##### Table of Contents





United States
 Securities and Exchange
    Commission
 Washington, D.C.
    20549
  Form 10-Q
  QUARTERLY REPORT UNDER
    SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
  For the
    quarterly period ended June 30, 2010
  Commission file number
    1-13805
  Harris Preferred Capital
    Corporation
    Maryland(State or other jurisdiction
    of incorporation or organization)

#36-4183096(I.R.S. Employer
    Identification No.)111 West Monroe Street, Chicago, Illinois(Address of principal executive offices)

60603(Zip Code)   Registrants telephone number, including area code:
 (312) 461-2121
  Securities registered pursuant to Section 12(b) of the
    Act:
  Name of each exchange onTitle of each class

which registered73/8%
    Noncumulative Exchangeable Preferred Stock,
    Series A, par value $1.00 per share

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act: None
   þ o
   Regulation S-T(232.405
 o o
   12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2
 o þ




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##### 





HARRIS
    PREFERRED CAPITAL CORPORATION
  TABLE OF
    CONTENTS
   
 Part I

FINANCIAL INFORMATIONItem 1.

Financial Statements:Consolidated Balance Sheets


2Consolidated Statements of Income and
    Comprehensive Income


3Consolidated Statements of Changes in
    Stockholders Equity


4Consolidated Statements of Cash Flows


5Notes to Consolidated Financial Statements


6Item 2.

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


10Item 3.

Quantitative and Qualitative Disclosures about
    Market Risk


23Item 4.

Controls and Procedures


24PART II

OTHER INFORMATIONItem 6.

Exhibits


25Signatures


26EX-31.1EX-31.2EX-32.1




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
  CONSOLIDATED
    BALANCE SHEETS
  June 30


December 31


June 302010


2009


2009(unaudited)


(audited)


(unaudited)(in thousands, except share data)AssetsCash on deposit with Harris N.A.

$
829


$
916


$
729Securities purchased from Harris N.A. under agreement to resell


12,500



22,000



10,672Total cash and cash equivalents

$
13,329


$
22,916


$
11,401Notes receivable from Harris N.A.


3,459



3,584



3,896Securities available for sale, at fair valueMortgage-backed


515,492



515,190



566,047U.S. Treasury Bills


59,998



39,999



Other assets


1,808



1,885



2,094Total assets

$
594,086


$
583,574


$
583,438Liabilities and Stockholders EquityAccrued expenses

$
111


$
111


$
869Deferred state tax liabilities


1,720



973



846Total liabilities

$
1,831


$
1,084


$
1,715Stockholders Equity73/8%
    Noncumulative Exchangeable Preferred Stock, Series A
    ($1 par value); liquidation value of $250,000;
    20,000,000 shares authorized; 10,000,000 shares issued
    and outstanding

$
250,000


$
250,000


$
250,000Common stock ($1 par value); 5,000 shares authorized;
    1,180 issued and outstanding


1



1



1Additional paid-in capital


320,733



320,733



320,733Earnings in excess of (less than) distributions


(320
)


(601
)


250Accumulated other comprehensive income  net
    unrealized gains on
    available-for-sale
    securities, net of tax


21,841



12,357



10,739Total stockholders equity

$
592,255


$
582,490


$
581,723Total liabilities and stockholders equity

$
594,086


$
583,574


$
583,438   The accompanying notes are an integral part of these
    financial statements.
 2




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
  CONSOLIDATED STATEMENTS OF INCOME
 AND
    COMPREHENSIVE INCOME
  Quarter Ended


Six Months EndedJune 30,


June 30,2010


2009


2010


2009(in thousands, except share date)Interest income:Securities purchased from Harris N.A. under agreement to resell

$
27


$
8


$
38


$
17Notes receivable from Harris N.A.


56



62



113



127Securities available for sale:Mortgage-backed


5,126



5,612



10,407



10,994U.S. Treasury Bills


2



1



3



1Total interest income

$
5,211


$
5,683


$
10,561


$
11,139Operating expenses:Loan servicing fees paid to Harris N.A.

$
3


$
3


$
6


$
6Advisory fees paid to Harris N.A.


39



41



102



97General and administrative


77



74



207



194Total operating expenses

$
119


$
118


$
315


$
297Income before income taxes

$
5,092


$
5,565


$
10,246


$
10,842Applicable state income taxes


371



406



747



791Net Income

$
4,721


$
5,159


$
9,499


$
10,051Preferred stock dividends


4,609



4,609



9,218



9,218Net income available to common stockholder

$
112


$
550


$
281


$
833Basic and diluted earnings per common share

$
94


$
466


$
237


$
746Net income

$
4,721


$
5,159


$
9,499


$
10,051Other comprehensive income:Available-for-sale
    securities:Unrealized holding gains (losses) arising during the period, net
    of deferred state taxes


6,289



(2,728
)


9,484



907Less reclassification adjustment for realized (gains) losses
    included in net income














Comprehensive income

$
11,010


$
2,431


$
18,983


$
10,958   The accompanying notes are an integral part of these
    financial statements.
 3




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
  CONSOLIDATED STATEMENTS OF CHANGES IN
    STOCKHOLDERS EQUITY
  Six Months EndedJune 302010


2009(in thousands)Balance at January 1

$
582,490


$
500,244Net income


9,499



10,051Other comprehensive income


9,484



907Capital contribution and issuance of common stock






80,000Dividends on common stock






(261
)Dividends on preferred stock ($0.4609 per share)


(9,218
)


(9,218
)Balance at June 30

$
592,255


$
581,723   The accompanying notes are an integral part of these
    financial statements.
 4




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
  CONSOLIDATED STATEMENTS OF CASH
    FLOWS
  Six Months EndedJune 30,2010


2009(in thousands)Operating Activities:Net income

$
9,499


$
10,051Adjustments to reconcile net income to net cash provided by
    operating activities:Net decrease (increase) in other assets


75



(209
)Net increase in accrued expenses






756Net cash provided by operating activities

$
9,574


$
10,598Investing Activities:Repayments of notes receivable from Harris N.A.

$
125


$
388Purchases of securities available for sale


(189,499
)


(261,617
)Proceeds from maturities/redemptions of securities
    available-for-sale


179,431



184,832Net cash used in investing activities

$
(9,943
)

$
(76,397
)Financing Activities:Cash dividends paid on preferred stock

$
(9,218
)

$
(9,218
)Cash dividends paid on common stock






(261
)Capital contribution and issuance of common stock






80,000Net cash (used in) provided by financing activities

$
(9,218
)

$
70,521Net (decrease) increase in cash and cash equivalents with Harris
    N.A.

$
(9,587
)

$
4,722Cash and cash equivalents with Harris N.A. at beginning of period


22,916



6,679Cash and cash equivalents with Harris N.A. at end of period

$
13,329


$
11,401   The accompanying notes are an integral part of these
    financial statements.
 5




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
  NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Basis of
    Presentation    Form 10-K.
    2.
    Commitments
    and Contingencies    3.
    Securities    June 30, 2010Amortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value(in thousands)Available-for-Sale
    SecuritiesResidential mortgage-backed

$
491,931


$
23,561


$



$
515,492U.S. Treasury Bills


59,998











59,998Total Securities

$
551,929


$
23,561


$



$
575,490   6




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
  December 31, 2009Amortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value(in thousands)Available-for-Sale
    SecuritiesResidential mortgage-backed

$
501,861


$
14,214


$
885


$
515,190U.S. Treasury Bills


40,000







1



39,999Total Securities

$
541,861


$
14,214


$
886


$
555,189   June 30, 2009Amortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value(in thousands)Available-for-Sale
    SecuritiesResidential mortgage-backed

$
554,463


$
13,207


$
1,623


$
566,047   Available-for-sale available-for-sale
  other-than-temporary
  other-than-temporarily
 7




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
    December 31, 2009Length of Continuous Unrealized Loss PositionLess than 12 months


12 months or longer


TotalUnrealized





Unrealized





UnrealizedFair Value


Losses


Fair Value


Losses


Fair Value


Losses(in thousands)Residential mortgage-backed

$
104,988


$
885


$



$



$
104,988


$
885U.S. Treasury Bills


39,999



1











39,999



1$
144,987


$
886


$



$



$
144,987


$
886   June 30, 2009Length of Continuous Unrealized Loss PositionLess than 12 months


12 months or longer


TotalUnrealized





Unrealized





UnrealizedFair Value


Loss


Fair Value


Losses


Fair Value


Losses(in thousands)Residential mortgage-backed

$
146,066


$
1,623


$



$



$
146,066


$
1,623   available-for-sale
  June 30, 2010Amortized


FairCost


Value(in thousands)Maturities:Within 1 year

$
75,827


$
76,0141 to 5 years


17,563



17,9685 to 10 years


140,906



150,518Over 10 years


317,633



330,990Total

$
551,929


$
575,490   4.
    Fair
    Value Measurements   8




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
    Fair Value


Fair Value Measurements UsingJune 30, 2010


Level 1


Level 2


Level 3(in thousands)Available-for-sale
    securitiesResidential mortgage-backed

$
515,492


$



$
515,492


$
U.S. Treasury


59,998



59,998







$
575,490


$
59,998


$
515,492


$
   Fair Value


Fair Value Measurements UsingDecember 31, 2009


Level 1


Level 2


Level 3(in thousands)Available-for-sale
    securitiesResidential mortgage-backed

$
515,190


$



$
515,190


$
U.S. Treasury


39,999



39,999







$
555,189


$
39,999


$
515,190


$
   Fair Value


Fair Value Measurements UsingJune 30, 2009


Level 1


Level 2


Level 3(in thousands)Available-for-sale
    securitiesResidential mortgage-backed

$
566,047


$



$
566,047


$
   5.
    Fair
    Value of Financial Instruments  item-by-item
       9




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
    June 30, 2010Carrying


FairValue


Value(in thousands)AssetsCash on deposit with Harris N.A.

$
829


$
829Securities purchased from Harris N.A. under agreement to resell


12,500



12,500Notes receivable from Harris N.A.


3,459



5,317Securities available for sale


575,490



575,490Accrued interest receivable


1,808



1,808Total on-balance-sheet financial assets

$
594,086


$
595,944   6.
    Operating
    Segment    Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Forward-Looking
    Information
  Form 10-Q Form 10-K Form S-11 No. 333-40257),
  Results
    of Operations
  Second
    Quarter 2010 Compared with Second Quarter 2009
     10




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
            Six
    Months Ended June 30, 2010 compared with June 30,
    2009
    available-for-sale
 11




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
  available-for-sale
    Liquidity
    Risk Management
          available-for-sale. available-for-sale available-for-sale available-for-sale
  Market
    Risk Management
   12




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##### Table of Contents



HARRIS
    PREFERRED CAPITAL CORPORATION
  Tax
    Matters
    Financial
    Statements of Harris N.A.
   13




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##### Table of Contents



HARRIS
    N.A. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CONDITION
  June 30


December 31


June 302010


2009


2009(unaudited)


(audited)


(unaudited)(in thousands except share data)ASSETSCash and demand balances due from banks

$
686,350


$
904,865


$
1,102,486Money market assets:Interest-bearing deposits at banks ($10.2 billion,
    $8.4 billion, and $3.0 billion held at Federal Reserve
    Bank at June 30, 2010, December 31, 2009, and
    June 30, 2009 respectively)


10,788,872



9,231,581



4,311,466Federal funds sold and securities purchased under agreement to
    resell


141,050



174,979



78,538Total cash and cash equivalents

$
11,616,272


$
10,311,425


$
5,492,490Securities
    available-for-sale
    at fair value


5,496,483



5,898,831



7,616,642Trading account assets and derivative instruments


1,207,521



1,353,509



1,336,124Loans, net of unearned income


22,735,050



23,175,717



24,250,612Allowance for loan losses


(701,490
)


(680,782
)


(646,184
)Net loans

$
22,033,560


$
22,494,935


$
23,604,428Loans held for sale


21,755



29,974



92,775Premises and equipment


524,664



526,623



527,451Bank-owned insurance


1,358,149



1,339,657



1,320,877Goodwill and other intangible assets


908,379



817,507



766,582Other assets


1,775,740



1,199,166



815,350Total assets

$
44,942,523


$
43,971,627


$
41,572,719LIABILITIESDeposits in domestic offices  noninterest-bearing

$
8,274,901


$
9,704,773


$
7,494,673 interest-bearing (includes $1.1 billion, $707.4 million and $187.4 million measured at fair value at June 30, 2010, December 31, 2009 and June 30, 2009, respectively)


21,724,858



18,968,058



19,130,311Deposits in foreign offices     
    interest-bearing


1,511,593



1,622,410



2,351,579Total deposits

$
31,511,352


$
30,295,241


$
28,976,563Federal funds purchased


247,270



236,099



328,963Securities sold under agreement to repurchase


1,347,299



2,512,490



661,927Short-term borrowings


642,454



717,050



992,516Short-term senior notes










400,000Accrued interest, taxes and other expenses


180,803



172,618



194,813Accrued pension and post-retirement


22,898



58,393



109,725Other liabilities


757,754



643,289



450,415Long-term notes  senior/unsecured


2,396,500



2,396,500



2,646,500Long-term notes  senior/secured


2,375,000



2,375,000



2,375,000Long-term notes  subordinated


200,000



292,750



292,750Total liabilities

$
39,681,330


$
39,699,430


$
37,429,172STOCKHOLDERS EQUITYCommon stock ($10 par value); authorized
    40,000,000 shares; issued and outstanding
    19,989,512 shares at June 30, 2010,
    17,534,512 shares at December 31, 2009, and
    17,149,512 shares at June 30, 2009

$
199,895


$
175,345


$
171,495Surplus


3,291,667



2,322,917



2,173,757Retained earnings


1,637,817



1,621,719



1,693,581Accumulated other comprehensive loss


(118,241
)


(97,784
)


(145,286
)Stockholders equity before noncontrolling
    interest  preferred stock of subsidiary

$
5,011,138


$
4,022,197


$
3,893,547Noncontrolling interest  preferred stock of subsidiary


250,055



250,000



250,000Total stockholders equity

$
5,261,193


$
4,272,197


$
4,143,547Total liabilities and stockholders equity

$
44,942,523


$
43,971,627


$
41,572,719   The accompanying notes to consolidated financial statements
    are an integral part of these statements.
 14




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##### Table of Contents



HARRIS
    N.A. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 (Unaudited)
  Quarter Ended June 30,


Six Months Ended June 30,2010


2009


2010


2009(in thousands)Interest IncomeLoans

$
277,188


$
273,201


$
532,246


$
561,179Money market assets:Deposits at banks


6,629



3,693



12,412



10,079Federal funds sold and securities purchased under agreements to
    resell


21



(310
)


84



145Trading account assets


2,797



2,559



5,747



5,097Securities
    available-for-sale:U.S. Treasury and federal agency


12,187



25,233



28,184



59,502State and municipal


12,067



13,552



24,488



27,405Other


4,399



5,607



5,868



9,716Total interest income

$
315,288


$
323,535


$
609,029


$
673,123Interest ExpenseDeposits

$
45,891


$
80,850


$
88,659


$
192,830Short-term borrowings


1,910



2,413



3,663



4,310Short-term senior notes






1,313







1,319Long-term notes  senior/unsecured


22,782



8,162



45,261



18,479Long-term notes  senior/secured


8,371



2,495



20,611



5,328Long-term notes  subordinated


365



1,081



832



2,731Total interest expense

$
79,319


$
96,314


$
159,026


$
224,997Net Interest Income

$
235,969


$
227,221


$
450,003


$
448,126Provision for loan losses


92,019



147,142



183,746



240,236Net Interest Income after Provision for Loan Losses

$
143,950


$
80,079


$
266,257


$
207,890Noninterest IncomeTrust and investment management fees

$
23,433


$
19,856


$
43,995


$
38,638Net money market and bond trading income, including derivative
    activity


11,283



4,776



25,140



9,209Foreign exchange trading gains, net


1,303



2,775



4,216



5,400Service charges and fees


53,331



51,815



100,241



99,462Charge card income


29,454



277



58,748



333Equity securities gains, net


1,913



2,835



4,088



3,937Net securities gains, other than trading


642



500



2,316



30,019Other-than-temporary
    impairment on securities


(110
)


(850
)


(131
)


(1,033
)Bank-owned insurance


11,238



11,423



23,138



22,526Letter of credit fees


6,207



5,268



11,593



10,362Net gains on loans held for sale


3,573



9,400



7,668



11,618Other


9,494



9,902



20,194



18,418Total noninterest income

$
151,761


$
117,977


$
301,206


$
248,889Noninterest ExpensesSalaries and other compensation

$
111,750


$
105,238


$
205,761


$
198,117Pension, profit sharing and other employee benefits


24,666



23,575



54,405



54,306Net occupancy


24,051



24,035



49,020



51,019Equipment


18,484



17,079



38,532



34,581Marketing


14,752



9,792



26,643



18,617Communication and delivery


8,131



7,249



15,503



14,896Professional fees


27,673



21,160



48,799



49,378Outside information processing, database and network fees


7,351



8,702



15,856



17,681FDIC Insurance


12,137



28,670



23,371



43,704Intercompany services, net


(2,314
)


(198
)


(5,262
)


(382
)Visa indemnification reversal


(2,800
)






(2,800
)


Charge card expense


6,997







14,302



Amortization of intangibles


6,554



7,080



12,242



14,186Other


34,839



22,789



58,592



41,032Total noninterest expenses

$
292,271


$
275,171


$
554,964


$
537,135Income (loss) before income tax benefit

$
3,440


$
(77,115
)

$
12,499


$
(80,356
)Applicable income tax benefit


(8,658
)


(37,349
)


(12,818
)


(48,684
)Net income (loss)

$
12,098


$
(39,766
)

$
25,317


$
(31,672
)Less: noncontrolling interest  dividends on preferred
    stock of subsidiary


4,610



4,609



9,219



9,219Net Income (Loss) Available for Common Stockholder

$
7,488


$
(44,375
)

$
16,098


$
(40,891
)   The accompanying notes to consolidated financial statements
    are an integral part of these statements.
 15




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##### Table of Contents



HARRIS
    N.A. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF COMPREHENSIVE INCOME
 (Unaudited)
  Quarter EndedJune 30,


Six Months Ended June 30,2010


2009


2010


2009(in thousands)Net income (loss) available for common stockholder

$
12,098


$
(39,766
)

$
25,317


$
(31,672
)Other comprehensive (loss) income:Cash flow hedges:Net unrealized (loss) gain on derivative instruments, net of tax
    (benefit) expense for the quarter of ($6,966) in 2010 and
    $20,770 in 2009 and net of tax (benefit) expense for the
    year-to-date
    period of ($17,179) in 2010 and $29,918 in 2009


(12,939
)


38,573



(31,905
)


55,560Reclassification adjustment for realized loss included in net
    income (loss), net of tax benefit for the quarter of $548 in
    2010 and $401 in 2009 and net of tax benefit for the
    year-to-date
    period of $938 in 2010 and $2,081 in 2009


1,020



744



1,743



3,866Pension and postretirement medical benefit plans:Net (loss) gain and net prior service cost included in net
    income (loss), net of tax benefit for the quarter of $0 in 2010
    and 2009 and net of tax expense for the
    year-to-date
    period of $1,318 in 2010 and $3,531 in 2009


(319
)






4,574



6,556Reclassification adjustment for amortization included in net
    income (loss), net of tax benefit for the quarter of $663 in
    2010 and $367 in 2009 and net of tax benefit for the
    year-to-date
    period of $1,326 in 2010 and $733 in 2009


1,231



681



2,462



1,362Available-for-sale
    securities:Unrealized holding gain arising during the period, net of tax
    expense for the quarter of $2,749 in 2010 and $6,148 in 2009 and
    net of tax (benefit) expense for the
    year-to-date
    period of ($2,155) in 2010 and $6,947 in 2009


10,536



11,426



4,174



12,921Reclassification adjustment for realized gain included in net
    income (loss), net of tax expense for the quarter of $225 in
    2010 and $473 in 2009 and net of tax expense for the
    year-to-date
    period of $811 in 2010 and $10,507 in 2009


(417
)


(877
)


(1,505
)


(19,512
)Other comprehensive (loss) income

$
(888
)

$
50,547


$
(20,457
)

$
60,753Comprehensive income

$
11,210


$
10,781


$
4,860


$
29,081Comprehensive income related to noncontrolling interest


4,610



4,609



9,219



9,219Comprehensive income (loss) available for common
    stockholder

$
6,600


$
6,172


$
(4,359
)

$
19,862   The accompanying notes to consolidated financial statements
    are an integral part of these statements.
 16




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##### Table of Contents



HARRIS
    N.A. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (Unaudited)
  Accumulated


NoncontrollingOther


Interest 


TotalCommon





Retained


Comprehensive


Preferred Stock


StockholdersStock


Surplus


Earnings


Loss


of Subsidiary


Equity(in thousands except per share data)Balance at December 31, 2009

$
175,345


$
2,322,917


$
1,621,719


$
(97,784
)

$
250,000


$
4,272,197Stock option exercise






300















300Net income










16,098







9,219



25,317Dividends  preferred stock of subsidiary


















(9,219
)


(9,219
)Change in noncontrolling interest ownership


















55



55Other comprehensive loss














(20,457
)






(20,457
)Issuance of common stock and contribution to capital surplus


24,550



968,450















993,000Balance at June 30, 2010

$
199,895


$
3,291,667


$
1,637,817


$
(118,241
)

$
250,055


$
5,261,193Balance at December 31, 2008

$
171,495


$
2,172,030


$
1,734,471


$
(206,039
)

$
250,000


$
4,121,957Stock option exercise






494















494Tax benefit from stock option exercise






1,234















1,234Net income










(40,891
)






9,219



(31,672
)Dividends  preferred stock of subsidiary


















(9,219
)


(9,219
)Other comprehensive income














60,753







60,753Balance at June 30, 2009

$
171,495


$
2,173,758


$
1,693,580


$
(145,286
)

$
250,000


$
4,143,547   The accompanying notes to consolidated financial statements
    are an integral part of these statements.
 17




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##### Table of Contents



HARRIS
    N.A. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (Unaudited)
  Six Months Ended June 302010


2009Cash Flows from Operating Activities:Net income (loss)

$
25,317


$
(31,672
)Less: noncontrolling interest  dividends on preferred
    stock of subsidiary


9,219



9,219Net income (loss) available for common stockholder

$
16,098


$
(40,891
)Adjustments to determine net cash flows provided by operating
    activities:Provision for loan losses


183,746



240,236Depreciation and amortization, including intangibles


53,063



56,316Deferred tax expense (benefit)


62,536



(20,758
)Excess tax expense from stock options exercise


119



1,234Other-than-temporary
    impairment on securities


131



1,033Net gains on securities, other than trading


(2,316
)


(30,019
)Net equity investment gains


(4,088
)


(3,937
)Increase in bank-owned insurance


(18,492
)


(16,562
)Net decrease in trading securities


237,391



31,672Decrease in accrued interest receivable


16,058



33,547(Increase) decrease in prepaid expenses


(85,788
)


5,507Decrease in accrued interest payable


(706
)


(49,683
)Net (increase) decrease in accrued tax payable


(65,930
)


15,362Net (decrease) increase in other accrued expenses


(42,285
)


72,734Net increase in pension and post retirement benefits


(25,815
)


(51,492
)Origination of loans held for sale


(372,086
)


(688,859
)Proceeds from sale of loans held for sale


387,973



637,246Net gains on loans held for sale


(7,668
)


(11,618
)Net gains on sale of premises and equipment


(803
)


(1,477
)Recoveries on charged-off loans


38,369



33,124Net increase in settlement clearing account


(1
)


(13,875
)Net increase (decrease) in trading hedging derivatives


27,635



(88,238
)Visa indemnification reversal


(2,800
)


Other, net


17,266



(49,037
)Net cash provided by operating activities

$
411,607


$
61,565Cash Flows from Investing Activities:Proceeds from sales of securities
    available-for-sale

$
463,525


$
2,830,608Proceeds from maturities of securities
    available-for-sale


2,330,121



2,245,203Purchases of securities
    available-for-sale


(2,393,605
)


(3,372,114
)Net decrease in loans


1,493,028



1,944,369Proceeds from loans sold to affiliates


273,522



Purchases of premises and equipment


(51,815
)


(49,662
)Sales of premises and equipment


18,045



17,867Acquisitions, net of cash received


191,663



(3,423
)Net cash provided by investing activities

$
2,324,484


$
3,612,848Cash flows from Financing Activities:Net decrease in deposits

$
(1,326,658
)

$
(24,487,001
)Net increase in deposits measured at fair value


370,227



109,720Net decrease in Federal funds purchased and securitiessold under agreement to repurchase


(1,154,020
)


(2,589,393
)Net (decrease) increase in other short-term borrowings


(74,596
)


633,040Net increase in short-term senior notes






325,000Proceeds from issuance long-term notes  senior






550,000Repayment of long-term notes  senior/secured


(137,409
)


Repayment of long-term notes  subordinated


(92,750
)


Net proceeds from stock options exercise


300



494Excess tax expense from stock options exercise


(119
)


(173
)Capital contributions


993,000



Cash dividends paid on preferred stock


(9,219
)


(9,219
)Net cash used in financing activities

$
(1,431,244
)

$
(25,467,532
)Net increase (decrease) in cash and cash equivalents

$
1,304,847


$
(21,793,119
)Cash and cash equivalents at January 1


10,311,425



27,285,609Cash and cash equivalents at June 30

$
11,616,272


$
5,492,490   The accompanying notes to consolidated financial statements
    are an integral part of these statements.
 18




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##### Table of Contents



HARRIS
    N.A. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Basis of
    Presentation      travel-and-entertainment
  high-net-worth
   19




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##### Table of Contents



HARRIS
    N.A. AND SUBSIDIARIES
    2.
    Contingent
    Liabilities and Litigation    3.
    Cash
    Flows    4.
    Visa
    Indemnification Charge          5.
    Auction
    Rate Securities Purchase Program   20




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##### Table of Contents



HARRIS
    N.A. AND SUBSIDIARIES
      available-for-sale.
  6.
    Health
    Care Legislation    7.
    Noncontrolling
    Interests  810-10-65)
  8.
    FDIC
    Special Assessment   21




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##### Table of Contents



HARRIS
    N.A. AND SUBSIDIARIES
  9.
    Recent
    accounting standards      2010-20, Disclosures about the Credit Quality of Financing Receivables
    and the Allowance for Credit Losses ASC 310-10-50, Receivables  Overall  Disclosure
 22




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##### Table of Contents



HARRIS
    N.A. AND SUBSIDIARIES
  FINANCIAL
    REVIEW
  Second
    Quarter 2010 Compared with Second Quarter 2009
  Summary
             23




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##### Table of Contents



Six
    Months Ended June 30, 2010 Compared with Six Months Ended
    June 30, 2009
  Summary
           24




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##### Table of Contents



Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk    available-for-sale
  July 1, 2010 to


Year Ending December 31,








Fair Value atDec. 31, 2010


2011


2012


2013


2014


Thereafter


Total


June 30, 2010Residential mortgage-backedAmortized cost

$
4,242


$
11,587


$



$
9,720


$
5,738


$
460,644


$
491,931


$
515,492Average Yield


4.00%



4.00%







4.00%



4.00%



4.42%



4.40%U.S. Treasury BillsAmortized cost

$
59,998


$



$



$



$



$



$
59,998


$
59,998Average Yield


0.070%























0.070%   sub-prime
 25




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##### Table of Contents



Item 4T.
    Controls
    and Procedures  (a)
    Evaluation
    of Disclosure Controls and Procedures    (b)
    Changes
    in Internal Control over Financial Reporting   26




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##### Table of Contents



Part II.
    OTHER INFORMATION  Items 1,
    1A, 2, 3, 4 and 5 are being omitted from this Report because
    such items are not applicable to the reporting period.
  None
  Item 6.
    Exhibits  31.1  Certification of Pamela C. Piarowski pursuant
    to
    rule 13a-14(a)
  31.2  Certification of Paul R. Skubic pursuant to
    rule 13a-14(a)
  32.1  Certification pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes- Oxley Act of 2002
 27




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##### Table of Contents



SIGNATURES     Paul
    R. Skubic
      Pamela
    C. Piarowski
    28