,403
                                                                          
                                                                          
                                                                          
                                                                          6.14Interest-bearing
      deposits in other financial institutions
                                                                          
                                                                          
                                                                          28,145
                                                                          
                                                                          
                                                                          
                                                                          68
                                                                          
                                                                          
                                                                          
                                                                          .32
                                                                          
                                                                          
                                                                          
                                                                          24,051
                                                                          
                                                                          
                                                                          
                                                                          42
                                                                          
                                                                          
                                                                          
                                                                          .23Federal
      funds sold and other short-term investments
                                                                          
                                                                          
                                                                          122,985
                                                                          
                                                                          
                                                                          
                                                                          269
                                                                          
                                                                          
                                                                          
                                                                          .29
                                                                          
                                                                          
                                                                          
                                                                          40,574
                                                                          
                                                                          
                                                                          
                                                                          59
                                                                          
                                                                          
                                                                          
                                                                          .19Total
      earning assets
                                                                          
                                                                          
                                                                          1,035,345
                                                                          
                                                                          
                                                                          
                                                                          39,727
                                                                          
                                                                          
                                                                          
                                                                          5.13
                                                                          
                                                                          
                                                                          
                                                                          858,557
                                                                          
                                                                          
                                                                          
                                                                          35,254
                                                                          
                                                                          
                                                                          
                                                                          5.49Non-earning
      assets:Cash
      and due from banks
                                                                          
                                                                          
                                                                          10,220
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          9,517Premise
      and equipment, net
                                                                          
                                                                          
                                                                          10,066
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          11,322Bank
      owned life insurance
                                                                          
                                                                          
                                                                          13,854
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          13,306Goodwill
      and otherintangibles
                                                                          
                                                                          
                                                                          7,808
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          7,969Other
      assets
                                                                          
                                                                          
                                                                          61,778
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          47,197Allowance
      for loan losses
                                                                          
                                                                          
                                                                          (9,280
                                                                          )
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (6,803
                                                                          )Total
      assets
                                                                          
                                                                          $
                                                                          1,129,791
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          $
                                                                          941,065Liabilities
      and Shareholders’ Equity1Interest-bearing
      liabilities:Interest-bearing
      demanddeposits
                                                                          
                                                                          $
                                                                          172,057
                                                                          
                                                                          
                                                                          $
                                                                          1,526
                                                                          
                                                                          
                                                                          
                                                                          1.19
                                                                          %
                                                                          
                                                                          $
                                                                          107,397
                                                                          
                                                                          
                                                                          $
                                                                          1,181
                                                                          
                                                                          
                                                                          
                                                                          1.47
                                                                          %Savings
      deposits
                                                                          
                                                                          
                                                                          26,087
                                                                          
                                                                          
                                                                          
                                                                          227
                                                                          
                                                                          
                                                                          
                                                                          1.16
                                                                          
                                                                          
                                                                          
                                                                          23,617
                                                                          
                                                                          
                                                                          
                                                                          242
                                                                          
                                                                          
                                                                          
                                                                          1.37Time
      deposits >= $100
                                                                          
                                                                          
                                                                          53,089
                                                                          
                                                                          
                                                                          
                                                                          626
                                                                          
                                                                          
                                                                          
                                                                          1.58
                                                                          
                                                                          
                                                                          
                                                                          43,206
                                                                          
                                                                          
                                                                          
                                                                          827
                                                                          
                                                                          
                                                                          
                                                                          2.56Other
      time deposits
                                                                          
                                                                          
                                                                          90,791
                                                                          
                                                                          
                                                                          
                                                                          1,245
                                                                          
                                                                          
                                                                          
                                                                          1.83
                                                                          
                                                                          
                                                                          
                                                                          74,006
                                                                          
                                                                          
                                                                          
                                                                          1,291
                                                                          
                                                                          
                                                                          
                                                                          2.33Total
      interest-bearing deposits
                                                                          
                                                                          
                                                                          342,024
                                                                          
                                                                          
                                                                          
                                                                          3,624
                                                                          
                                                                          
                                                                          
                                                                          1.42
                                                                          
                                                                          
                                                                          
                                                                          248,226
                                                                          
                                                                          
                                                                          
                                                                          3,541
                                                                          
                                                                          
                                                                          
                                                                          1.91Short-term
      borrowings &
      other
                                                                          
                                                                          
                                                                          39
                                                                          
                                                                          
                                                                          
                                                                          —
                                                                          
                                                                          
                                                                          
                                                                          —
                                                                          
                                                                          
                                                                          
                                                                          5,000
                                                                          
                                                                          
                                                                          
                                                                          23
                                                                          
                                                                          
                                                                          
                                                                          .62Subordinated
      debentures
                                                                          
                                                                          
                                                                          —
                                                                          
                                                                          
                                                                          
                                                                          —
                                                                          
                                                                          
                                                                          
                                                                          —
                                                                          
                                                                          
                                                                          
                                                                          2,649
                                                                          
                                                                          
                                                                          
                                                                          106
                                                                          
                                                                          
                                                                          
                                                                          5.35Total
      interest bearing liabilities
                                                                          
                                                                          
                                                                          342,063
                                                                          
                                                                          
                                                                          
                                                                          3,624
                                                                          
                                                                          
                                                                          
                                                                          1.42
                                                                          
                                                                          
                                                                          
                                                                          255,875
                                                                          
                                                                          
                                                                          
                                                                          3,670
                                                                          
                                                                          
                                                                          
                                                                          1.92Non-interest
      bearing liabilities:Demand
      deposits
                                                                          
                                                                          
                                                                          111,645
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          98,090Accounts
      and drafts payable
                                                                          
                                                                          
                                                                          524,997
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          452,898Other
      liabilities
                                                                          
                                                                          
                                                                          15,625
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          19,247Total
      liabilities
                                                                          
                                                                          
                                                                          994,330
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          826,110Shareholders’
      equity
                                                                          
                                                                          
                                                                          135,461
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          114,955Total
      liabilities andshareholders’
      equity
                                                                          
                                                                          $
                                                                          1,129,791
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          $
                                                                          941,065Net
      interest income
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          $
                                                                          36,103
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          $
                                                                          31,584Interest
      spread
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3.71
                                                                          %
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          3.57
                                                                          %Net
      interest margin
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          4.66
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          4.92


1.
            Balances
      shown are daily averages.


2.
            For
      purposes of these computations, nonaccrual loans are included in the
      average loan amounts outstanding.  Interest on nonaccrual loans
      is recorded when received as discussed further in Note 1 to the Company's
      2009 consolidated financial statements, filed with the Company’s 2009
      Annual Report on Form 10-K.


3.
            Interest
      income on loans includes net loan fees of $345,000 and $348,000 for the
      Nine Months Ended September 30, 2010 and 2009,
    respectively.


4.
            Interest
      income is presented on a tax-equivalent basis assuming a tax rate of
      35%.  The tax-equivalent adjustment was approximately $3,479,000
      and $2,997,000 for the Nine Months Ended September 30, 2010 and 2009,
      respectively.


5.
            For
      purposes of these computations, yields on investment securities are
      computed as interest income divided by the average amortized cost of the
      investments.


-20-





Analysis
of Net Interest Income Changes





The
following table presents the changes in interest income and expense between
periods due to changes in volume and interest rates.  That portion of
the change in interest attributable to the combined rate/volume variance has
been allocated to rate and volume changes in proportion to the absolute dollar
amounts of the change in each.





Third
      Quarter of 2010 Over 2009(In
      thousands)
                            
                            Volume
                            
                            
                            Rate
                            
                            
                            TotalIncrease
      (decrease) in interest income:Loans1,
      2:Taxable
                            
                            $
                            885
                            
                            
                            $
                            195
                            
                            
                            $
                            1,080Tax-exempt3
                            
                            
                            (22
                            )
                            
                            
                            (13
                            )
                            
                            
                            (35
                            )Debt
      and equity securities:Taxable
                            
                            
                            (9
                            )
                            
                            
                            (3
                            )
                            
                            
                            (12
                            )Tax-exempt3
                            
                            
                            519
                            
                            
                            
                            (42
                            )
                            
                            
                            477Interest-bearing
      deposits in other financial institutions
                            
                            
                            2
                            
                            
                            
                            16
                            
                            
                            
                            18Federal
      funds sold and other short-term investments
                            
                            
                            38
                            
                            
                            
                            37
                            
                            
                            
                            75Total
      interest income
                            
                            
                            1,413
                            
                            
                            
                            190
                            
                            
                            
                            1,603Interest
      expense on:Interest-bearing
      demand deposits
                            
                            
                            133
                            
                            
                            
                            (111
                            )
                            
                            
                            22Savings
      deposits
                            
                            
                            (4
                            )
                            
                            
                            (17
                            )
                            
                            
                            (21
                            )Time
      deposits of $100 or more
                            
                            
                            36
                            
                            
                            
                            (93
                            )
                            
                            
                            (57
                            )Other
      time deposits
                            
                            
                            61
                            
                            
                            
                            (128
                            )
                            
                            
                            (67
                            )Subordinated
      debentures
                            
                            
                            (14
                            )
                            
                            
                            (13
                            )
                            
                            
                            (27
                            )Total
      interest expense
                            
                            
                            212
                            
                            
                            
                            (362
                            )
                            
                            
                            (150
                            )Net
      interest income
                            
                            $
                            1,201
                            
                            
                            $
                            552
                            
                            
                            $
                            1,753


1.
            Average
      balances include nonaccrual loans.


2.
            Interest
      income includes net loan fees.


3.
            Interest
      income is presented on a tax-equivalent basis assuming a tax rate of
      35%.





Nine Months Ended September 30, 2010
                              Over 2009(In thousands)
                            
                            Volume
                            
                            
                            Rate
                            
                            
                            TotalIncrease
      (decrease) in interest income:Loans1,
      2:Taxable
                            
                            $
                            2,680
                            
                            
                            $
                            186
                            
                            
                            $
                            2,866Tax-exempt3
                            
                            
                            (45
                            )
                            
                            
                            (27
                            )
                            
                            
                            (72
                            )Debt
      and equity securities:Taxable
                            
                            
                            (39
                            )
                            
                            
                            34
                            
                            
                            
                            (5
                            )Tax-exempt3
                            
                            
                            1,520
                            
                            
                            
                            (72
                            )
                            
                            
                            1,448Interest-bearing
      deposits in other financial institutions
                            
                            
                            8
                            
                            
                            
                            18
                            
                            
                            
                            26Federal
      funds sold and other short-term investments
                            
                            
                            168
                            
                            
                            
                            42
                            
                            
                            
                            210Total
      interest income
                            
                            
                            4,292
                            
                            
                            
                            181
                            
                            
                            
                            4,473Interest
      expense on:Interest-bearing
      demand deposits
                            
                            
                            607
                            
                            
                            
                            (262
                            )
                            
                            
                            345Savings
      deposits
                            
                            
                            24
                            
                            
                            
                            (39
                            )
                            
                            
                            (15
                            )Time
      deposits of $100 or more
                            
                            
                            162
                            
                            
                            
                            (363
                            )
                            
                            
                            (201
                            )Other
      time deposits
                            
                            
                            261
                            
                            
                            
                            (307
                            )
                            
                            
                            (46
                            )Short-term
      borrowings & other
                            
                            
                            (11
                            )
                            
                            
                            (12
                            )
                            
                            
                            (23
                            )Subordinated
      debentures
                            
                            
                            (53
                            )
                            
                            
                            (53
                            )
                            
                            
                            (106
                            )Total
      interest expense
                            
                            
                            990
                            
                            
                            
                            (1,036
                            )
                            
                            
                            (46
                            )Net
      interest income
                            
                            $
                            3,302
                            
                            
                            $
                            1,217
                            
                            
                            $
                            4,519


1.
            Average
      balances include nonaccrual loans.


2.
            Interest
      income includes net loan fees.


3.
            Interest
      income is presented on a tax-equivalent basis assuming a tax rate of
      35%.


-21-


Provision
and Allowance for Loan Losses





A
significant determinant of the Company's operating results is the provision for
loan losses and the level of loans charged off.  There was a $950,000
and $400,000 provision for loan losses during the Third Quarter of 2010 and the
Third Quarter of 2009, respectively.  There was a $3,000,000 and
$1,100,000 provision for loan losses during the Nine Months Ended September 30,
2010 and the Nine Months Ended September 30, 2009, respectively. As discussed
below, the Company continually analyzes the outstanding loan portfolio based on
the performance, financial condition and collateralization of the
credits.  The increases were primarily due to the growth in loan
balances of $68,840,000 from September 30, 2009 to September 30,
2010.  There were net loan charge-offs of $353,000 in the Third
Quarter of 2010 compared to net loan charge-offs of $143,000 for the same period
in 2009.  There were $526,000 net loan charge-offs in the Nine Months
Ended September 30, 2010 and $319,000 in the Nine Months Ended September 30,
2009.





The
allowance for loan losses at September 30, 2010 was $10,758,000 and at December
31, 2009 was $8,284,000. The ratio of allowance for loan losses to total loans
outstanding at September 30, 2010 was 1.56% compared to 1.29% at December 31,
2009.  Nonperforming loans were $1,035,000, or .15%, of total loans at
September 30, 2010 compared to $1,608,000, or .25%, of total loans at December
31, 2009.  These loans, which are also considered impaired, consisted
of five loans to borrowers with businesses in financial trouble or in the
process of liquidation at September 30, 2010.   Nonperforming
loans at December 31, 2009 consisted of five non-accrual loans.  Total
nonperforming loans decreased $753,000 from September 30, 2009 to September 30,
2010.  This change was primarily due to the charge-off of one loan,
full payment of one loan plus the addition of one loan.





In
addition to the nonperforming loans discussed above, at September 30, 2010, four
loans totaling $2,995,000 not included in the table below were identified by
management as having potential credit problems.  These loans are
excluded from the table due to the fact that they are current under the original
terms of the loans, however circumstances have raised doubts as to the ability
of the borrowers to comply with the current loan repayment
terms.  These loans are closely monitored by management.





The
allowance for loan losses has been established and is maintained to absorb
probable losses in the loan portfolio.  An ongoing assessment of risk
of loss is performed to determine if the current balance of the allowance is
adequate to cover probable losses in the portfolio.  A charge or
credit is made to expense to cover any deficiency or reduce any
excess.  The current methodology employed to determine the appropriate
allowance consists of two components, specific and general.  The
Company develops specific allowances on commercial, commercial real estate, and
construction loans based on individual review of these loans and an estimate of
the borrower’s ability to repay the loan given the availability of collateral,
other sources of cash flow and collection options available.  The
general component relates to all other loans, which are evaluated based on loan
grade.  The loan grade assigned to each loan is typically evaluated on
an annual basis, unless circumstances require interim evaluation.  The
Company assigns an allowance amount consistent with each loan's rating
category.  The allowance amount is based on derived loss experience
over prescribed periods.  In addition to the amounts derived from the
loan grades, a portion is added to the general allowance to take into account
other factors including national and local economic conditions; downturns in
specific industries including loss in collateral value; trends in credit quality
at the Company and in the banking industry; and trends in risk rating
changes.  As part of their examination process, federal and state
agencies review the Company's methodology for maintaining the allowance for loan
losses and the related balance.  These agencies may require the
Company to increase the allowance for loan losses based on their judgments and
interpretations about information available to them at the time of their
examination.





Summary
of Asset Quality


The
following table presents information pertaining to the Company's provision for
loan losses and analysis of the allowance for loan losses.





Third
      Quarter
                                  
                                  
                                  Nine
      Months Ended
                                    September
      30,(In
      thousands)
                                  
                                  2010
                                  
                                  
                                  2009
                                  
                                  
                                  2010
                                  
                                  
                                  2009Allowance
      at beginning of period
                                  
                                  $
                                  10,161
                                  
                                  
                                  $
                                  6,975
                                  
                                  
                                  $
                                  8,284
                                  
                                  
                                  $
                                  6,451Provision
      charged to expense
                                  
                                  
                                  950
                                  
                                  
                                  
                                  400
                                  
                                  
                                  
                                  3,000
                                  
                                  
                                  
                                  1,100Loans
      charged off
                                  
                                  
                                  (354
                                  )
                                  
                                  
                                  (146
                                  )
                                  
                                  
                                  (554
                                  )
                                  
                                  
                                  (400
                                  )Recoveries
      on loans previously charged off
                                  
                                  
                                  1
                                  
                                  
                                  
                                  3
                                  
                                  
                                  
                                  28
                                  
                                  
                                  
                                  81Net
      loans charged-off
                                  
                                  
                                  (353
                                  )
                                  
                                  
                                  (143
                                  )
                                  
                                  
                                  (526
                                  )
                                  
                                  
                                  (319
                                  )Allowance
      at end of period
                                  
                                  $
                                  10,758
                                  
                                  
                                  $
                                  7,232
                                  
                                  
                                  $
                                  10,758
                                  
                                  
                                  $
                                  7,232Loans
      outstanding:Average
                                  
                                  $
                                  677,715
                                  
                                  
                                  $
                                  620,422
                                  
                                  
                                  $
                                  667,167
                                  
                                  
                                  $
                                  607,597September
      30
                                  
                                  
                                  689,683
                                  
                                  
                                  
                                  620,843
                                  
                                  
                                  
                                  689,683
                                  
                                  
                                  
                                  620,843Ratio
      of allowance for loan losses to loans outstanding:Average
                                  
                                  
                                  1.59
                                  %
                                  
                                  
                                  1.17
                                  %
                                  
                                  
                                  1.61
                                  %
                                  
                                  
                                  1.19
                                  %September
      30
                                  
                                  
                                  1.56
                                  
                                  
                                  
                                  1.16
                                  
                                  
                                  
                                  1.56
                                  
                                  
                                  
                                  1.16Nonperforming
      loans:Nonaccrual
      loans
                                  
                                  $
                                  1,035
                                  
                                  
                                  $
                                  1,232
                                  
                                  
                                  $
                                  1,035
                                  
                                  
                                  $
                                  1,232Loans
      past due 90 days or more
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Renegotiated
      loans
                                  
                                  
                                  —
                                  
                                  
                                  
                                  556
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  556Total
      nonperforming loans
                                  
                                  $
                                  1,035
                                  
                                  
                                  $
                                  1,788
                                  
                                  
                                  $
                                  1,035
                                  
                                  
                                  $
                                  1,788Foreclosed
      assets
                                  
                                  
                                  1,910
                                  
                                  
                                  
                                  2,177
                                  
                                  
                                  
                                  1,910
                                  
                                  
                                  
                                  2,177Nonperforming
      loans as percentage of average loans
                                  
                                  
                                  .15
                                  %
                                  
                                  
                                  .29
                                  %
                                  
                                  
                                  .16
                                  %
                                  
                                  
                                  .29
                                  %


-22-





The Bank
had two properties carried as other real estate owned of $1,910,000 and
$2,177,000 as of September 30, 2010 and 2009, respectively.





Operating
Expenses





Total
operating expenses for the Third Quarter of 2010 were up 4%, or $732,000
compared to the Third Quarter of 2009.  Total operating expenses for
the Nine Months Ended September 30, 2010 were up 1%, or $692,000 from the Nine
Months Ended September 30, 2009.





Salaries
and benefits expense for the Third Quarter of 2010 increased 4%, or $443,000, to
$13,026,000 compared to the Third Quarter of 2009 due to additional incentive
compensation related to the increase in pre-tax income from
operations.  It increased 1%, or $437,000, to $38,199,000 for the Nine
Months Ended September 30, 2010 compared to the Nine Months Ended September 30,
2009.





Occupancy
expense for the Third Quarter of 2010 increased $47,000, or 8%, to $658,000 from
the Third Quarter of 2009 and increased $44,000, or 2%, from the Nine Months
Ended September 30, 2009.





Equipment
expense for the Third Quarter of 2009 increased $52,000, or 6%, compared to the
Third Quarter of 2009 and increased $192,000, or 8%, from the Nine Months Ended
September 30, 2009.





Amortization
of intangible assets was $26,000 and $55,000 for the Third Quarter of 2010 and
2009, respectively, and $80,000 and $195,000 for the Nine Months Ended September
30, 2010 and 2009, respectively.  Software from the Profitlab, Inc.
acquisition in 2004 was fully amortized during the Third Quarter of
2009.





Other
operating expenses for the Third Quarter of 2010 increased $219,000, or 10%,
compared to the Third Quarter of 2009 primarily due to increases in promotional
and outside service expenses.  Other operating expense increased
$134,000 for the Nine Months Ended September 30, 2010 compared to the Nine
Months Ended September 30, 2009, primarily due to an increase in outside
services expense.





Income
tax expense for the Third Quarter of 2010 increased $722,000, or 56%, compared
to the Third Quarter of 2009 and increased $1,778,000 for the Nine Months Ended
September 30, 2010 compared to the Nine Months Ended September 30,
2009.  The effective tax rate was 26.5% and 23.0% for the Third
Quarters of 2010 and 2009, respectively, and was 27.7% and 25.5% for the Nine
Months Ended September 30, 2010 and 2009, respectively.  The increases
are the result of higher pre-tax income for the periods and smaller relative
increases in tax-exempt investment income.





Financial
Condition





Total
assets at September 30, 2010 were $1,217,429,000, an increase of $204,448,000,
or 20%, from December 31, 2009.  The most significant changes in asset
balances during this period were an increase of $85,494,000, or 213%, in federal
funds sold and other short-term investments and increases of $47,726,000 and
$40,008,000 in loans and interest-bearing deposits in other financial
institutions, respectively. Changes in federal funds sold and other short-term
investments reflect the Company’s daily liquidity position and are affected by
the changes in the other asset balances and changes in deposit and accounts and
drafts payable balances.


-23-


Total
liabilities at September 30, 2010 were $1,071,612,000, an increase of
$188,199,000, or 21%, from December 31, 2009.  Total deposits at
September 30, 2010 were $501,259,000, an increase of $63,383,000, or 14%, from
December 31, 2009.  Accounts and drafts payable at September 30, 2010
were $554,945,000, an increase of $124,694,000, or 29%, from December 31,
2009.  Total shareholders’ equity at September 30, 2010 was
$145,817,000, a $16,249,000, or 13%, increase from December 31,
2009.





Accounts
and drafts payable will fluctuate from period-end to period-end due to the
payment processing cycle, which results in lower balances on days when checks
clear and higher balances on days when checks are issued.  For this
reason, average balances are a more meaningful measure of accounts and drafts
payable (for average balances refer to the tables under the “Distribution of
Assets, Liabilities and Shareholders’ Equity; Interest Rate and Interest
Differential” section of this report).





The
increase in total shareholders’ equity primarily resulted from net income of
$15,229,000, $1,133,000 from stock-based compensation expense, and an increase
in other comprehensive income of $4,066,000, offset by dividends paid of
$3,945,000 ($.14 per share) plus other miscellaneous activity of
$234,000.





Liquidity
and Capital Resources





The
balance of liquid assets consists of cash and cash equivalents, which include
cash and due from banks, interest-bearing deposits in other financial
institutions, federal funds sold and other short-term investments, and was
$209,468,000 at September 30, 2010, an increase of $130,174,000, or 164%, from
December 31, 2009.  At September 30, 2010, these assets represented
17% of total assets.  These funds are the Company’s and its
subsidiaries’ primary source of liquidity to meet future expected and unexpected
loan demand, depositor withdrawals or reductions in accounts and drafts
payable.





Secondary
sources of liquidity include the investment portfolio and borrowing
lines.  Total investment in securities was $238,262,000 at September
30, 2010, an increase of $13,665,000 from December 31,
2009.   These assets represented 20% of total assets at September
30, 2010.  Of this total, 100% were state and political subdivision
securities.  Of the total portfolio, 3% mature in one year, 18% mature
in one to five years, and 79% mature in five or more years.





The Bank
has unsecured lines of credit at correspondent banks to purchase federal funds
up to a maximum of $81,000,000 at the following banks:  Bank of
America, $20,000,000; US Bank, $20,000,000; Wells Fargo Bank, $20,000,000; Frost
National Bank, $10,000,000, JPM Chase Bank, $6,000,000 and UMB Bank,
$5,000,000.  The Company had secured lines of credit with the Federal
Home Loan Bank of $109,701,000 collateralized by commercial mortgage
loans.  The Company also had a secured federal funds line of credit of
$18,782,000 with the Federal Reserve Bank and a secured line of credit of
$10,000,000 with UMB Bank.  There were no amounts outstanding under
any of the lines of credit discussed above at September 30, 2010 or December 31,
2009.





The
deposits of the Company's banking subsidiary have historically been stable,
consisting of a sizable volume of core deposits related to customers that
utilize other commercial products of the Bank.  The accounts and
drafts payable generated by the Company has also historically been a stable
source of funds.  The Company is part of the Certificate of Deposit
Account Registry Service (“CDARS”).  Time deposits at September 30,
2010 include $87,408,000 of CDARS deposits which offer the Bank’s customers the
ability to maximize FDIC insurance coverage.  The Company uses this
program to retain or attract deposits from existing customers.





Net cash
flows provided by operating activities were $21,683,000 for the Nine Months
Ended September 30, 2010 compared with $16,971,000 for the Nine Months Ended
September 30, 2009.  This increase is attributable to the increases in
net income of $3,327,000 and provision for loan losses of $1,900,000 offset by
the income taxes deferred and payable of $1,406,000 and the other normal
fluctuations in asset and liability accounts.  Net cash flows from
investing and financing activities fluctuate greatly as the Company actively
manages its investment and loan portfolios and customer activity influences
changes in deposit and accounts and drafts payable balances.  Other
causes for the changes in these account balances are discussed earlier in this
report.  Due to the daily fluctuations in these account balances, the
analysis of changes in average balances, also discussed earlier in this report,
can be more indicative of underlying activity than the period-end balances used
in the statements of cash flows.  Management anticipates that cash and
cash equivalents, maturing investments and cash from operations will continue to
be sufficient to fund the Company’s operations and capital expenditures in 2010,
which are estimated to be less than $3,000,000.





The
Company faces market risk to the extent that its net interest income and fair
market value of equity are affected by changes in market interest
rates.  For information regarding the market risk of the Company’s
financial instruments, see Item 3, “Quantitative and Qualitative Disclosures
about Market Risk.”


-24-


There are
several trends and uncertainties that may impact the Company’s ability to
generate revenues and income at the levels that it has in the past. In addition,
these trends and uncertainties may impact available liquidity.  Those
that could significantly impact the Company include the general levels of
interest rates, business activity, and energy costs as well as new business
opportunities available to the Company.





As a
financial institution, a significant source of the Company’s earnings is
generated from net interest income.  Therefore, the prevailing
interest rate environment is important to the Company’s
performance.  A major portion of the Company’s funding sources are the
non-interest bearing accounts and drafts payable generated from its payment and
information processing services.  Accordingly, higher levels of
interest rates will generally allow the Company to earn more net interest
income.  Conversely, a lower interest rate environment will generally
tend to depress net interest income.  The Company actively manages its
balance sheet in an effort to maximize net interest income as the interest rate
environment changes.  This balance sheet management impacts the mix of
earning assets maintained by the Company at any point in time.





The
overall level of economic activity can have a significant impact on the
Company’s ability to generate revenues and income, as the volume and size of
customer invoices processed may increase or decrease.  Higher levels
of economic activity increase both fee income (as more invoices are processed)
and balances of accounts and drafts payable.





The
relative level of energy costs can impact the Company’s earnings and available
liquidity.  Higher levels of energy costs will tend to increase
transportation and utility invoice amounts resulting in a corresponding increase
in accounts and drafts payable.  Increases in accounts and drafts
payable generate higher interest income and improve liquidity.





New
business opportunities are an important component of the Company’s strategy to
grow earnings and improve performance.  Generating new customers
allows the Company to leverage existing systems and facilities and grow revenues
faster than expenses.





Risk-based
capital guidelines require the Company to meet a minimum total capital ratio of
8.0%, of which at least 4.0% must consist of Tier 1 capital.  Tier 1
capital generally consists of (a) common shareholders' equity (excluding the
unrealized market value adjustments on the available-for-sale securities), (b)
qualifying perpetual preferred stock and related surplus subject to certain
limitations specified by the FDIC, (c) minority interests in the equity accounts
of consolidated subsidiaries less (d) goodwill, (e) mortgage servicing rights
within certain limits, and (f) any other intangible assets and investments in
subsidiaries that the FDIC determines should be deducted from Tier 1
capital.  The FDIC also requires a minimum leverage ratio of 3.0%,
defined as the ratio of Tier 1 capital less purchased mortgage servicing rights
to total assets, for banking organizations deemed the strongest and most highly
rated by banking regulators.  A higher minimum leverage ratio is
required of less highly rated banking organizations.  Total capital, a
measure of capital adequacy, includes Tier 1 capital, allowance for loan losses,
and debt considered equity for regulatory capital purposes.





The
Company and the Bank continue to exceed all regulatory capital requirements, as
evidenced by the following capital amounts and ratios:





September
      30, 2010
                            
                            
                            December
      31, 2009(In
      thousands)
                            
                            Amount
                            
                            
                            Ratio
                            
                            
                            Amount
                            
                            
                            RatioTotal
      capital (to risk-weighted assets)Cass
      Information Systems, Inc.
                            
                            $
                            144,923
                            
                            
                            
                            16.56
                            %
                            
                            $
                            130,187
                            
                            
                            
                            16.69
                            %Cass
      Commercial Bank
                            
                            
                            56,544
                            
                            
                            
                            10.90
                            %
                            
                            
                            50,853
                            
                            
                            
                            10.34
                            %Tier
      I capital (to risk-weighted assets)Cass
      Information Systems, Inc.
                            
                            $
                            134,165
                            
                            
                            
                            15.33
                            %
                            
                            $
                            121,903
                            
                            
                            
                            15.63
                            %Cass
      Commercial Bank
                            
                            
                            50,061
                            
                            
                            
                            9.65
                            %
                            
                            
                            44,864
                            
                            
                            
                            9.12
                            %Tier
      I capital (to average assets)Cass
      Information Systems, Inc.
                            
                            $
                            134,165
                            
                            
                            
                            11.23
                            %
                            
                            $
                            121,903
                            
                            
                            
                            11.28
                            %Cass
      Commercial Bank
                            
                            
                            50,061
                            
                            
                            
                            9.32
                            %
                            
                            
                            44,864
                            
                            
                            
                            8.75
                            %





Inflation





The
Company’s assets and liabilities are primarily monetary, consisting of cash,
cash equivalents, securities, loans, payables and deposits.  Monetary
assets and liabilities are those that can be converted into a fixed number of
dollars. The Company's consolidated balance sheet reflects a net positive
monetary position (monetary assets exceed monetary
liabilities).  During periods of inflation, the holding of a net
positive monetary position will result in an overall decline in the purchasing
power of a company.  Management believes that replacement costs of
equipment, furniture, and leasehold improvements will not materially affect
operations.  The rate of inflation does affect certain expenses, such
as those for employee compensation, which may not be readily recoverable in the
price of the Company’s services.


-25-


Impact
of New and Not Yet Adopted Accounting Pronouncements





In July
2010, the Financial Accounting Standards Board issued Accounting Standards
Update (ASU) “Disclosures about the Credit Quality of Financing Receivables and
the Allowance for Credit Losses”. This guidance requires a greater level of
disaggregated information about the credit quality of financing receivables and
reserves for credit losses, including increased disclosure of credit quality
indicators, past due information, and modifications of financing receivables.
Disclosures regarding activity during a reporting period are effective for
interim and annual reporting periods beginning on or after December 15,
2010. Adoption of this ASU is not expected to have a material impact on the
Company’s consolidated financial position or results of operations.





ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





As
described in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2009, the Company manages its interest rate risk through
measurement techniques that include gap analysis and a simulation model. As part
of the risk management process, asset/liability management policies are
established and monitored by management. The policy objective is to limit the
change in annualized net interest income to 15% from an immediate and sustained
parallel change in interest rates of 200 basis points. Based on the Company's
most recent evaluation, management does not believe the Company's risk position
at September 30, 2010 has changed materially from that at December 31,
2009.





ITEM
      4.
            CONTROLS
      AND PROCEDURES





The
Company’s management, under the supervision and with the participation of the
principal executive officer and the principal financial officer, evaluated the
effectiveness of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended) as of the end of the period covered by this report and concluded that,
as of such date, these controls and procedures were effective.





There
were no changes in the Third Quarter of 2010 in the Company's internal control
over financial reporting identified by the Company’s principal executive officer
and principal financial officer in connection with their evaluation that
materially affected or are reasonably likely to materially affect the Company’s
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934, as
amended).


-26-





PART
      II.
            OTHER
      INFORMATION





ITEM
      1.
            LEGAL
      PROCEEDINGS


The
Company and its subsidiaries are not involved in any pending proceedings other
than ordinary routine litigation incidental to its
businesses.  Management believes none of these proceedings, if
determined adversely, would have a material effect on the businesses or
financial conditions of the Company or its subsidiaries.





ITEM
      1A.
            RISK
      FACTORS


The
Company has included in Part I, Item 1A of its Annual Report on Form 10-K for
the year ended December 31, 2009, a description of certain risks and
uncertainties that could affect the Company’s business, future performance or
financial condition (the “Risk Factors”).  There are no material
changes to the Risk Factors as disclosed in the Company’s 2009 Annual Report on
Form 10-K.





ITEM
      2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS


None





ITEM
      3.
            DEFAULTS
      UPON SENIOR SECURITIES


None





ITEM
      4.
            [REMOVED
      AND RESERVED]





ITEM
      5.
            OTHER
      INFORMATION


(a)
            None


(b)
            There
      have been no material changes to the procedures by which security holders
      may recommend nominees to the Company’s Board of Directors implemented in
      the Third Quarter of 2010.





ITEM
      6.
            EXHIBITS





Exhibit
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.





Exhibit
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.





Exhibit
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.





Exhibit
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.


-27-


SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.





CASS
      INFORMATION SYSTEMS, INC.DATE:  November
      4, 2010
                      By
                      /s/ Eric H. BrunngraberEric
      H. BrunngraberPresident
      and Chief Executive Officer(Principal
      Executive Officer)DATE:  November
      4, 2010
                      By
                      /s/ P. Stephen AppelbaumP.
      Stephen AppelbaumChief
      Financial Officer(Principal
      Financial and Accounting
Officer)


-28-