##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 000-21671
 THE NATIONAL BANK OF INDIANAPOLIS CORPORATION
 (Exact name of Registrant as Specified in its Charter)
 Indiana (State or Other Jurisdiction of 
Incorporation or Organization)
    
    35-1887991(I.R.S. Employer Identification No.)107 North Pennsylvania Street
Indianapolis, Indiana(Address of Principal Executive Offices)
    
    46204(Zip Code)
 (317) 261-9000  (Registrants Telephone Number, Including Area Code)
 Securities registered pursuant to Section 12(b) of the Act: None
 Securities registered Pursuant to Section 12(g) of the Act: Common Stock
 Yes o No þ
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(do not check if a smaller reporting company)
 Yes o No þ




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##### 



Form 10-K Cross Reference Index
 PagePART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    13Item 1B. Unresolved Staff Comments
    
    
    19Item 2. Properties
    
    
    19Item 3. Legal Proceedings
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    20Item 6. Selected Financial Data
    
    
    22Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    54Item 8. Financial Statements and Supplementary Data
    
    
    55Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    90Item 9A. Controls and Procedures
    
    
    90Item 9B. Other Information
    
    
    91PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    91Item 11. Executive Compensation
    
    
    91Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    91Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    91Item 14. Principal Accounting Fees and Services
    
    
    91PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    92Signatures
    
    
    95Exhibit 21.00Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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PART I
 
 Item 1. Business
 The Corporation
  
    
    8451 Ditch Road in northwestern Marion County;
 
    
    6807 East 82nd Street in northeastern Marion County;
 
    
    Chamber of Commerce Building on North Meridian Street;
 
    
    One America Office Complex in downtown Indianapolis;
 
    
    4930 North Pennsylvania Street in northern Marion County;
 
    
    650 East Carmel Drive in Hamilton County;
 
    
    10590 North Michigan Road in Hamilton County;
 
    
    1689 West Smith Valley Road in Johnson County;
 
    
    2714 East 146th Street in Hamilton County;
 
    
    2410 Harleston Street in Hamilton County; and
 
    
    11701 Olio Road in Hamilton County.
     1




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Business Plan Overview
     The Market
 Competition
  2




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Employees
 Lending Activity
    REGULATION AND SUPERVISION
   3




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THE CORPORATION
 The Bank Holding Company Act
 Investments, Control, and Activities
    Capital Adequacy Guidelines for Bank Holding Companies
  4




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Tier 1 Capital to Risk-Weighted Assets
    
    
    9.3
    %Total Risk Based Capital to Risk-Weighted Assets
    
    
    11.1
    %Tier 1 Leverage Ratio
    
    
    6.8
    %
 Dividends
 Source of Strength
 THE BANK
 General Regulatory Supervision
  Lending Limits
 Deposit Insurance.
  5




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Transactions with Affiliates and Insiders
  
    
    be made on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with third parties; and
 
    
    not involve more than the normal risk of repayment or present other unfavorable
features.
 Dividends
  Branching and Acquisitions
  6




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Community Reinvestment Act
 Capital Regulations
    Tier 1 Capital to Risk-Weighted Assets
    
    
    9.2
    %Total Risk-Based Capital to Risk-Weighted Assets
    
    
    10.9
    %Tier 1 Leverage Ratio
    
    
    6.7
    %
   7




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USA Patriot Act
 Sarbanes-Oxley Act of 2002
  8




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Recent Legislative and Regulatory Initiatives to Address Financial and Economic
Crises
      9




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10




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Other Regulations
   
    
    Truth-In-Lending Act and state consumer protection laws governing disclosures of
credit terms and prohibiting certain practices with regard to consumer borrowers;
 
    
    Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide
information to enable the public and public officials to determine whether a financial
institution is fulfilling its obligation to help meet the housing needs of the
community it serves;
 
    
    Equal Credit Opportunity Act and other fair lending laws, prohibiting discrimination
on the basis of race, creed or other prohibited factors in extending credit;
 
    
    Fair Credit Reporting Act of 1978 and Fair and Accurate Credit Transactions Act of
2003, governing the use and provision of information to credit reporting agencies;
 
    
    Fair Debt Collection Practices Act, governing the manner in which consumer debts may
be collected by collection agencies; and rules and regulations of the various federal
agencies charged with the responsibility of implementing such federal laws.
  
    
    Customer Information Security Guidelines. The federal bank regulatory agencies have
adopted final guidelines (the Guidelines) for safeguarding confidential customer
information. The Guidelines require each financial institution, under the supervision
and ongoing oversight of its Board of
Directors, to create a comprehensive written information security program designed to
ensure the security and confidentiality of customer information, protect against any
anticipated threats or hazards to the security or integrity of such information; protect
against unauthorized access to or use of such information that could result in
substantial harm or inconvenience to any customer; and implement response programs for
security breaches.
 
    
    Electronic Funds Transfer Act and Regulation E. The Electronic Funds Transfer Act,
which is implemented by Regulation E, governs automatic deposits to and withdrawals
from deposit accounts and customers rights and liabilities arising from the use of
automated teller machines and other electronic banking service.
 
    
    Gramm-Leach-Bliley Act, Fair and Accurate Credit Transactions Act. The
Gramm-Leach-Bliley Act, the Fair and Accurate Credit Transactions Act, and the
implementing regulations govern consumer financial privacy, provide disclosure
requirements and restrict the sharing of certain consumer financial information with
other parties.
  11




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Enforcement Powers
  Effect of Governmental Monetary Policies
 Available Information
   12




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Item 1A. Risk Factors
 Difficult conditions in the capital markets and the economy generally may materially adversely
affect our business and results of operations
    There can be no assurance that actions of the U.S. government, Federal Reserve and other
governmental and regulatory bodies for the purpose of stabilizing the financial markets will
achieve the intended effect
   13




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We may be required to pay significantly higher Federal Deposit Insurance Corporation (FDIC)
premiums in the future
   Recent negative developments in the financial industry and the credit markets may subject us to
additional regulation
   14




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The Corporation is subject to interest rate risk
  The Corporation is subject to lending risk
  The Corporations allowance for loan losses may be insufficient
   15




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The Corporation operates in a highly competitive industry and market area
   
    
    The ability to develop, maintain and build upon long-term customer relationships
based on top quality service, and safe, sound assets;
 
    
    The ability to expand the Corporations market position;
 
    
    The scope, relevance and pricing of products and services offered to meet customer
needs and demands;
 
    
    The rate at which the Corporation introduces new products and services relative to
its competitors;
 
    
    Customer satisfaction with the Corporations level of service; and
 
    
    Industry and general economic trends.
  The Corporation is subject to extensive government regulation and supervision
   16




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The Corporations controls and procedures may fail or be circumvented
  The Corporation is dependent on certain key management and staff
  The Corporations information systems may experience an interruption or breach in security
   17




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The Corporation has opened new offices
  The geographic concentration of our markets makes our business highly susceptible to local
economic conditions
  
    
    an increase in loan delinquencies;
 
    
    an increase in problem assets and foreclosures;
 
    
    a decrease in the demand for our products and services; and
 
    
    a decrease in the value of collateral for loans, especially real estate, in
turn reducing customers borrowing power, the value of assets associated with problem
loans and collateral coverage.
 Future growth or operating results may require the Corporation to raise additional capital but
that capital may not be available or it may be dilutive
  The Corporation continually encounters technological change
   18




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Item 1B. Unresolved Staff Comments
  
 Item 2. Property
  th nd th th
   19




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  Price per ShareHigh
    
    
    LowQuarter
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008First Quarter
    
    $
    50.00
    
    
    $
    53.93
    
    
    $
    35.65
    
    
    $
    52.22Second Quarter
    
    $
    39.67
    
    
    $
    51.80
    
    
    $
    35.97
    
    
    $
    50.92Third Quarter
    
    $
    39.90
    
    
    $
    52.29
    
    
    $
    38.97
    
    
    $
    51.12Fourth Quarter
    
    $
    40.00
    
    
    $
    52.36
    
    
    $
    36.74
    
    
    $
    38.18
     20




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Maximum Number(or ApproximateDollar Value) ofTotal Number of
    
    
    Shares that May YetShares Purchased as
    
    
    Be Purchased UnderPart of Publicly
    
    
    the Plans orTotal Number of
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    Programs (dollars inPeriod
    
    Shares Purchased
    
    
    per Share
    
    
    Programs**
    
    
    thousands)10/01/09  10/31/09
    
    
    2,000
    
    
    $
    39.66
    
    
    
    2,000
    
    
    $
    5,97711/01/09
 11/30/09
    
    
    1,400
    
    
    $
    39.02
    
    
    
    1,400
    
    
    $
    5,92312/01/09
 12/31/09
    
    
    490
    
    
    $
    36.74
    
    
    
    490
    
    
    $
    5,905Total
    
    
    3,890
    
    
    
    *
    
    
    
    3,890
 *
    
    The weighted average price per share under the new repurchase program for the period October
2009 through December 2009 was $39.06.**
    
    All shares repurchased by the Corporation during the fourth quarter 2009 were completed
pursuant to the new repurchase program.  21




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Item 6. Selected Financial Data
  2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Consolidated Operating Data:Interest income
    
    $
    47,531
    
    
    $
    56,377
    
    
    $
    68,880
    
    
    $
    61,375
    
    
    $
    50,847Interest expense
    
    
    11,313
    
    
    
    20,449
    
    
    
    35,263
    
    
    
    29,565
    
    
    
    20,906Net interest income
    
    
    36,218
    
    
    
    35,928
    
    
    
    33,617
    
    
    
    31,811
    
    
    
    29,941Provision for loan losses
    
    
    11,905
    
    
    
    7,400
    
    
    
    904
    
    
    
    1,086
    
    
    
    2,085Net interest income after provision for loan losses
    
    
    24,313
    
    
    
    28,528
    
    
    
    32,713
    
    
    
    30,725
    
    
    
    27,856Other operating income
    
    
    12,903
    
    
    
    11,204
    
    
    
    9,834
    
    
    
    8,356
    
    
    
    7,461Other operating expenses
    
    
    38,354
    
    
    
    34,706
    
    
    
    30,800
    
    
    
    28,595
    
    
    
    25,176Income (loss) before taxes
    
    
    (1,138
    )
    
    
    5,026
    
    
    
    11,747
    
    
    
    10,486
    
    
    
    10,141Federal and state income tax (benefit)
    
    
    (1,250
    )
    
    
    1,242
    
    
    
    3,856
    
    
    
    3,501
    
    
    
    3,911Net income
    
    
    112
    
    
    
    3,784
    
    
    
    7,891
    
    
    
    6,985
    
    
    
    6,230Consolidated Balance Sheet Data (at end of period):Total assets
    
    $
    1,233,630
    
    
    $
    1,117,784
    
    
    $
    1,163,109
    
    
    $
    1,034,432
    
    
    $
    928,462Total investment securities (including stock in Federal Banks)
    
    
    165,368
    
    
    
    143,694
    
    
    
    137,174
    
    
    
    150,137
    
    
    
    157,471Total loans
    
    
    864,722
    
    
    
    904,207
    
    
    
    830,328
    
    
    
    744,538
    
    
    
    684,488Allowance for loan losses
    
    
    (13,716
    )
    
    
    (12,847
    )
    
    
    (9,453
    )
    
    
    (8,513
    )
    
    
    (8,346
    )Deposits
    
    
    1,052,065
    
    
    
    965,966
    
    
    
    1,004,762
    
    
    
    875,084
    
    
    
    774,316Shareholders equity
    
    
    73,031
    
    
    
    72,212
    
    
    
    68,938
    
    
    
    59,785
    
    
    
    51,583Weighted basic average shares outstanding
    
    
    2,302
    
    
    
    2,311
    
    
    
    2,328
    
    
    
    2,302
    
    
    
    2,299Per Share Data:Diluted net income per common share (1)
    
    $
    0.05
    
    
    $
    1.58
    
    
    $
    3.27
    
    
    $
    2.90
    
    
    $
    2.61Cash dividends declared
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Book value (2)
    
    
    31.65
    
    
    
    31.48
    
    
    
    29.63
    
    
    
    25.88
    
    
    
    22.11Other Statistics and Operating Data:Return on average assets
    
    
    0.0
    %
    
    
    0.3
    %
    
    
    0.7
    %
    
    
    0.7
    %
    
    
    0.7
    %Return on average equity
    
    
    0.2
    %
    
    
    5.3
    %
    
    
    12.3
    %
    
    
    12.7
    %
    
    
    12.8
    %Net interest margin (3)
    
    
    3.2
    %
    
    
    3.4
    %
    
    
    3.3
    %
    
    
    3.4
    %
    
    
    3.3
    %Average loans to average deposits
    
    
    85.5
    %
    
    
    88.5
    %
    
    
    82.3
    %
    
    
    85.9
    %
    
    
    85.5
    %Allowance for loan losses to loans at end of period
    
    
    1.6
    %
    
    
    1.4
    %
    
    
    1.1
    %
    
    
    1.1
    %
    
    
    1.2
    %Allowance for loan losses to non-performing loans
    
    
    90.8
    %
    
    
    146.4
    %
    
    
    164.1
    %
    
    
    119.0
    %
    
    
    228.8
    %Non-performing loans to loans at end of period
    
    
    1.7
    %
    
    
    1.0
    %
    
    
    0.7
    %
    
    
    1.0
    %
    
    
    0.5
    %Net charge-offs to average loans
    
    
    1.2
    %
    
    
    0.5
    %
    
    
    0.0
    %
    
    
    0.1
    %
    
    
    0.2
    %Number of offices
    
    
    12
    
    
    
    11
    
    
    
    9
    
    
    
    9
    
    
    
    9Number of full and part-time employees
    
    
    270
    
    
    
    252
    
    
    
    228
    
    
    
    221
    
    
    
    211Number of Shareholders of Record
    
    
    679
    
    
    
    681
    
    
    
    676
    
    
    
    639
    
    
    
    601Capital Ratios:Average shareholders equity to average assets
    
    
    6.1
    %
    
    
    6.3
    %
    
    
    5.9
    %
    
    
    5.7
    %
    
    
    5.2
    %Equity to assets
    
    
    5.9
    %
    
    
    6.5
    %
    
    
    5.9
    %
    
    
    5.8
    %
    
    
    5.6
    %Total risk-based capital ratio (Bank only)
    
    
    10.9
    %
    
    
    10.5
    %
    
    
    10.6
    %
    
    
    10.7
    %
    
    
    10.9
    %
 (1)
    
    Based upon weighted average shares outstanding during the period.(2)
    
    Based on Common Stock outstanding at the end of the period.(3)
    
    Net interest income as a percentage of average interest-earning assets.  22




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis of the Corporation relates to the years ended December 31,
2009, 2008, and 2007 and should be read in conjunction with the Corporations Consolidated
Financial Statements and Notes thereto included elsewhere herein.
 Overview
     23




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##### Table of Contents



Results of Operations
 Year ended December 31, 2009, Compared to the Year Ended December 31, 2008, and the Year Ended
December 31, 2008, Compared to the Year Ended December 31, 2007.
  2009 compared with 2008
   2008 compared with 2007
 th
   24




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Net Interest Income
  2009
    
    
    2008
    
    
    $ Change
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    $ Change
    
    
    % ChangeInterest income:Interest and fees on loans
    
    $
    42,217
    
    
    $
    48,988
    
    
    $
    (6,771
    )
    
    
    -13.8
    %
    
    $
    48,988
    
    
    $
    57,383
    
    
    $
    (8,395
    )
    
    
    -14.6
    %Interest on investment securities taxable
    
    
    3,242
    
    
    
    4,489
    
    
    
    (1,247
    )
    
    
    -27.8
    %
    
    
    4,489
    
    
    
    6,777
    
    
    
    (2,288
    )
    
    
    -33.8
    %Interest on investment securities nontaxable
    
    
    2,068
    
    
    
    2,047
    
    
    
    21
    
    
    
    1.0
    %
    
    
    2,047
    
    
    
    1,817
    
    
    
    230
    
    
    
    12.7
    %Interest on federal funds sold
    
    
    4
    
    
    
    705
    
    
    
    (701
    )
    
    
    -99.4
    %
    
    
    705
    
    
    
    2,492
    
    
    
    (1,787
    )
    
    
    -71.7
    %Interest on reverse repurchase agreements
    
    
    
    
    
    
    148
    
    
    
    (148
    )
    
    
    -100.0
    %
    
    
    148
    
    
    
    411
    
    
    
    (263
    )
    
    
    -64.0
    %Total interest income
    
    $
    47,531
    
    
    $
    56,377
    
    
    $
    (8,846
    )
    
    
    -15.7
    %
    
    $
    56,377
    
    
    $
    68,880
    
    
    $
    (12,503
    )
    
    
    -18.2
    %Interest expense:Interest on deposits
    
    $
    9,427
    
    
    $
    17,979
    
    
    $
    (8,552
    )
    
    
    -47.6
    %
    
    $
    17,979
    
    
    $
    30,847
    
    
    $
    (12,868
    )
    
    
    -41.7
    %Interest on other short term borrowings
    
    
    182
    
    
    
    544
    
    
    
    (362
    )
    
    
    -66.5
    %
    
    
    544
    
    
    
    2,078
    
    
    
    (1,534
    )
    
    
    -73.8
    %Interest on
FHLB advances and overnight borrowings
    
    
    
    
    
    
    193
    
    
    
    (193
    )
    
    
    -100.0
    %
    
    
    193
    
    
    
    463
    
    
    
    (270
    )
    
    
    -58.3
    %Interest on short-term debt
    
    
    121
    
    
    
    16
    
    
    
    105
    
    
    
    656.3
    %
    
    
    16
    
    
    
    
    
    
    
    16
    
    
    
    100.0
    %Interest on long-term debt
    
    
    1,583
    
    
    
    1,717
    
    
    
    (134
    )
    
    
    -7.8
    %
    
    
    1,717
    
    
    
    1,875
    
    
    
    (158
    )
    
    
    -8.4
    %Total interest expense
    
    $
    11,313
    
    
    $
    20,449
    
    
    $
    (9,136
    )
    
    
    -44.7
    %
    
    $
    20,449
    
    
    $
    35,263
    
    
    $
    (14,814
    )
    
    
    -42.0
    %Net interest income
    
    $
    36,218
    
    
    $
    35,928
    
    
    $
    290
    
    
    
    0.8
    %
    
    $
    35,928
    
    
    $
    33,617
    
    
    $
    2,311
    
    
    
    6.9
    %
 2009 compared with 2008
     25




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2008 compared with 2007
     26




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2009
    
    
    2008
    
    
    2007Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Rate/
    
    
    Average
    
    
    Income/
    
    
    Rate/
    
    
    Average
    
    
    Income/
    
    
    Rate/Balance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    Yield
    
    
    Balance
    
    
    Expense
    
    
    YieldAssets:Interest bearing due from banks
    
    $
    91,295
    
    
    $
    231
    
    
    
    0.25
    %
    
    $
    20,645
    
    
    $
    509
    
    
    
    2.47
    %
    
    $
    61,200
    
    
    $
    2,999
    
    
    
    4.90
    %Reverse repurchase agreements
    
    
    1,000
    
    
    
    
    
    
    
    0.01
    %
    
    
    4,197
    
    
    
    148
    
    
    
    3.53
    %
    
    
    8,701
    
    
    
    411
    
    
    
    4.72
    %Federal funds
    
    
    2,646
    
    
    
    4
    
    
    
    0.15
    %
    
    
    31,530
    
    
    
    705
    
    
    
    2.24
    %
    
    
    52,466
    
    
    
    2,492
    
    
    
    4.75
    %Non taxable investment securities  FTE
    
    
    56,070
    
    
    
    3,140
    
    
    
    5.60
    %
    
    
    55,178
    
    
    
    3,046
    
    
    
    5.52
    %
    
    
    46,252
    
    
    
    2,640
    
    
    
    5.71
    %Taxable investments securities
    
    
    88,855
    
    
    
    3,011
    
    
    
    3.39
    %
    
    
    98,585
    
    
    
    3,980
    
    
    
    4.04
    %
    
    
    93,757
    
    
    
    3,778
    
    
    
    4.03
    %Loans (gross)
    
    
    883,721
    
    
    
    42,217
    
    
    
    4.78
    %
    
    
    855,313
    
    
    
    48,988
    
    
    
    5.73
    %
    
    
    768,271
    
    
    
    57,383
    
    
    
    7.47
    %Total earning assets  FTE
    
    $
    1,123,587
    
    
    $
    48,603
    
    
    
    4.33
    %
    
    $
    1,065,448
    
    
    $
    57,376
    
    
    
    5.39
    %
    
    $
    1,030,647
    
    
    $
    69,703
    
    
    
    6.76
    %Non-earning assets
    
    
    83,573
    
    
    
    
    
    
    
    
    
    
    
    63,335
    
    
    
    
    
    
    
    
    
    
    
    57,065Total assets
    
    $
    1,207,160
    
    
    
    
    
    
    
    
    
    
    $
    1,128,783
    
    
    
    
    
    
    
    
    
    
    $
    1,087,712Liabilities:Interest bearing DDA
    
    $
    160,233
    
    
    $
    600
    
    
    
    0.37
    %
    
    $
    116,999
    
    
    $
    1,206
    
    
    
    1.03
    %
    
    $
    97,908
    
    
    $
    1,632
    
    
    
    1.67
    %Savings
    
    
    472,181
    
    
    
    3,448
    
    
    
    0.73
    %
    
    
    495,956
    
    
    
    9,698
    
    
    
    1.96
    %
    
    
    481,295
    
    
    
    19,589
    
    
    
    4.07
    %CDs under $100
    
    
    63,609
    
    
    
    1,665
    
    
    
    2.62
    %
    
    
    66,256
    
    
    
    2,547
    
    
    
    3.84
    %
    
    
    71,087
    
    
    
    3,378
    
    
    
    4.75
    %CDs over $100
    
    
    129,325
    
    
    
    3,160
    
    
    
    2.44
    %
    
    
    101,008
    
    
    
    3,806
    
    
    
    3.77
    %
    
    
    107,030
    
    
    
    5,415
    
    
    
    5.06
    %Individual retirement accounts
    
    
    19,980
    
    
    
    554
    
    
    
    2.77
    %
    
    
    18,737
    
    
    
    722
    
    
    
    3.85
    %
    
    
    17,618
    
    
    
    833
    
    
    
    4.73
    %Repurchase agreements and other
secured short term borrowings
    
    
    68,742
    
    
    
    182
    
    
    
    0.26
    %
    
    
    57,125
    
    
    
    544
    
    
    
    0.95
    %
    
    
    54,326
    
    
    
    2,078
    
    
    
    3.83
    %FHLB advances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,336
    
    
    
    193
    
    
    
    2.63
    %
    
    
    9,318
    
    
    
    463
    
    
    
    4.97
    %Short-term debt
    
    
    4,200
    
    
    
    121
    
    
    
    2.88
    %
    
    
    586
    
    
    
    16
    
    
    
    2.73
    %
    
    
    
    
    
    
    
    
    
    
    Subordinated debt
    
    
    5,000
    
    
    
    108
    
    
    
    2.16
    %
    
    
    5,000
    
    
    
    242
    
    
    
    4.84
    %
    
    
    5,000
    
    
    
    393
    
    
    
    7.86
    %Long term debt
    
    
    13,918
    
    
    
    1,475
    
    
    
    10.60
    %
    
    
    13,918
    
    
    
    1,475
    
    
    
    10.60
    %
    
    
    13,918
    
    
    
    1,482
    
    
    
    10.65
    %Total interest bearing liabilities
    
    $
    937,188
    
    
    $
    11,313
    
    
    
    1.21
    %
    
    $
    882,921
    
    
    $
    20,449
    
    
    
    2.32
    %
    
    $
    857,500
    
    
    $
    35,263
    
    
    
    4.11
    %Non-interest bearing liabilities
    
    
    188,594
    
    
    
    
    
    
    
    
    
    
    
    167,121
    
    
    
    
    
    
    
    
    
    
    
    158,882Other liabilities
    
    
    8,034
    
    
    
    
    
    
    
    
    
    
    
    7,921
    
    
    
    
    
    
    
    
    
    
    
    7,141Total liabilities
    
    $
    1,133,816
    
    
    
    
    
    
    
    
    
    
    $
    1,057,963
    
    
    
    
    
    
    
    
    
    
    $
    1,023,523Equity
    
    
    73,344
    
    
    
    
    
    
    
    
    
    
    
    70,820
    
    
    
    
    
    
    
    
    
    
    
    64,189Total liabilities & equity
    
    $
    1,207,160
    
    
    
    
    
    
    
    
    
    
    $
    1,128,783
    
    
    
    
    
    
    
    
    
    
    $
    1,087,712Recap:Interest income  FTE
    
    
    
    
    
    $
    48,603
    
    
    
    4.33
    %
    
    
    
    
    
    $
    57,376
    
    
    
    5.39
    %
    
    
    
    
    
    $
    69,703
    
    
    
    6.76
    %Interest expense
    
    
    
    
    
    
    11,313
    
    
    
    1.21
    %
    
    
    
    
    
    
    20,449
    
    
    
    2.32
    %
    
    
    
    
    
    
    35,263
    
    
    
    4.11
    %Net interest income/spread  FTE
    
    
    
    
    
    $
    37,290
    
    
    
    3.12
    %
    
    
    
    
    
    $
    36,927
    
    
    
    3.07
    %
    
    
    
    
    
    $
    34,440
    
    
    
    2.65
    %Contribution of non-interest bearing funds
    
    
    
    
    
    
    
    
    
    
    0.20
    %
    
    
    
    
    
    
    
    
    
    
    0.40
    %
    
    
    
    
    
    
    
    
    
    
    0.69
    %Net interest margin  FTE
    
    
    
    
    
    
    
    
    
    
    3.32
    %
    
    
    
    
    
    
    
    
    
    
    3.47
    %
    
    
    
    
    
    
    
    
    
    
    3.34
    %
  27




---



##### Table of Contents




    
    Average balances are computed using daily actual balances.
 
    
    The average loan balance includes non-accrual loans and the interest recognized prior to
becoming non-accrual is reflected in the interest income for loans.
 
    
    Interest income on loans includes loan fees net of loan costs, of $(645) thousand,
$(714) thousand, and $153 thousand, for the years ended December 31, 2009, 2008, and 2007,
respectively.
 
    
    Net interest income on a fully taxable equivalent basis, the most significant component
of the Corporations earnings, is total interest income on a fully taxable equivalent basis
less total interest expense. The level of net interest income on a fully taxable
equivalent basis is determined by the mix and volume of interest earning assets, interest
bearing deposits and borrowed funds, and changes in interest rates.
 
    
    Net interest spread is the difference between the fully taxable equivalent rate earned
on interest earning assets less the rate expensed on interest bearing liabilities.
 
    
    Net interest margin represents net interest income on a fully taxable equivalent basis
as a percentage of average interest earning assets. Net interest margin is affected by
both the interest rate spread and the level of non-interest bearing sources of funds,
primarily consisting of demand deposits and shareholders equity.
 
    
    Interest income on a fully taxable equivalent basis includes the additional amount of
interest income that would have been earned if investments in certain tax-exempt interest
earning assets had been made in assets subject to federal taxes yielding the same after-tax
income. Interest income on municipal securities has been calculated on a fully taxable
equivalent basis using a federal and state income tax blended rate of 40%. The appropriate
tax equivalent adjustments to interest income were $1.1 million, $999 thousand, and $823
thousand, for the years ended December 31, 2009, 2008, and 2007, respectively.
 
    
    Management believes the disclosure of the fully taxable equivalent net interest income
information improves the clarity of financial analysis, and is particularly useful to
investors in understanding and evaluating the changes and trends in the Corporations
results of operations. This adjustment is considered helpful in the comparison of one
financial institutions net interest income to that of another institution, as each will
have a different proportion of tax-exempt interest from their earning asset portfolios.
  28




---



##### Table of Contents



Net Interest Income Changes Due to Volume and Rates ($ in 000s):
 2009 Changes from 2008
    
    
    2008 Changes from 2007Net
    
    
    Due to
    
    
    Due to
    
    
    Net
    
    
    Due to
    
    
    Due toChange
    
    
    Rate
    
    
    Volume
    
    
    Change
    
    
    Rate
    
    
    VolumeInterest earning assets:Interest bearing due from banks
    
    $
    (278
    )
    
    $
    (781
    )
    
    $
    503
    
    
    $
    (2,490
    )
    
    $
    (1,067
    )
    
    $
    (1,423
    )Reverse repurchase agreements
    
    $
    (148
    )
    
    $
    
    
    
    $
    (148
    )
    
    $
    (263
    )
    
    $
    (86
    )
    
    $
    (177
    )Federal funds
    
    $
    (701
    )
    
    $
    (354
    )
    
    $
    (347
    )
    
    $
    (1,787
    )
    
    $
    (1,019
    )
    
    $
    (768
    )Non taxable investment securities  FTE
    
    $
    94
    
    
    $
    44
    
    
    $
    50
    
    
    $
    406
    
    
    $
    (89
    )
    
    $
    495Taxable investment securities
    
    $
    (969
    )
    
    $
    (600
    )
    
    $
    (369
    )
    
    $
    202
    
    
    $
    7
    
    
    $
    195Loans (gross)
    
    $
    (6,771
    )
    
    $
    (8,353
    )
    
    $
    1,582
    
    
    $
    (8,395
    )
    
    $
    (14,401
    )
    
    $
    6,006TOTAL
    
    
    (8,773
    )
    
    
    (10,044
    )
    
    
    1,271
    
    
    
    (12,327
    )
    
    
    (16,655
    )
    
    
    4,328Interest bearing liabilities:Interest bearing DDA
    
    $
    (606
    )
    
    $
    (947
    )
    
    $
    341
    
    
    $
    (426
    )
    
    $
    (703
    )
    
    $
    277Savings deposits
    
    $
    (6,250
    )
    
    $
    (5,806
    )
    
    $
    (444
    )
    
    $
    (9,891
    )
    
    $
    (10,471
    )
    
    $
    580CDs under $100
    
    $
    (882
    )
    
    $
    (784
    )
    
    $
    (98
    )
    
    $
    (831
    )
    
    $
    (613
    )
    
    $
    (218
    )CDs over $100
    
    $
    (646
    )
    
    $
    (1,547
    )
    
    $
    901
    
    
    $
    (1,609
    )
    
    $
    (1,318
    )
    
    $
    (291
    )Individual retirement accounts
    
    $
    (168
    )
    
    $
    (213
    )
    
    $
    45
    
    
    $
    (111
    )
    
    $
    (161
    )
    
    $
    50Repurchase agreements and other short-term
secured borrowings
    
    $
    (362
    )
    
    $
    (455
    )
    
    $
    93
    
    
    $
    (1,534
    )
    
    $
    (1,636
    )
    
    $
    102FHLB advances
    
    $
    (193
    )
    
    $
    
    
    
    $
    (193
    )
    
    $
    (270
    )
    
    $
    (186
    )
    
    $
    (84
    )Short-term debt
    
    $
    105
    
    
    $
    1
    
    
    $
    104
    
    
    $
    16
    
    
    $
    
    
    
    $
    16Subordinated debt
    
    $
    (134
    )
    
    $
    (134
    )
    
    $
    
    
    
    $
    (151
    )
    
    $
    (151
    )
    
    $
    Long term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (7
    )
    
    $
    (7
    )
    
    $
    TOTAL
    
    $
    (9,136
    )
    
    $
    (9,885
    )
    
    $
    749
    
    
    $
    (14,814
    )
    
    $
    (15,246
    )
    
    $
    432Net change in net interest income
    
    $
    363
    
    
    $
    (159
    )
    
    $
    522
    
    
    $
    2,487
    
    
    $
    (1,409
    )
    
    $
    3,896
  29




---



##### Table of Contents



Provision for Loan Losses
  2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Beginning of Period
    
    $
    12,847
    
    
    $
    9,453
    
    
    $
    8,513
    
    
    $
    8,346
    
    
    $
    7,796Provision for loan losses
    
    
    11,905
    
    
    
    7,400
    
    
    
    904
    
    
    
    1,086
    
    
    
    2,085ChargeoffsCommercial
    
    
    2,603
    
    
    
    1,697
    
    
    
    228
    
    
    
    1,094
    
    
    
    1,318Commercial Real Estate
    
    
    6,150
    
    
    
    1,126
    
    
    
    
    
    
    
    191
    
    
    
    Residential Mortgage
    
    
    864
    
    
    
    1,360
    
    
    
    600
    
    
    
    121
    
    
    
    447Consumer
    
    
    21
    
    
    
    64
    
    
    
    50
    
    
    
    51
    
    
    
    5Credit Cards
    
    
    84
    
    
    
    97
    
    
    
    4
    
    
    
    28
    
    
    
    50Construction
    
    
    1,710
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    11,432
    
    
    
    4,393
    
    
    
    882
    
    
    
    1,485
    
    
    
    1,820RecoveriesCommercial
    
    
    343
    
    
    
    187
    
    
    
    814
    
    
    
    412
    
    
    
    259Residential Mortgage
    
    
    20
    
    
    
    174
    
    
    
    67
    
    
    
    154
    
    
    
    26Consumer
    
    
    
    
    
    
    1
    
    
    
    6
    
    
    
    
    
    
    
    Credit Cards
    
    
    33
    
    
    
    25
    
    
    
    31
    
    
    
    
    
    
    
    396
    
    
    
    387
    
    
    
    918
    
    
    
    566
    
    
    
    285End of Period
    
    $
    13,716
    
    
    $
    12,847
    
    
    $
    9,453
    
    
    $
    8,513
    
    
    $
    8,346Allowance as a % of Loans
    
    
    1.59
    %
    
    
    1.42
    %
    
    
    1.14
    %
    
    
    1.14
    %
    
    
    1.22
    %
 2009 compared with 2008
  2008 compared with 2007
   30




---



##### Table of Contents



Other Operating Income
  2009
    
    
    2008
    
    
    $ Change
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    $ Change
    
    
    % ChangeWealth management fees
    
    $
    4,917
    
    
    $
    5,048
    
    
    $
    (131
    )
    
    
    -2.6
    %
    
    $
    5,048
    
    
    $
    4,547
    
    
    $
    501
    
    
    
    11.0
    %Service charges and fees on deposit accounts
    
    
    3,113
    
    
    
    2,484
    
    
    
    629
    
    
    
    25.3
    %
    
    
    2,484
    
    
    
    1,818
    
    
    $
    666
    
    
    
    36.6
    %Rental income
    
    
    321
    
    
    
    575
    
    
    
    (254
    )
    
    
    -44.2
    %
    
    
    575
    
    
    
    597
    
    
    $
    (22
    )
    
    
    -3.7
    %Mortgage banking income
    
    
    1,576
    
    
    
    62
    
    
    
    1,514
    
    
    
    2,441.9
    %
    
    
    62
    
    
    
    329
    
    
    $
    (267
    )
    
    
    -81.2
    %Interchange income
    
    
    1,007
    
    
    
    877
    
    
    
    130
    
    
    
    14.8
    %
    
    
    877
    
    
    
    678
    
    
    $
    199
    
    
    
    29.4
    %Other income
    
    
    1,969
    
    
    
    2,158
    
    
    
    (189
    )
    
    
    -8.8
    %
    
    
    2,158
    
    
    
    1,865
    
    
    $
    293
    
    
    
    15.7
    %Total other operating income
    
    $
    12,903
    
    
    $
    11,204
    
    
    $
    1,699
    
    
    
    15.2
    %
    
    $
    11,204
    
    
    $
    9,834
    
    
    $
    1,370
    
    
    
    13.9
    %
 2009 compared with 2008
        31




---



##### Table of Contents



2008 compared with 2007
         32




---



##### Table of Contents



Other Operating Expenses
  2009
    
    
    2008
    
    
    $ Change
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    $ Change
    
    
    % ChangeSalaries, wages and employee benefits
    
    $
    21,332
    
    
    $
    19,172
    
    
    $
    2,160
    
    
    
    11.3
    %
    
    $
    19,172
    
    
    $
    19,098
    
    
    $
    74
    
    
    
    0.4
    %Occupancy
    
    
    2,441
    
    
    
    2,081
    
    
    
    360
    
    
    
    17.3
    %
    
    
    2,081
    
    
    
    1,791
    
    
    $
    290
    
    
    
    16.2
    %Furniture and equipment
    
    
    1,359
    
    
    
    1,428
    
    
    
    (69
    )
    
    
    -4.8
    %
    
    
    1,428
    
    
    
    1,241
    
    
    $
    187
    
    
    
    15.1
    %Professional services
    
    
    1,873
    
    
    
    1,971
    
    
    
    (98
    )
    
    
    -5.0
    %
    
    
    1,971
    
    
    
    1,800
    
    
    $
    171
    
    
    
    9.5
    %Data processing
    
    
    2,752
    
    
    
    2,514
    
    
    
    238
    
    
    
    9.5
    %
    
    
    2,514
    
    
    
    2,200
    
    
    $
    314
    
    
    
    14.3
    %Business development
    
    
    1,531
    
    
    
    1,526
    
    
    
    5
    
    
    
    0.3
    %
    
    
    1,526
    
    
    
    1,292
    
    
    $
    234
    
    
    
    18.1
    %FDIC insurance
    
    
    2,142
    
    
    
    918
    
    
    
    1,224
    
    
    
    133.3
    %
    
    
    918
    
    
    
    99
    
    
    $
    819
    
    
    
    827.3
    %Non performing assets
    
    
    1,383
    
    
    
    149
    
    
    
    1,234
    
    
    
    828.2
    %
    
    
    149
    
    
    
    109
    
    
    $
    40
    
    
    
    36.7
    %Other
    
    
    3,541
    
    
    
    4,947
    
    
    
    (1,406
    )
    
    
    -28.4
    %
    
    
    4,947
    
    
    
    3,170
    
    
    $
    1,777
    
    
    
    56.1
    %Total other operating expenses
    
    $
    38,354
    
    
    $
    34,706
    
    
    $
    3,648
    
    
    
    10.5
    %
    
    $
    34,706
    
    
    $
    30,800
    
    
    $
    3,906
    
    
    
    12.7
    %
 2009 compared with 2008
        33




---



##### Table of Contents



2008 compared with 2007
   th
 th
  34




---



##### Table of Contents



Tax (Benefit)/Expense
  2009
    
    
    2008
    
    
    2007Current tax (benefit) expense
    
    $
    (405
    )
    
    $
    3,155
    
    
    $
    4,181Deferred tax (benefit) expense
    
    
    (845
    )
    
    
    1,913
    
    
    
    (325
    )$
    (1,250
    )
    
    $
    1,242
    
    
    $
    3,856
  35




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007Income (loss) before provision for
income tax
    
    $
    (1,138
    )
    
    $
    5,026
    
    
    $
    11,747Tax expense (benefit) at federal
statutory rate
    
    $
    (387
    )
    
    $
    1,709
    
    
    $
    3,994Increase (decrease) in taxes resulting from:State income taxes
    
    
    (92
    )
    
    
    203
    
    
    
    603Tax-exempt interest
    
    
    (716
    )
    
    
    (685
    )
    
    
    (558
    )Other
    
    
    (55
    )
    
    
    15
    
    
    
    (183
    )$
    (1,250
    )
    
    $
    1,242
    
    
    $
    3,856
   2009
    
    
    2008Deferred tax assets:Allowance for loan losses
    
    $
    5,364
    
    
    $
    5,025Equity based compensation
    
    
    1,841
    
    
    
    1,193Accrued contingencies
    
    
    391
    
    
    
    391Other
    
    
    693
    
    
    
    508Total deferred tax assets
    
    
    8,289
    
    
    
    7,117Deferred tax liabilities:Mortgage servicing rights
    
    
    (570
    )
    
    
    (418
    )Net unrealized gain on securities
    
    
    
    
    
    
    (537
    )Other
    
    
    (586
    )
    
    
    (413
    )Total deferred tax liabilities
    
    
    (1,156
    )
    
    
    (1,368
    )Net deferred tax assets
    
    $
    7,133
    
    
    $
    5,749
 Effects of Inflation
    36




---



##### Table of Contents



Liquidity and Interest Rate Sensitivity
       Covenants
    
    U.S. Bank Policy
    
    
    ActualNon-performing assets to total loans
    
    < 2.65
    %
    
    
    2.70
    %Return on assets
    
    not < 0.30
    %
    
    
    0.19
    %Loan loss reserve to non-performing loans
    
    not £ 100
    %
    
    
    90.80
    %
  37




---



##### Table of Contents



38




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007U.S. Treasuries
    
    
    1.09
    %
    
    
    3.59
    %
    
    
    4.81
    %U.S. Government agencies
    
    
    3.42
    %
    
    
    4.32
    %
    
    
    4.25
    %Collateralized mortgage obligations
    
    
    3.28
    %
    
    
    3.46
    %
    
    
    3.50
    %Municipals
    
    
    5.60
    %
    
    
    5.52
    %
    
    
    5.71
    %Other securities
    
    
    0.39
    %
    
    
    2.78
    %
    
    
    4.91
    %
   39




---



##### Table of Contents



($ in 000s):
 Available-for-Sale SecuritiesGross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gain
    
    
    Loss
    
    
    Value2009U.S. Treasury securities
    
    $
    506
    
    
    $
    
    
    
    $
    
    
    
    $
    506U.S. Government agencies
    
    
    66,795
    
    
    
    97
    
    
    
    102
    
    
    
    66,790$
    67,301
    
    
    $
    97
    
    
    $
    102
    
    
    $
    67,2962008U.S. Treasury securities
    
    $
    494
    
    
    $
    5
    
    
    $
    
    
    
    $
    499U.S. Government agencies
    
    
    55,109
    
    
    
    1,369
    
    
    
    
    
    
    
    56,478$
    55,603
    
    
    $
    1,374
    
    
    
    
    
    
    $
    56,9772007U.S. Treasury securities
    
    $
    1,504
    
    
    $
    10
    
    
    $
    
    
    
    $
    1,514U.S. Government agencies
    
    
    60,000
    
    
    
    889
    
    
    
    138
    
    
    
    60,751Collateralized mortgage obligations
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3$
    61,507
    
    
    $
    899
    
    
    $
    138
    
    
    $
    62,268
 Held-to-Maturity SecuritiesGross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gain
    
    
    Loss
    
    
    Value2009Municipals
    
    $
    54,913
    
    
    $
    1,805
    
    
    $
    47
    
    
    $
    56,671Collateralized mortgage obligations, residential
    
    
    30,124
    
    
    
    29
    
    
    
    232
    
    
    
    29,921Mortgage backed securities, residential
    
    
    9,735
    
    
    
    111
    
    
    
    
    
    
    
    9,846Other securities
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    150$
    94,922
    
    
    $
    1,945
    
    
    $
    279
    
    
    $
    96,5882008Municipals
    
    $
    56,874
    
    
    $
    213
    
    
    $
    800
    
    
    $
    56,287Collateralized mortgage obligations, residential
    
    
    8,825
    
    
    
    12
    
    
    
    
    
    
    
    8,837Mortgage backed securities, residential
    
    
    17,693
    
    
    
    45
    
    
    
    66
    
    
    
    17,672Other securities
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    175$
    83,567
    
    
    $
    270
    
    
    $
    866
    
    
    $
    82,9712007Municipals
    
    $
    46,257
    
    
    $
    554
    
    
    $
    12
    
    
    $
    46,799Collateralized mortgage obligations, residential
    
    
    20,535
    
    
    
    
    
    
    
    209
    
    
    
    20,326Mortgage backed securities, residential
    
    
    4,764
    
    
    
    
    
    
    
    53
    
    
    
    4,711Other securities
    
    
    200
    
    
    
    
    
    
    
    1
    
    
    
    199$
    71,756
    
    
    $
    554
    
    
    $
    275
    
    
    $
    72,035
   40




---



##### Table of Contents



Available-for-Sale SecuritiesWeighted-Within
    
    
    1 to 5
    
    
    5 to 15
    
    
    
    
    
    
    Average1 Year
    
    
    Years
    
    
    Years
    
    
    Total
    
    
    YieldU.S. Treasury securities
    
    $
    506
    
    
    $
    
    
    
    $
    
    
    
    $
    506
    
    
    
    0.38
    %U.S. Government agencies
    
    
    28,868
    
    
    
    37,922
    
    
    
    
    
    
    
    66,790
    
    
    
    1.62
    %Fair value
    
    $
    29,374
    
    
    $
    37,922
    
    
    $
    
    
    
    $
    67,296Weighted-average yield
    
    
    1.64
    %
    
    
    1.59
    %
    
    
    
    
    
    
    1.61
    %
 Held-to-Maturity SecuritiesWeighted-Within
    
    
    1 to 5
    
    
    5 to 15
    
    
    
    
    
    
    Average1 Year
    
    
    Years
    
    
    Years
    
    
    Total
    
    
    YieldMuncipals  FTE
    
    $
    9,675
    
    
    $
    12,891
    
    
    $
    32,347
    
    
    $
    54,913
    
    
    
    5.72
    %Collateralized mortgage obligations, residential
    
    
    6,697
    
    
    
    17,656
    
    
    
    5,771
    
    
    
    30,124
    
    
    
    3.89
    %Mortgage backed securities, residential
    
    
    7,801
    
    
    
    1,934
    
    
    
    
    
    
    
    9,735
    
    
    
    3.71
    %Other securities
    
    
    25
    
    
    
    125
    
    
    
    
    
    
    
    150
    
    
    
    4.27
    %Amortized cost
    
    $
    24,198
    
    
    $
    32,606
    
    
    $
    38,118
    
    
    $
    94,922Weighted-average yield  FTE
    
    
    4.51
    %
    
    
    4.53
    %
    
    
    5.54
    %
    
    
    4.93
    %
  41




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    TotalTYPES OF LOANSCommercial
    
    $
    273,117
    
    
    
    31.6
    %
    
    $
    307,409
    
    
    
    34.0
    %
    
    $
    279,109
    
    
    
    33.6
    %
    
    $
    253,745
    
    
    
    33.9
    %
    
    $
    234,216
    
    
    
    34.3
    %Construction
    
    
    75,615
    
    
    
    8.7
    %
    
    
    83,822
    
    
    
    9.3
    %
    
    
    82,581
    
    
    
    9.9
    %
    
    
    57,083
    
    
    
    7.7
    %
    
    
    50,173
    
    
    
    7.3
    %Commercial Mortgage
    
    
    232,841
    
    
    
    26.9
    %
    
    
    217,445
    
    
    
    24.0
    %
    
    
    175,027
    
    
    
    21.1
    %
    
    
    164,256
    
    
    
    22.1
    %
    
    
    156,108
    
    
    
    22.8
    %Residential Mortgage
    
    
    254,722
    
    
    
    29.5
    %
    
    
    260,354
    
    
    
    28.8
    %
    
    
    243,015
    
    
    
    29.3
    %
    
    
    217,170
    
    
    
    29.2
    %
    
    
    196,045
    
    
    
    28.6
    %Consumer
    
    
    24,488
    
    
    
    2.8
    %
    
    
    31,833
    
    
    
    3.5
    %
    
    
    47,550
    
    
    
    5.7
    %
    
    
    49,575
    
    
    
    6.7
    %
    
    
    45,188
    
    
    
    6.6
    %Credit Cards
    
    
    3,939
    
    
    
    0.5
    %
    
    
    3,344
    
    
    
    0.4
    %
    
    
    3,046
    
    
    
    0.4
    %
    
    
    2,709
    
    
    
    0.4
    %
    
    
    2,737
    
    
    
    0.4
    %Other
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    20
    
    
    
    0.0
    %Total  Gross
    
    $
    864,722
    
    
    
    100.0
    %
    
    $
    904,207
    
    
    
    100.0
    %
    
    $
    830,328
    
    
    
    100.0
    %
    
    $
    744,538
    
    
    
    100.0
    %
    
    $
    684,487
    
    
    
    100.0
    %Allowance
    
    
    (13,716
    )
    
    
    
    
    
    
    (12,847
    )
    
    
    
    
    
    
    (9,453
    )
    
    
    
    
    
    
    (8,513
    )
    
    
    
    
    
    
    (8,346
    )Total  Net
    
    $
    851,006
    
    
    
    
    
    
    $
    891,360
    
    
    
    
    
    
    $
    820,875
    
    
    
    
    
    
    $
    736,025
    
    
    
    
    
    
    $
    676,141
 ($ in $000s):
 2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Type
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Agriculture, Foresty & Fishing
    
    $
    355
    
    
    
    0.1
    %
    
    $
    369
    
    
    
    0.1
    %
    
    $
    307
    
    
    
    0.1
    %
    
    $
    355
    
    
    
    0.1
    %
    
    $
    1,136
    
    
    
    0.5
    %Mining
    
    
    5,162
    
    
    
    1.9
    %
    
    
    6,947
    
    
    
    2.3
    %
    
    
    5,136
    
    
    
    1.8
    %
    
    
    5,123
    
    
    
    2.0
    %
    
    
    2,574
    
    
    
    1.1
    %Utilities
    
    
    27
    
    
    
    0.0
    %
    
    
    31
    
    
    
    0.0
    %
    
    
    28
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Construction
    
    
    7,593
    
    
    
    2.8
    %
    
    
    14,417
    
    
    
    4.7
    %
    
    
    10,885
    
    
    
    3.9
    %
    
    
    9,367
    
    
    
    3.7
    %
    
    
    9,527
    
    
    
    4.1
    %Manufacturing
    
    
    41,814
    
    
    
    15.3
    %
    
    
    38,979
    
    
    
    12.7
    %
    
    
    43,067
    
    
    
    15.4
    %
    
    
    46,982
    
    
    
    18.5
    %
    
    
    37,988
    
    
    
    16.2
    %Wholesale Trade
    
    
    38,428
    
    
    
    14.1
    %
    
    
    37,627
    
    
    
    12.2
    %
    
    
    40,889
    
    
    
    14.6
    %
    
    
    30,421
    
    
    
    12.0
    %
    
    
    30,850
    
    
    
    13.2
    %Retail Trade
    
    
    6,391
    
    
    
    2.3
    %
    
    
    6,025
    
    
    
    2.0
    %
    
    
    7,257
    
    
    
    2.6
    %
    
    
    7,090
    
    
    
    2.8
    %
    
    
    4,330
    
    
    
    1.9
    %Transportation
    
    
    17,479
    
    
    
    6.4
    %
    
    
    18,045
    
    
    
    5.9
    %
    
    
    16,635
    
    
    
    6.0
    %
    
    
    9,617
    
    
    
    3.8
    %
    
    
    7,793
    
    
    
    3.3
    %Information
    
    
    737
    
    
    
    0.3
    %
    
    
    123
    
    
    
    0.0
    %
    
    
    140
    
    
    
    0.0
    %
    
    
    606
    
    
    
    0.2
    %
    
    
    945
    
    
    
    0.4
    %Finance & Insurance
    
    
    10,952
    
    
    
    4.0
    %
    
    
    10,667
    
    
    
    3.5
    %
    
    
    6,866
    
    
    
    2.5
    %
    
    
    5,050
    
    
    
    2.0
    %
    
    
    3,845
    
    
    
    1.6
    %Real Estate and Rental & Leasing
    
    
    50,336
    
    
    
    18.5
    %
    
    
    58,624
    
    
    
    18.9
    %
    
    
    44,657
    
    
    
    16.0
    %
    
    
    52,833
    
    
    
    20.8
    %
    
    
    47,627
    
    
    
    20.2
    %Professional, Scientific & Technical Services
    
    
    31,217
    
    
    
    11.4
    %
    
    
    39,809
    
    
    
    13.0
    %
    
    
    37,345
    
    
    
    13.4
    %
    
    
    30,146
    
    
    
    11.9
    %
    
    
    31,565
    
    
    
    13.5
    %Management of Companies & Enterprises
    
    
    1,803
    
    
    
    0.7
    %
    
    
    2,521
    
    
    
    0.8
    %
    
    
    2,652
    
    
    
    1.0
    %
    
    
    3,928
    
    
    
    1.6
    %
    
    
    1,576
    
    
    
    0.7
    %Administrative and Support, Waste Management &
Remediation Services
    
    
    1,857
    
    
    
    0.7
    %
    
    
    2,367
    
    
    
    0.8
    %
    
    
    2,428
    
    
    
    0.9
    %
    
    
    2,453
    
    
    
    1.0
    %
    
    
    1,476
    
    
    
    0.6
    %Educational Services
    
    
    3,359
    
    
    
    1.2
    %
    
    
    4,919
    
    
    
    1.6
    %
    
    
    4,270
    
    
    
    1.5
    %
    
    
    5,160
    
    
    
    2.0
    %
    
    
    4,384
    
    
    
    1.9
    %Health Care & Social Assistance
    
    
    29,278
    
    
    
    10.7
    %
    
    
    32,063
    
    
    
    10.4
    %
    
    
    26,264
    
    
    
    9.4
    %
    
    
    25,160
    
    
    
    9.9
    %
    
    
    19,494
    
    
    
    8.3
    %Arts, Entertainment & Recreation
    
    
    2,704
    
    
    
    1.0
    %
    
    
    3,013
    
    
    
    1.0
    %
    
    
    2,093
    
    
    
    0.8
    %
    
    
    1,678
    
    
    
    0.7
    %
    
    
    1,759
    
    
    
    0.8
    %Accommodation & Food Services
    
    
    3,059
    
    
    
    1.1
    %
    
    
    3,627
    
    
    
    1.2
    %
    
    
    3,908
    
    
    
    1.4
    %
    
    
    6,777
    
    
    
    2.7
    %
    
    
    6,842
    
    
    
    2.9
    %Other Services
    
    
    20,566
    
    
    
    7.5
    %
    
    
    27,236
    
    
    
    8.9
    %
    
    
    24,282
    
    
    
    8.7
    %
    
    
    10,999
    
    
    
    4.3
    %
    
    
    20,505
    
    
    
    8.8
    %$
    273,117
    
    
    
    100.0
    %
    
    $
    307,409
    
    
    
    100.0
    %
    
    $
    279,109
    
    
    
    100.0
    %
    
    $
    253,745
    
    
    
    100.0
    %
    
    $
    234,216
    
    
    
    100.0
    %
  42




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    TotalTYPES OF DEPOSITSDemand
    
    $
    192,705
    
    
    
    22.86
    %
    
    $
    178,656
    
    
    
    23.75
    %
    
    $
    180,590
    
    
    
    22.30
    %MMDA/Savings
    
    
    650,353
    
    
    
    77.14
    %
    
    
    573,679
    
    
    
    76.25
    %
    
    
    629,342
    
    
    
    77.70
    %Total Demand Deposits
    
    
    843,058
    
    
    
    100.00
    %
    
    
    752,335
    
    
    
    100.00
    %
    
    
    809,932
    
    
    
    100.00
    %CDs < $100,000
    
    
    62,769
    
    
    
    30.03
    %
    
    
    63,590
    
    
    
    29.77
    %
    
    
    71,503
    
    
    
    36.70
    %CDs > $100,000
    
    
    124,085
    
    
    
    59.37
    %
    
    
    131,426
    
    
    
    61.52
    %
    
    
    104,238
    
    
    
    53.50
    %Individual Retirement Accounts
    
    
    22,153
    
    
    
    10.60
    %
    
    
    18,615
    
    
    
    8.71
    %
    
    
    19,089
    
    
    
    9.80
    %Total Certificates of Deposit
    
    
    209,007
    
    
    
    100.00
    %
    
    
    213,631
    
    
    
    100.00
    %
    
    
    194,830
    
    
    
    100.00
    %Total Deposits
    
    $
    1,052,065
    
    
    
    
    
    
    $
    965,966
    
    
    
    
    
    
    $
    1,004,762
  43




---



##### Table of Contents



0  180
    
    
    181  365
    
    
    1  2
    
    
    2  3
    
    
    3  5
    
    
    5 +
    
    
    Non-interestdays
    
    
    days
    
    
    years
    
    
    years
    
    
    years
    
    
    years
    
    
    Earning
    
    
    TotalInterest Earning Assets:Cash and due from banks
    
    $
    149,375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    149,375Reverse repurchase agreements
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000Federal funds sold
    
    
    1,242
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,242Investments
    
    
    19,360
    
    
    
    34,212
    
    
    
    23,052
    
    
    
    32,695
    
    
    
    14,781
    
    
    
    38,118
    
    
    
    
    
    
    
    162,218Federal reserve and FHLB stock
    
    
    2,188
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    962
    
    
    
    
    
    
    
    3,150LoansCommercial & IndustrialFixed
    
    
    16,952
    
    
    
    5,562
    
    
    
    16,167
    
    
    
    9,648
    
    
    
    10,703
    
    
    
    4,858
    
    
    
    734
    
    
    
    64,624Variable
    
    
    204,488
    
    
    
    212
    
    
    
    489
    
    
    
    336
    
    
    
    25
    
    
    
    
    
    
    
    2,943
    
    
    
    208,493Construction
    
    
    53,769
    
    
    
    4
    
    
    
    154
    
    
    
    
    
    
    
    775
    
    
    
    
    
    
    
    2,305
    
    
    
    57,007Commercial Loans Secured by Real EstateFixed
    
    
    7,840
    
    
    
    15,205
    
    
    
    19,571
    
    
    
    16,689
    
    
    
    27,293
    
    
    
    17,343
    
    
    
    716
    
    
    
    104,657Variable
    
    
    108,148
    
    
    
    4,529
    
    
    
    5,303
    
    
    
    787
    
    
    
    2,093
    
    
    
    
    
    
    
    7,324
    
    
    
    128,184Residential Loans Secured by Real EstateFixed
    
    
    54,315
    
    
    
    21,248
    
    
    
    19,014
    
    
    
    6,158
    
    
    
    2,725
    
    
    
    411
    
    
    
    500
    
    
    
    104,371Variable
    
    
    137,670
    
    
    
    9,524
    
    
    
    7,738
    
    
    
    5,467
    
    
    
    6,830
    
    
    
    1,153
    
    
    
    577
    
    
    
    168,959OtherFixed
    
    
    1,325
    
    
    
    760
    
    
    
    1,414
    
    
    
    1,099
    
    
    
    1,981
    
    
    
    
    
    
    
    
    
    
    
    6,579Variable
    
    
    21,848
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,848Total Interest Earning Assets
    
    $
    779,520
    
    
    $
    91,256
    
    
    $
    92,902
    
    
    $
    72,879
    
    
    $
    67,206
    
    
    $
    62,845
    
    
    $
    15,099
    
    
    $
    1,181,707Non-Interest Earning Assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,923
    
    
    
    51,923Total Assets
    
    $
    779,520
    
    
    $
    91,256
    
    
    $
    92,902
    
    
    $
    72,879
    
    
    $
    67,206
    
    
    $
    62,845
    
    
    $
    67,022
    
    
    $
    1,233,630Interest Bearing Liabilities:Demand Deposits
    
    $
    11,234
    
    
    $
    10,704
    
    
    $
    19,566
    
    
    $
    17,343
    
    
    $
    28,998
    
    
    $
    104,860
    
    
    $
    
    
    
    $
    192,705Interest Bearing Demand
    
    
    200,831
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,831Savings Deposits
    
    
    21,667
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,667Money Market Accounts
    
    
    427,855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    427,855Certificate of Deposits
    
    
    35,359
    
    
    
    24,182
    
    
    
    7,490
    
    
    
    3,046
    
    
    
    5,298
    
    
    
    1,694
    
    
    
    
    
    
    
    77,069Jumbo CDs
    
    
    67,050
    
    
    
    46,258
    
    
    
    11,907
    
    
    
    2,519
    
    
    
    3,182
    
    
    
    1,022
    
    
    
    
    
    
    
    131,938Repurchase agreements and other short-term
secured borrowings
    
    
    75,643
    
    
    
    1,650
    
    
    
    4,021
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,314Short-term debt
    
    
    126
    
    
    
    4,012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,138Subordinated Debt
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Company obligated mandatorily redeemable
preferred capital securities of subsidiary
trust holding solely the junior subordinated
debentures of the parent company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,918
    
    
    
    
    
    
    
    13,918Total Interest Bearing Liabilities
    
    $
    844,765
    
    
    $
    86,806
    
    
    $
    42,984
    
    
    $
    22,908
    
    
    $
    37,478
    
    
    $
    121,494
    
    
    $
    
    
    
    $
    1,156,435Non-Interest Bearing Liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,164
    
    
    
    4,164Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,031
    
    
    
    73,031Total Liabilities & Shareholders Equity
    
    $
    844,765
    
    
    $
    86,806
    
    
    $
    42,984
    
    
    $
    22,908
    
    
    $
    37,478
    
    
    $
    121,494
    
    
    $
    77,195
    
    
    $
    1,233,630Interest Sensitivy Gap per Period
    
    $
    (65,245
    )
    
    $
    4,450
    
    
    $
    49,918
    
    
    $
    49,971
    
    
    $
    29,728
    
    
    $
    (58,649
    )
    
    $
    (10,173
    )Cumulative Interest Sensitivity Gap
    
    $
    (65,245
    )
    
    $
    (60,795
    )
    
    $
    (10,877
    )
    
    $
    39,094
    
    
    $
    68,822
    
    
    $
    10,173
    
    
    $
    Interest Sensitivity Gap as a Percentage
of Earning Assets
    
    
    -5.59
    %
    
    
    0.38
    %
    
    
    4.28
    %
    
    
    4.28
    %
    
    
    2.55
    %
    
    
    -5.03
    %
    
    
    -0.87
    %Cumulative Sensitivity Gap as a
Percentage of Earning Assets
    
    
    -5.59
    %
    
    
    -5.21
    %
    
    
    -0.93
    %
    
    
    3.35
    %
    
    
    5.90
    %
    
    
    0.87
    %
    
    
    0.00
    %
   44




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##### Table of Contents



Contractual Obligations
  Payments Due InNote
    
    
    Less than One
    
    
    One to Two
    
    
    Three to Five
    
    
    Over FiveReference
    
    
    Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalDeposits without a stated maturity(a)
    
    
    
    
    
    $
    843,058
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    843,058Consumer certificates of deposits(a)
    
    
    9
    
    
    
    172,849
    
    
    
    24,962
    
    
    
    8,480
    
    
    
    2,716
    
    
    
    209,007Revolving line of credit(a)
    
    
    10
    
    
    
    4,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,200Security repurchase agreements and other secured short-term borrowings(a)
    
    
    10
    
    
    
    77,293
    
    
    
    4,021
    
    
    
    
    
    
    
    
    
    
    
    81,314Long-term debt(a)
    
    
    5,10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,918
    
    
    
    18,918Operating leases
    
    
    7
    
    
    
    398
    
    
    
    702
    
    
    
    678
    
    
    
    1,001
    
    
    
    2,779
 (a)
    
    Excludes Interest  Critical Accounting Policies
    45




---



##### Table of Contents



Mortgage Servicing Assets
   Investment Securities Valuation
    46




---



##### Table of Contents



Allowance for Loan Losses
      47




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Commercial
    
    $
    4,155
    
    
    $
    5,113
    
    
    $
    3,422
    
    
    $
    3,870
    
    
    $
    4,204Construction
    
    
    2,443
    
    
    
    1,650
    
    
    
    1,381
    
    
    
    448
    
    
    
    404Commercial Mortgage
    
    
    3,836
    
    
    
    2,378
    
    
    
    1,724
    
    
    
    1,529
    
    
    
    1,319Residential Mortgage
    
    
    3,003
    
    
    
    3,332
    
    
    
    2,445
    
    
    
    2,165
    
    
    
    1,758Consumer
    
    
    53
    
    
    
    262
    
    
    
    400
    
    
    
    410
    
    
    
    586Credit Card
    
    
    189
    
    
    
    61
    
    
    
    74
    
    
    
    73
    
    
    
    74Other
    
    
    37
    
    
    
    51
    
    
    
    7
    
    
    
    18
    
    
    
    1Total
    
    $
    13,716
    
    
    $
    12,847
    
    
    $
    9,453
    
    
    $
    8,513
    
    
    $
    8,346
  48




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    TotalCommercial
    
    $
    3,422
    
    
    
    22.7
    %
    
    $
    3,429
    
    
    
    39.1
    %
    
    $
    316
    
    
    
    5.5
    %
    
    $
    4,754
    
    
    
    66.5
    %
    
    $
    1,055
    
    
    
    28.9
    %Construction
    
    
    2,305
    
    
    
    15.3
    %
    
    
    
    
    
    
    0.0
    %
    
    
    1,466
    
    
    
    25.4
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Commercial Mortgage
    
    
    8,040
    
    
    
    53.2
    %
    
    
    3,085
    
    
    
    35.2
    %
    
    
    2,025
    
    
    
    35.2
    %
    
    
    1,220
    
    
    
    17.1
    %
    
    
    629
    
    
    
    17.2
    %Residential Mortgage
    
    
    1,332
    
    
    
    8.8
    %
    
    
    2,243
    
    
    
    25.5
    %
    
    
    1,851
    
    
    
    32.1
    %
    
    
    1,039
    
    
    
    14.5
    %
    
    
    1,777
    
    
    
    48.8
    %Consumer
    
    
    
    
    
    
    0.0
    %
    
    
    17
    
    
    
    0.2
    %
    
    
    104
    
    
    
    1.8
    %
    
    
    139
    
    
    
    1.9
    %
    
    
    187
    
    
    
    5.1
    %Total
    
    $
    15,099
    
    
    
    100.0
    %
    
    $
    8,774
    
    
    
    100.0
    %
    
    $
    5,762
    
    
    
    100.0
    %
    
    $
    7,152
    
    
    
    100.0
    %
    
    $
    3,648
    
    
    
    100.0
    %Loans 90 Days Past Due 
Still Accruing
    
    $
    7
    
    
    
    
    
    
    $
    4
    
    
    
    
    
    
    $
    27
    
    
    
    
    
    
    $
    33
    
    
    
    
    
    
    $
    Restructured due to troubled
conditions of the borrower
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
  
    
    an increase of $962 thousand in the allocation for classified loans not impaired due
mainly to commercial mortgages and construction loan portfolios;
 
    
    an increase of $1,683 thousand in the general allocation related largely to credit
deterioration in commercial, commercial mortgages, and construction portfolios;
 
    
    an increase of $35 thousand in the specific loan allocation;
 
    
    a decrease of $1,379 thousand in the allocation of qualitative factors considered for
the entire loan portfolio;
 
    
    a decrease of $432 thousand for the allocation for special mention loans.
  49




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Loan TypeCommercial# of loans
    
    
    11
    
    
    
    25
    
    
    
    4
    
    
    
    9
    
    
    
    12Interest income recognized
    
    $
    37
    
    
    $
    140
    
    
    $
    34
    
    
    $
    188
    
    
    $
    57Additional interest income if loan had been accruing
    
    $
    180
    
    
    $
    148
    
    
    $
    62
    
    
    $
    138
    
    
    $
    111Commercial Construction# of loans
    
    
    3
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    Interest income recognized
    
    $
    178
    
    
    $
    
    
    
    $
    105
    
    
    $
    
    
    
    $
    Additional interest income if loan had been accruing
    
    $
    13
    
    
    $
    
    
    
    $
    10
    
    
    $
    
    
    
    $
    Commercial Mortgage# of loans
    
    
    8
    
    
    
    5
    
    
    
    3
    
    
    
    1
    
    
    
    3Interest income recognized
    
    $
    354
    
    
    $
    110
    
    
    $
    51
    
    
    $
    18
    
    
    $
    Additional interest income if loan had been accruing
    
    $
    146
    
    
    $
    122
    
    
    $
    127
    
    
    $
    10
    
    
    $
    54Consumer# of loans
    
    
    2
    
    
    
    5
    
    
    
    4
    
    
    
    2
    
    
    
    3Interest income recognized
    
    $
    
    
    
    $
    1
    
    
    $
    1
    
    
    $
    
    
    
    $
    Additional interest income if loan had been accruing
    
    $
    
    
    
    $
    1
    
    
    $
    20
    
    
    $
    21
    
    
    $
    22Residential Mortgage# of loans
    
    
    27
    
    
    
    17
    
    
    
    15
    
    
    
    23
    
    
    
    20Interest income recognized
    
    $
    48
    
    
    $
    73
    
    
    $
    47
    
    
    $
    12
    
    
    $
    52Additional interest income if loan had been accruing
    
    $
    65
    
    
    $
    72
    
    
    $
    72
    
    
    $
    80
    
    
    $
    73Credit cards# of loans
    
    
    2
    
    
    
    3
    
    
    
    6
    
    
    
    
    
    
    
    Interest income recognized
    
    $
    
    
    
    $
    
    
    
    $
    3
    
    
    $
    
    
    
    $
    Additional interest income if loan had been accruing
    
    $
    
    
    
    $
    
    
    
    $
    1
    
    
    $
    
    
    
    $
    Restructured loans
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  50




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##### Table of Contents



Capital Resources
      Amount
    
    
    Rate
    
    
    Maturity$
    3,000
    
    
    5.55%
    
    
    10/02/2008$
    3,000
    51




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##### Table of Contents



Well
    
    
    AdequatelyActual
    
    
    Capitalized
    
    
    CapitalizedTier 1 risk-based capital ratio
    
    
    9.2
    %
    
    
    6.0
    %
    
    
    4.0
    %Total risk-based capital ratio
    
    
    10.9
    %
    
    
    10.0
    %
    
    
    8.0
    %Leverage ratio
    
    
    6.7
    %
    
    
    5.0
    %
    
    
    4.0
    %
    Recent Accounting Pronouncements and Developments
   52




---



##### Table of Contents



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
     53




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures about Market Risk
      54




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 
     /s/ Morris L. Maurer
    
    /s/ Debra L. RossMorris L. Maurer
    
    Debra L. RossPresident and Chief Executive Officer
    
    Senior Vice President and Chief Financial Officer
  55




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##### Table of Contents



Internal Control  Integrated Framework
    Internal Control  Integrated Framework
  
  56




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##### Table of Contents



57




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##### Table of Contents



2009
    
    
    2008ASSETSCash and cash equivalentsCash and due from banks
    
    $
    149,375
    
    
    $
    29,819Reverse repurchase agreements
    
    
    1,000
    
    
    
    1,000Federal funds sold
    
    
    1,242
    
    
    
    601Total cash and cash equivalents
    
    
    151,617
    
    
    
    31,420Investment securitiesAvailable-for-sale securities
    
    
    67,296
    
    
    
    56,977Held-to-maturity securities (fair value of $96,588 and
$82,971 at December 31, 2009, and 2008)
    
    
    94,922
    
    
    
    83,567Total investment securities
    
    
    162,218
    
    
    
    140,544Loans
    
    
    864,722
    
    
    
    904,207Less allowance for loan losses
    
    
    (13,716
    )
    
    
    (12,847
    )Net loans
    
    
    851,006
    
    
    
    891,360Premises and equipment
    
    
    24,532
    
    
    
    22,818Deferred tax asset
    
    
    7,133
    
    
    
    5,749Accrued interest
    
    
    4,199
    
    
    
    4,855Federal Reserve and FHLB stock
    
    
    3,150
    
    
    
    3,150Other real estate owned and repossessions
    
    
    8,432
    
    
    
    3,418Other assets
    
    
    21,343
    
    
    
    14,470Total assets
    
    $
    1,233,630
    
    
    $
    1,117,784LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest-bearing demand deposits
    
    $
    192,705
    
    
    $
    178,656Money market and savings deposits
    
    
    650,353
    
    
    
    573,679Time deposits over $100
    
    
    131,938
    
    
    
    136,814Other time deposits
    
    
    77,069
    
    
    
    76,817Total deposits
    
    
    1,052,065
    
    
    
    965,966Repurchase agreements and other secured short-term
borrowings
    
    
    81,314
    
    
    
    51,146Short-term debt
    
    
    4,138
    
    
    
    4,200Subordinated debt
    
    
    5,000
    
    
    
    5,000Junior subordinated debentures owed to unconsolidated
subsidiary trust
    
    
    13,918
    
    
    
    13,918Other liabilities
    
    
    4,164
    
    
    
    5,342Total liabilities
    
    
    1,160,599
    
    
    
    1,045,572Shareholders equity:Preferred stock, no par value  authorized 5,000,000 shares
    
    $
    
    
    
    $
    Common stock, no par value  authorized 15,000,000 shares
issued 2,840,382 shares at December 31, 2009,
and 2,778,311 shares at December 31, 2008
    
    
    34,440
    
    
    
    33,136Treasury stock, at cost; 533,204 shares at December 31, 2009,
and 484,130 shares at December 31, 2008
    
    
    (20,346
    )
    
    
    (18,481
    )Additional paid-in capital
    
    
    10,873
    
    
    
    8,766Retained earnings
    
    
    48,067
    
    
    
    47,955Accumulated other comprehensive income (loss)
    
    
    (3
    )
    
    
    836Total shareholders equity
    
    
    73,031
    
    
    
    72,212Total liabilities and shareholders equity
    
    $
    1,233,630
    
    
    $
    1,117,784
   58




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##### Table of Contents



2009
    
    
    2008
    
    
    2007Interest income:Interest and fees on loans
    
    $
    42,217
    
    
    $
    48,988
    
    
    $
    57,383Interest on investment securities taxable
    
    
    3,242
    
    
    
    4,489
    
    
    
    6,777Interest on investment securities nontaxable
    
    
    2,068
    
    
    
    2,047
    
    
    
    1,817Interest on federal funds sold
    
    
    4
    
    
    
    705
    
    
    
    2,492Interest on reverse repurchase agreements
    
    
    
    
    
    
    148
    
    
    
    411Total interest income
    
    
    47,531
    
    
    
    56,377
    
    
    
    68,880Interest expense:Interest on deposits
    
    
    9,427
    
    
    
    17,979
    
    
    
    30,847Interest on other short term borrowings
    
    
    182
    
    
    
    544
    
    
    
    2,078Interest on FHLB advances and overnight
borrowings
    
    
    
    
    
    
    193
    
    
    
    463Interest on short-term debt
    
    
    121
    
    
    
    16
    
    
    
    Interest on long-term debt
    
    
    1,583
    
    
    
    1,717
    
    
    
    1,875Total interest expense
    
    
    11,313
    
    
    
    20,449
    
    
    
    35,263Net interest income
    
    
    36,218
    
    
    
    35,928
    
    
    
    33,617Provision for loan losses
    
    
    11,905
    
    
    
    7,400
    
    
    
    904Net interest income after provision for loan losses
    
    
    24,313
    
    
    
    28,528
    
    
    
    32,713Other operating income:Wealth management fees
    
    
    4,917
    
    
    
    5,048
    
    
    
    4,547Service charges and fees on deposit accounts
    
    
    3,113
    
    
    
    2,484
    
    
    
    1,818Rental income
    
    
    321
    
    
    
    575
    
    
    
    597Mortgage banking income
    
    
    1,576
    
    
    
    62
    
    
    
    329Interchange income
    
    
    1,007
    
    
    
    877
    
    
    
    678Other income
    
    
    1,969
    
    
    
    2,158
    
    
    
    1,865Total other operating income
    
    
    12,903
    
    
    
    11,204
    
    
    
    9,834Other operating expenses:Salaries, wages and employee benefits
    
    
    21,332
    
    
    
    19,172
    
    
    
    19,098Occupancy
    
    
    2,441
    
    
    
    2,081
    
    
    
    1,791Furniture and equipment
    
    
    1,359
    
    
    
    1,428
    
    
    
    1,241Professional services
    
    
    1,873
    
    
    
    1,971
    
    
    
    1,800Data processing
    
    
    2,752
    
    
    
    2,514
    
    
    
    2,200Business development
    
    
    1,531
    
    
    
    1,526
    
    
    
    1,292FDIC insurance
    
    
    2,142
    
    
    
    918
    
    
    
    99Non performing assets
    
    
    1,383
    
    
    
    149
    
    
    
    109Other
    
    
    3,541
    
    
    
    4,947
    
    
    
    3,170Total other operating expenses
    
    
    38,354
    
    
    
    34,706
    
    
    
    30,800Income (loss) before tax
    
    
    (1,138
    )
    
    
    5,026
    
    
    
    11,747Federal and state income tax (benefit)
    
    
    (1,250
    )
    
    
    1,242
    
    
    
    3,856Net income
    
    $
    112
    
    
    $
    3,784
    
    
    $
    7,891Basic earnings per share
    
    $
    0.05
    
    
    $
    1.64
    
    
    $
    3.39Diluted earnings per share
    
    $
    0.05
    
    
    $
    1.58
    
    
    $
    3.27
   59




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##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon
    
    
    Treasury
    
    
    Paid-In
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    TotalBalance at January 1, 2007
    
    $
    30,386
    
    
    $
    (12,585
    )
    
    $
    6,236
    
    
    $
    36,280
    
    
    $
    (533
    )
    
    $
    59,784Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,891
    
    
    
    
    
    
    
    7,891Other comprehensive incomeNet unrealized gain on investments, net of tax of $588
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    896
    
    
    
    896Net unrealized gain on swap, net of tax of $64
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    97Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,884Income tax benefit from deferred stock compensation
    
    
    
    
    
    
    
    
    
    
    552
    
    
    
    
    
    
    
    
    
    
    
    552Issuance of 63,567 shares of common stock under stock-based
compensation plans
    
    
    1,719
    
    
    
    
    
    
    
    (816
    )
    
    
    
    
    
    
    
    
    
    
    904Repurchase of 47,718 shares of common stock
    
    
    
    
    
    
    (2,394
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,394
    )Stock based compensation earned
    
    
    
    
    
    
    
    
    
    
    1,209
    
    
    
    
    
    
    
    
    
    
    
    1,209Balance at December 31, 2007
    
    
    32,105
    
    
    
    (14,979
    )
    
    
    7,181
    
    
    
    44,171
    
    
    
    460
    
    
    
    68,938Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,784
    
    
    
    
    
    
    
    3,784Other comprehensive income:Net unrealized gain on investments, net of tax of $236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    376
    
    
    
    376Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,160
 )
  60




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##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon
    
    
    Treasury
    
    
    Paid-In
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    TotalIncome tax benefit from deferred stock compensation
    
    $
    
    
    
    $
    
    
    
    $
    321
    
    
    $
    
    
    
    $
    
    
    
    $
    321Issuance of 36,873 shares of common stock under stock-based
compensation plans
    
    
    1,031
    
    
    
    
    
    
    
    (98
    )
    
    
    
    
    
    
    
    
    
    
    933Repurchase of stock 69,027 shares of common stock
    
    
    
    
    
    
    (3,502
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,502
    )Stock based compensation earned
    
    
    
    
    
    
    
    
    
    
    1,362
    
    
    
    
    
    
    
    
    
    
    
    1,362Balance at December 31, 2008
    
    
    33,136
    
    
    
    (18,481
    )
    
    
    8,766
    
    
    
    47,955
    
    
    
    836
    
    
    
    72,212Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    
    
    
    
    112Other comprehensive income:Net unrealized loss on investments, net of tax of $540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (839
    )
    
    
    (839
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (727
    )Income tax benefit from deferred stock compensation
    
    
    
    
    
    
    
    
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    414Issuance of 62,071 shares of common stock under stock-based
compensation plans
    
    
    1,304
    
    
    
    
    
    
    
    (60
    )
    
    
    
    
    
    
    
    
    
    
    1,244Repurchase of 49,074 shares of common stock
    
    
    
    
    
    
    (1,865
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,865
    )Stock based compensation earned
    
    
    
    
    
    
    
    
    
    
    1,753
    
    
    
    
    
    
    
    
    
    
    
    1,753Balance at December 31, 2009
    
    $
    34,440
    
    
    $
    (20,346
    )
    
    $
    10,873
    
    
    $
    48,067
    
    
    $
    (3
    )
    
    $
    73,031
   61




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##### Table of Contents



2009
    
    
    2008
    
    
    2007Operating ActivitiesNet income
    
    $
    112
    
    
    $
    3,784
    
    
    $
    7,891Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    11,905
    
    
    
    7,400
    
    
    
    904Proceeds from sale of loans
    
    
    70,930
    
    
    
    40,594
    
    
    
    15,188Origination of loans held for sale
    
    
    (69,691
    )
    
    
    (38,524
    )
    
    
    (15,003
    )Depreciation and amortization
    
    
    1,533
    
    
    
    1,545
    
    
    
    1,408Fair value adjustment on mortgage servicing rights
    
    
    334
    
    
    
    715
    
    
    
    145Gain on sale of loans
    
    
    (1,561
    )
    
    
    (499
    )
    
    
    (205
    )Gain on disposal of premises and equipment
    
    
    
    
    
    
    
    
    
    
    (1
    )Increase in deferred income taxes
    
    
    (845
    )
    
    
    (1,913
    )
    
    
    (325
    )Increase in bank owned life insurance
    
    
    (410
    )
    
    
    (450
    )
    
    
    (476
    )Excess tax benefit from deferred stock compensation
    
    
    (414
    )
    
    
    (321
    )
    
    
    (552
    )Stock compensation
    
    
    100
    
    
    
    100
    
    
    
    100Net accretion of discounts and amortization of
premiums on investments
    
    
    480
    
    
    
    309
    
    
    
    175Compensation expense related to restricted stock
and options
    
    
    1,753
    
    
    
    1,362
    
    
    
    1,209(Increase) decrease in:Accrued interest receivable
    
    
    656
    
    
    
    610
    
    
    
    12Other real estate owned and repossessions
    
    
    (5,013
    )
    
    
    (3,055
    )
    
    
    75Other assets
    
    
    (6,797
    )
    
    
    686
    
    
    
    (917
    )Increase (decrease) in:Other liabilities
    
    
    (764
    )
    
    
    (3,352
    )
    
    
    2,055Net cash provided by operating activities
    
    
    2,308
    
    
    
    8,991
    
    
    
    11,683Investing activitiesProceeds from maturities of investment securities
held-to-maturity
    
    
    19,904
    
    
    
    16,377
    
    
    
    14,284Proceeds from maturities of investment securities
available-for-sale
    
    
    51,000
    
    
    
    23,003
    
    
    
    36,514Purchases of investment securities held-to-maturity
    
    
    (31,451
    )
    
    
    (28,417
    )
    
    
    (25
    )Purchases of investment securities available-for-sale
    
    
    (62,986
    )
    
    
    (17,180
    )
    
    
    (36,501
    )Net (increase) decrease in loans
    
    
    28,771
    
    
    
    (79,456
    )
    
    
    (85,734
    )Purchases of premises and equipment
    
    
    (3,247
    )
    
    
    (6,947
    )
    
    
    (6,756
    )Net cash provided (used) by investing activities
    
    
    1,991
    
    
    
    (92,620
    )
    
    
    (78,218
    )Financing activitiesNet increase (decrease) in deposits
    
    
    86,099
    
    
    
    (38,796
    )
    
    
    129,677Net increase (decrease) in repurchase agreements and
other secured short-term borrowings
    
    
    30,168
    
    
    
    (7,330
    )
    
    
    (657
    )Net change in FHLB borrowings
    
    
    
    
    
    
    (3,000
    )
    
    
    (11,000
    )Proceeds from issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    5,000Repayment of long-term debt
    
    
    
    
    
    
    
    
    
    
    (5,000
    )Net change in short-term debt
    
    
    (62
    )
    
    
    4,200
    
    
    
    Income tax benefit from deferred stock compensation
    
    
    414
    
    
    
    321
    
    
    
    552Proceeds from issuance of stock
    
    
    1,144
    
    
    
    833
    
    
    
    804Repurchase of stock
    
    
    (1,865
    )
    
    
    (3,502
    )
    
    
    (2,394
    )Net cash provided (used) by financing activities
    
    
    115,898
    
    
    
    (47,274
    )
    
    
    116,982Increase (decrease) in cash and cash equivalents
    
    
    120,197
    
    
    
    (130,903
    )
    
    
    50,447Cash and cash equivalents at beginning of year
    
    
    31,420
    
    
    
    162,323
    
    
    
    111,876Cash and cash equivalents at end of year
    
    $
    151,617
    
    
    $
    31,420
    
    
    $
    162,323Interest paid
    
    $
    11,377
    
    
    $
    21,050
    
    
    $
    35,052Income taxes paid
    
    $
    1,612
    
    
    $
    3,755
    
    
    $
    2,669
   62




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##### Table of Contents



NOTE 1  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations and Principles of Consolidation
    Subsequent Events
 Cash Flows
 Investment Securities
      63




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##### Table of Contents



NOTE 1  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) Stock:
 Loans Held for Sale
 Loans
  Allowance for Loan Losses
      64




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##### Table of Contents



NOTE 1  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 Mortgage Servicing Rights
   Transfer of Financial Assets
 Loan Commitments and Related Financial Instruments
 Derivative Instruments and Hedging Activities
  Premises and Equipment
  65




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##### Table of Contents



NOTE 1  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 Foreclosed Assets
 Bank-Owned Life Insurance
  Long-Term Assets
 Securities Purchased Under Resale Agreements and Securities Sold Under Repurchase
Agreements
 Comprehensive Income
 Earnings Per Share
 Loss Contingencies
 Fair Values of Financial Instruments
  66




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##### Table of Contents



NOTE 1  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 Stock-Based Compensation
  Retirement Plans
 Reportable Segments
 Income Taxes
    Use of Estimates
 NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS
   67




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##### Table of Contents



NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS
   The Hierarchy of Generally Accepted Accounting Principles FASB Accounting Standards Codification TM
    68




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##### Table of Contents



NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS
 Effect of Newly Issued But Not Yet Effective Accounting Standards
   NOTE 3  RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
  NOTE 4  JUNIOR SUBORDINATED DEBENTURES
     69




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##### Table of Contents



NOTE 5  INVESTMENT SECURITIES
  Available for Sale SecuritiesGross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gain
    
    
    Loss
    
    
    Value2009U.S. Treasury securities
    
    $
    506
    
    
    $
    
    
    
    $
    
    
    
    $
    506U.S. Government agencies
    
    
    66,795
    
    
    
    97
    
    
    
    102
    
    
    
    66,790$
    67,301
    
    
    $
    97
    
    
    $
    102
    
    
    $
    67,2962008U.S. Treasury securities
    
    $
    494
    
    
    $
    5
    
    
    $
    
    
    
    $
    499U.S. Government agencies
    
    
    55,109
    
    
    
    1,369
    
    
    
    
    
    
    
    56,478$
    55,603
    
    
    $
    1,374
    
    
    $
    
    
    
    $
    56,977
 Held-to-Maturity SecuritiesGross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrecognized
    
    
    Unrecognized
    
    
    FairCost
    
    
    Gain
    
    
    Loss
    
    
    Value2009Municipals
    
    $
    54,913
    
    
    $
    1,805
    
    
    $
    47
    
    
    $
    56,671Collateralized mortgage obligations,
residential
    
    
    30,124
    
    
    
    29
    
    
    
    232
    
    
    
    29,921Mortgage backed securities, residential
    
    
    9,735
    
    
    
    111
    
    
    
    
    
    
    
    9,846Other securities
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    150$
    94,922
    
    
    $
    1,945
    
    
    $
    279
    
    
    $
    96,5882008Municipals
    
    $
    56,874
    
    
    $
    213
    
    
    $
    800
    
    
    $
    56,287Collateralized mortgage obligations,
residential
    
    
    8,825
    
    
    
    12
    
    
    
    
    
    
    
    8,837Mortgage backed securities, residential
    
    
    17,693
    
    
    
    45
    
    
    
    66
    
    
    
    17,672Other securities
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    175$
    83,567
    
    
    $
    270
    
    
    $
    866
    
    
    $
    82,971
  Held-to-Maturity
    
    
    Available-for-SaleAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value2009Due in one year or less
    
    $
    8,720
    
    
    $
    8,784
    
    
    $
    10,563
    
    
    $
    10,629Due from one to five years
    
    
    8,190
    
    
    
    8,428
    
    
    
    56,738
    
    
    
    56,667Due from five to ten years
    
    
    38,153
    
    
    
    39,609
    
    
    
    
    
    
    
    CMOs/Mortgage-backed, residential
    
    
    39,859
    
    
    
    39,767
    
    
    
    
    
    
    
    $
    94,922
    
    
    $
    96,588
    
    
    $
    67,301
    
    
    $
    67,296
  70




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##### Table of Contents



NOTE 5  INVESTMENT SECURITIES
    Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss2009U.S.
Government agencies
    
    $
    36,515
    
    
    $
    102
    
    
    $
    
    
    
    $
    
    
    
    $
    36,515
    
    
    $
    102Collateralized mortgage
Obligations, residential
    
    
    24,851
    
    
    
    232
    
    
    
    
    
    
    
    
    
    
    
    24,851
    
    
    
    232Municipal bonds
    
    
    1,796
    
    
    
    10
    
    
    
    1,424
    
    
    
    37
    
    
    
    3,220
    
    
    
    47Total temporarily
Impaired
    
    $
    63,162
    
    
    $
    344
    
    
    $
    1,424
    
    
    $
    37
    
    
    $
    64,586
    
    
    $
    3812008Mortgage backed
securities, residential
    
    $
    14,035
    
    
    $
    66
    
    
    $
    
    
    
    $
    
    
    
    $
    14,035
    
    
    $
    66Municipal bonds
    
    
    7,981
    
    
    
    22
    
    
    
    33,281
    
    
    
    778
    
    
    
    41,262
    
    
    
    800Total temporarily
Impaired
    
    $
    22,016
    
    
    $
    88
    
    
    $
    33,281
    
    
    $
    778
    
    
    $
    55,297
    
    
    $
    866
    71




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##### Table of Contents



NOTE 5  INVESTMENT SECURITIES
    NOTE 6  LOANS AND ALLOWANCE FOR LOAN LOSSES
  2009
    
    
    2008Residential loans secured by real estate
    
    $
    254,722
    
    
    $
    260,354Commercial loans secured by real estate
    
    
    232,841
    
    
    
    217,445Construction loans
    
    
    75,615
    
    
    
    83,822Other commercial and industrial loans
    
    
    273,117
    
    
    
    307,409Consumer loans
    
    
    28,427
    
    
    
    35,177Total loans
    
    
    864,722
    
    
    
    904,207Less allowance for loan losses
    
    
    (13,716
    )
    
    
    (12,847
    )Total loans, net
    
    $
    851,006
    
    
    $
    891,360
    72




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##### Table of Contents



NOTE 6  LOANS AND ALLOWANCE FOR LOAN LOSSES
   2009
    
    
    2008
    
    
    2007Beginning balance
    
    $
    12,847
    
    
    $
    9,453
    
    
    $
    8,513Loan charge offs
    
    
    (11,432
    )
    
    
    (4,393
    )
    
    
    (882
    )Recoveries
    
    
    396
    
    
    
    387
    
    
    
    918Provision for loan losses
    
    
    11,905
    
    
    
    7,400
    
    
    
    904Ending balance
    
    $
    13,716
    
    
    $
    12,847
    
    
    $
    9,453
  2009
    
    
    2008
    
    
    2007Balance of impaired loans
    
    $
    15,106
    
    
    $
    8,777
    
    
    $
    5,789Related allowance on impaired loans
    
    $
    1,724
    
    
    $
    1,689
    
    
    $
    1,066Impaired loans with related
allowance
    
    $
    7,844
    
    
    $
    6,210
    
    
    $
    3,358Impaired loans without an allowance
    
    $
    7,262
    
    
    $
    2,567
    
    
    $
    2,431Average balance of impaired loans
    
    $
    11,961
    
    
    $
    7,708
    
    
    $
    5,386Accrued interest recorded
during impairment
    
    $
    
    
    
    $
    1
    
    
    $
    Cash basis interest income recognized
    
    $
    
    
    
    $
    
    
    
    $
    
  NOTE 7  PREMISES AND EQUIPMENT
  2009
    
    
    2008Land and improvements
    
    $
    8,893
    
    
    $
    8,893Building and improvements
    
    
    14,507
    
    
    
    12,548Leasehold improvements
    
    
    2,259
    
    
    
    2,257Furniture and equipment
    
    
    13,624
    
    
    
    12,33939,283
    
    
    
    36,037Less accumulated depreciation and amortization
    
    
    (14,751
    )
    
    
    (13,219
    )Net premises and equipment
    
    $
    24,532
    
    
    $
    22,818
    73




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##### Table of Contents



NOTE 7  PREMISES AND EQUIPMENT
  2010
    
    $
    3982011
    
    
    3502012
    
    
    3522013
    
    
    3572014
    
    
    321Thereafter
    
    
    1,001$
    2,779
 NOTE 8  MORTGAGE BANKING ACTIVITIES
    2009
    
    
    2008
    
    
    2007Balance at January 1
    
    $
    1,070
    
    
    $
    1,348
    
    
    $
    1,327Plus additions
    
    
    723
    
    
    
    437
    
    
    
    166Fair value adjustments
    
    
    (334
    )
    
    
    (715
    )
    
    
    (145
    )Net ending balance
    
    $
    1,459
    
    
    $
    1,070
    
    
    $
    1,348
  NOTE 9  DEPOSITS
  2010
    
    $
    172,8492011
    
    
    19,3972012
    
    
    5,5652013
    
    
    4,6372014
    
    
    3,843
  74




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##### Table of Contents



NOTE 10  OTHER BORROWINGS
  2009
    
    
    2008
    
    
    2007Average daily balance during the year
    
    $
    68,740
    
    
    $
    57,114
    
    
    $
    54,326Average interest rate during the year
    
    
    0.25
    %
    
    
    0.88
    %
    
    
    3.83
    %Maximum month-end balance during the year
    
    $
    85,248
    
    
    $
    66,000
    
    
    $
    65,969Weighted average interest rate at year-end
    
    
    0.27
    %
    
    
    0.15
    %
    
    
    3.04
    %
      Covenants
    
    U.S. Bank Policy
    
    
    ActualNon-performing assets to total loans
    
    < 2.65
    %
    
    
    2.70
    %Return on assets
    
    not < 0.30
    %
    
    
    0.19
    %Loan loss reserve to non-performing loans
    
    not £ 100
    %
    
    
    90.80
    %
   75




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##### Table of Contents



NOTE 11  EQUITY-BASED COMPENSATION
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at beginning of year
    
    
    154,163
    
    
    $
    24.58Exercised
    
    
    58,100
    
    
    $
    19.70Outstanding at end of year
    
    
    96,063
    
    
    $
    27.53
    
    
    
    
    
    
    $
    885Exercisable at end of year
    
    
    96,063
    
    
    $
    27.53
    
    
    
    2.4
    
    
    $
    885
  2009
    
    
    2008
    
    
    2007Intrinsic value of options exercised
    
    $
    1,069
    
    
    $
    806
    
    
    $
    801Cash received from option exercises
    
    $
    1,145
    
    
    $
    667
    
    
    $
    498Tax benefit realized from option exercises
    
    $
    413
    
    
    $
    302
    
    
    $
    304
  1993 Restricted Stock Plan
  Weighted AverageRestricted
    
    
    Grant Date FairStock
    
    
    ValueNonvested awards at beginning of year
    
    
    1,400
    
    
    $
    34.50Vested
    
    
    1,400
    
    
    $
    34.50Nonvested awards at end of year
    
    
    
    
    
    $
    
  76




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##### Table of Contents



NOTE 11  EQUITY-BASED COMPENSATION
  2009
    
    
    2008
    
    
    2007Intrinsic value of shares vested
    
    $
    51
    
    
    $
    111
    
    
    $
    1,421Tax benefit realized from shares vested
    
    $
    1
    
    
    $
    19
    
    
    $
    247
  2005 Equity Incentive Plan
  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at beginning of year
    
    
    189,400
    
    
    $
    44.03Granted
    
    
    5,600
    
    
    $
    35.97Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (2,800
    )
    
    $
    49.78Outstanding at end of year
    
    
    192,200
    
    
    $
    43.71
    
    
    
    6.6
    
    
    $
    4Exercisable at end of year
    
    
    2,800
    
    
    $
    43.38
    
    
    
    6.4
    
    
    $
    
  2009
    
    
    2008
    
    
    2007Intrinsic value of options exercised
    
    $
    
    
    
    $
    
    
    
    $
    Cash received from option exercises
    
    
    
    
    
    
    
    
    
    
    Tax benefit realized from option exercises
    
    
    
    
    
    
    
    
    
    
    Weighted average fair value of options granted
    
    $
    11.91
    
    
    $
    18.56
    
    
    $
    20.12
    77




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##### Table of Contents



NOTE 11  EQUITY-BASED COMPENSATION
  Year
    
    Dividend Yield
    
    
    Volatility Factor
    
    
    Risk-Free Rate2009
    
    
    
    
    
    
    13.42
    %
    
    
    3.41
    %2008
    
    
    
    
    
    
    7.65
    %
    
    
    4.37
    %2007
    
    
    
    
    
    
    3.92
    %
    
    
    5.18
    %
  Restricted Stock Issued
  Weighted AverageRestricted
    
    
    Grant Date FairStock
    
    
    ValueNonvested restricted stock at beginning of year
    
    
    70,675
    
    
    $
    50.03Granted
    
    
    65,000
    
    
    $
    35.97Forfeited or expired
    
    
    (900
    )
    
    $
    49.78Nonvested restricted stock at end of year
    
    
    134,775
    
    
    $
    43.25
   NOTE 12  EMPLOYEE BENEFIT PROGRAM
    78




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##### Table of Contents



NOTE 12  EMPLOYEE BENEFIT PROGRAM
  NOTE 13  REGULATORY CAPITAL MATTERS
      79




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##### Table of Contents



NOTE 13  REGULATORY CAPITAL MATTERS
  To Be WellRequired
    
    
    Capitalized UnderFor Capital
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action RegulationsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio2009Total Capital to risk
weighted assets
Consolidated
    
    $
    103,202
    
    
    
    11.1
    %
    
    $
    74,552
    
    
    
    8.0
    %
    
    
    
    
    
    
    N/ABank
    
    
    101,635
    
    
    
    10.9
    %
    
    
    74,335
    
    
    
    8.0
    %
    
    
    92,919
    
    
    
    10.0
    %Tier 1 (Core) Capital to risk
weighted assets
Consolidated
    
    
    86,528
    
    
    
    9.3
    %
    
    
    37,276
    
    
    
    4.0
    %
    
    
    
    
    
    
    N/ABank
    
    
    84,994
    
    
    
    9.2
    %
    
    
    37,168
    
    
    
    4.0
    %
    
    
    55,752
    
    
    
    6.0
    %Tier 1 (Core) Capital to
average assets
Consolidated
    
    
    86,528
    
    
    
    6.8
    %
    
    
    50,658
    
    
    
    4.0
    %
    
    
    
    
    
    
    N/ABank
    
    
    84,994
    
    
    
    6.7
    %
    
    
    50,715
    
    
    
    4.0
    %
    
    
    63,394
    
    
    
    5.0
    %2008Total Capital to risk
weighted assets
Consolidated
    
    $
    101,930
    
    
    
    10.6
    %
    
    $
    76,961
    
    
    
    8.0
    %
    
    
    
    
    
    
    N/ABank
    
    
    101,121
    
    
    
    10.5
    %
    
    
    76,800
    
    
    
    8.0
    %
    
    
    96,000
    
    
    
    10.0
    %Tier 1 (Core) Capital to risk
weighted assets
Consolidated
    
    
    84,895
    
    
    
    8.8
    %
    
    
    38,480
    
    
    
    4.0
    %
    
    
    
    
    
    
    N/ABank
    
    
    84,110
    
    
    
    8.8
    %
    
    
    38,400
    
    
    
    4.0
    %
    
    
    57,600
    
    
    
    6.0
    %Tier 1 (Core) Capital to
average assets
Consolidated
    
    
    84,895
    
    
    
    7.5
    %
    
    
    45,069
    
    
    
    4.0
    %
    
    
    
    
    
    
    N/ABank
    
    
    84,110
    
    
    
    7.5
    %
    
    
    45,073
    
    
    
    4.0
    %
    
    
    56,341
    
    
    
    5.0
    %
 NOTE 14  RELATED PARTIES
   80




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##### Table of Contents



NOTE 15  INCOME TAXES
  2009
    
    
    2008
    
    
    2007Current tax (benefit) expense
    
    $
    (405
    )
    
    $
    3,155
    
    
    $
    4,181Deferred tax (benefit) expense
    
    
    (845
    )
    
    
    (1,913
    )
    
    
    (325
    )$
    (1,250
    )
    
    $
    1,242
    
    
    $
    3,856
  2009
    
    
    2008
    
    
    2007Income (loss) before provision for
income tax
    
    $
    (1,138
    )
    
    $
    5,026
    
    
    $
    11,747Tax expense (benefit) at federal
statutory rate
    
    $
    (387
    )
    
    $
    1,709
    
    
    $
    3,994Increase (decrease) in taxes resulting from:State income taxes
    
    
    (92
    )
    
    
    203
    
    
    
    603Tax-exempt interest
    
    
    (716
    )
    
    
    (685
    )
    
    
    (558
    )Other
    
    
    (55
    )
    
    
    15
    
    
    
    (183
    )$
    (1,250
    )
    
    $
    1,242
    
    
    $
    3,856
  2009
    
    
    2008Deferred tax assets:Allowance for loan losses
    
    $
    5,364
    
    
    $
    5,025Equity based compensation
    
    
    1,841
    
    
    
    1,193Accrued contingencies
    
    
    391
    
    
    
    391Other
    
    
    693
    
    
    
    508Total deferred tax assets
    
    
    8,289
    
    
    
    7,117Deferred tax liability:Mortgage servicing rights
    
    
    (570
    )
    
    
    (418
    )Net unrealized gain on securities
    
    
    
    
    
    
    (537
    )Other
    
    
    (586
    )
    
    
    (413
    )Total deferred tax liabilities
    
    
    (1,156
    )
    
    
    (1,368
    )Net deferred tax assets
    
    $
    7,133
    
    
    $
    5,749
 Unrecognized Tax Benefits
  81




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##### Table of Contents



NOTE 15  INCOME TAXES
 Valuation Allowance on Deferred Tax Assets
 NOTE 16  COMMITMENTS AND CONTINGENCIES
   2009
    
    
    2008Unused commercial credit lines
    
    $
    198,815
    
    
    $
    231,795Unused revolving home equity and credit card lines
    
    
    99,629
    
    
    
    98,925Standby letters of credit
    
    
    24,338
    
    
    
    24,224Demand deposit account lines of credit
    
    
    2,499
    
    
    
    2,917$
    325,281
    
    
    $
    357,861
     82




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##### Table of Contents



NOTE 17  FAIR VALUE
 
          83




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##### Table of Contents



NOTE 17  FAIR VALUE
 Assets and Liabilities Measured on a Recurring Basis
  Fair Value Measurements Using:SignificantQuoted Prices in
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsDecember 31, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Available for sale
securities
    
    $
    67,296
    
    
    $
    
    
    
    $
    67,296
    
    
    $
    Mortgage servicing
rights
    
    
    1,459
    
    
    
    
    
    
    
    1,459
    
    
    
    December 31, 2008Assets:Available for sale
securities
    
    $
    56,977
    
    
    $
    
    
    
    $
    56,977
    
    
    $
    Mortgage servicing
rights
    
    
    1,070
    
    
    
    
    
    
    
    1,070
    
    
    
    
 Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurements Using:SignificantQuoted Prices in
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsDecember 31, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Impaired loans
    
    $
    6,120
    
    
    $
    
    
    
    $
    
    
    
    $
    6,120Other real estate
    
    
    8,432
    
    
    
    
    
    
    
    
    
    
    
    8,432December 31, 2008Assets:Impaired loans
    
    $
    4,521
    
    
    $
    
    
    
    $
    
    
    
    $
    4,521Other real estate
    
    
    3,414
    
    
    
    
    
    
    
    
    
    
    
    3,414
  84




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##### Table of Contents



NOTE 17  FAIR VALUE
     2009
    
    
    2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueAssetsCash and due from banks
    
    $
    149,375
    
    
    $
    149,375
    
    
    $
    29,819
    
    
    $
    29,819Federal funds sold
    
    
    1,242
    
    
    
    1,242
    
    
    
    601
    
    
    
    601Reverse repurchase agreements
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000Investment securities available-for-sale
    
    
    67,296
    
    
    
    67,296
    
    
    
    56,977
    
    
    
    56,997Investment securities held-to-maturity
    
    
    94,922
    
    
    
    96,588
    
    
    
    83,567
    
    
    
    82,971Net loans
    
    
    851,006
    
    
    
    850,877
    
    
    
    891,360
    
    
    
    904,043Federal Reserve and FHLB stock
    
    
    3,150
    
    
    
    N/A
    
    
    
    3,150
    
    
    
    N/AAccrued interest receivable
    
    
    4,199
    
    
    
    4,199
    
    
    
    4,855
    
    
    
    4,855LiabilitiesDeposits
    
    
    1,052,065
    
    
    
    1,053,849
    
    
    
    965,966
    
    
    
    967,071Repurchase agreements and other
secured short-term borrowings
    
    
    81,314
    
    
    
    81,415
    
    
    
    51,146
    
    
    
    51,146Short-term debt
    
    
    4,138
    
    
    
    4,138
    
    
    
    4,200
    
    
    
    4,200Subordinated debt
    
    
    5,000
    
    
    
    5,000
    
    
    
    5,000
    
    
    
    4,997Junior subordinated debentures
    
    
    13,918
    
    
    
    10,102
    
    
    
    13,918
    
    
    
    9,962Accrued interest payable
    
    
    2,158
    
    
    
    2,158
    
    
    
    2,222
    
    
    
    2,222
  
  85




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##### Table of Contents



NOTE 18  ACCUMULATED OTHER COMPREHENSIVE INCOME
  2009
    
    
    2008
    
    
    2007Accumulated unrealized gain (loss)
on securities available-for-sale at
January 1, net of tax
    
    $
    836
    
    
    $
    460
    
    
    $
    (436
    )Net unrealized gain (loss) for period
    
    
    (1,379
    )
    
    
    612
    
    
    
    1,484Tax benefit (expense)
    
    
    540
    
    
    
    (236
    )
    
    
    (588
    )Ending other comprehensive income
(loss) at December 31, net of tax
    
    $
    (3
    )
    
    $
    836
    
    
    $
    460Accumulated unrealized loss on
swap at January 1, net of tax
    
    $
    
    
    
    $
    
    
    
    $
    (97
    )Net unrealized gain for period
    
    
    
    
    
    
    
    
    
    
    161Tax expense
    
    
    
    
    
    
    
    
    
    
    (64
    )Ending other comprehensive income
at December 31, net of tax
    
    $
    
    
    
    $
    
    
    
    $
    Accumulated other comprehensive
income (loss) at January 1, net of tax
    
    $
    836
    
    
    $
    460
    
    
    $
    (533
    )Other comprehensive income (loss),
net of tax
    
    
    (839
    )
    
    
    376
    
    
    
    993Accumulated other comprehensive
income (loss) at December 31,
net of tax
    
    $
    (3
    )
    
    $
    836
    
    
    $
    460
 NOTE 19  EARNINGS PER SHARE
  2009
    
    
    2008
    
    
    2007Basic EPS CalculationBasic average shares outstanding
    
    
    2,301,502
    
    
    
    2,311,022
    
    
    
    2,327,878Net income
    
    $
    112
    
    
    $
    3,784
    
    
    $
    7,891Basic earnings per common share
    
    $
    0.05
    
    
    $
    1.64
    
    
    $
    3.39Diluted EPS CalculationAverage shares outstanding
    
    
    2,301,502
    
    
    
    2,311,022
    
    
    
    2,327,878Nonvested restricted stock
    
    
    19,289
    
    
    
    15,239
    
    
    
    12,574Net effect of the assumed exercise of
stock options
    
    
    28,313
    
    
    
    65,046
    
    
    
    69,833Diluted average shares
    
    
    2,349,104
    
    
    
    2,391,307
    
    
    
    2,410,285Net income
    
    $
    112
    
    
    $
    3,784
    
    
    $
    7,891Diluted earnings per common share
    
    $
    0.05
    
    
    $
    1.58
    
    
    $
    3.27
   86




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##### Table of Contents



NOTE 20  PARENT COMPANY FINANCIAL STATEMENTS
  Balance Sheets
 December 312009
    
    
    2008AssetsCash
    
    $
    3,974
    
    
    $
    3,801Investment in subsidiary
    
    
    85,137
    
    
    
    85,054Other assets
    
    
    3,002
    
    
    
    2,274Total assets
    
    $
    92,113
    
    
    $
    91,129Liabilities and shareholders equityOther liabilities
    
    $
    1,026
    
    
    $
    799Short term debt
    
    
    4,138
    
    
    
    4,200Junior subordinated debentures owed to
unconsolidated subsidiary trust
    
    
    13,918
    
    
    
    13,918Total liabilities
    
    
    19,082
    
    
    
    18,917Shareholders equity
    
    
    73,031
    
    
    
    72,212Total liabilities and shareholders equity
    
    $
    92,113
    
    
    $
    91,129
 Statements of Income
 Year Ended December 312009
    
    
    2008
    
    
    2007Interest income
    
    $
    7
    
    
    $
    7
    
    
    $
    35Interest expense
    
    
    1,596
    
    
    
    1,492
    
    
    
    1,482Net interest income
    
    
    (1,589
    )
    
    
    (1,485
    )
    
    
    (1,447
    )Other income
    
    
    44
    
    
    
    44
    
    
    
    44Dividend income from subsidiary
    
    
    1,385
    
    
    
    1,315
    
    
    
    1,300Other operating expenses:Deferred compensation
    
    
    1,753
    
    
    
    1,362
    
    
    
    1,209Other expenses
    
    
    304
    
    
    
    321
    
    
    
    345Total other operating expenses
    
    
    2,057
    
    
    
    1,683
    
    
    
    1,554Net loss before tax benefit and equity
in undistributed net income of
subsidiary
    
    
    (2,217
    )
    
    
    (1,809
    )
    
    
    (1,657
    )Tax benefit
    
    
    1,406
    
    
    
    1,213
    
    
    
    1,161Net loss before equity in undistributed
net income of subsidiary
    
    
    (811
    )
    
    
    (596
    )
    
    
    (496
    )Equity in undistributed net income of
subsidiary
    
    
    923
    
    
    
    4,380
    
    
    
    8,387Net income
    
    $
    112
    
    
    $
    3,784
    
    
    $
    7,891
  87




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##### Table of Contents



NOTE 20  PARENT COMPANY FINANCIAL STATEMENTS
 Statements of Cash Flows
 Year Ended December 312009
    
    
    2008
    
    
    2007Operating activitiesNet income
    
    $
    112
    
    
    $
    3,784
    
    
    $
    7,891Adjustments to reconcile net income to net cash
provided by operating activities:Undistributed net income of subsidiary
    
    
    (923
    )
    
    
    (4,380
    )
    
    
    (8,387
    )Stock compensation
    
    
    100
    
    
    
    100
    
    
    
    100Excess tax benefit from deferred compensation
    
    
    (414
    )
    
    
    (321
    )
    
    
    (552
    )Compensation expense related to restricted
stock and options
    
    
    1,753
    
    
    
    1,362
    
    
    
    1,209Increase in deferred income taxes
    
    
    (648
    )
    
    
    (499
    )
    
    
    (148
    )Increase in other assets
    
    
    (79
    )
    
    
    (31
    )
    
    
    (32
    )Increase in other liabilities
    
    
    641
    
    
    
    409
    
    
    
    773Net cash provided by operating activities
    
    
    542
    
    
    
    424
    
    
    
    854Investing activitiesNet cash provided by investing activities
    
    
    
    
    
    
    
    
    
    
    Financing activitiesProceeds from issuance of stock
    
    
    1,144
    
    
    
    833
    
    
    
    804Repurchase of stock
    
    
    (1,865
    )
    
    
    (3,502
    )
    
    
    (2,394
    )Net change in short term debt
    
    
    (62
    )
    
    
    4,200
    
    
    
    Income tax benefit from deferred
compensation
    
    
    414
    
    
    
    321
    
    
    
    552Net cash provided (used) in financing activities
    
    
    (369
    )
    
    
    1,852
    
    
    
    (1,038
    )Increase (decrease) in cash and cash equivalents
    
    
    173
    
    
    
    2,276
    
    
    
    (184
    )Cash and cash equivalents at beginning of year
    
    
    3,801
    
    
    
    1,525
    
    
    
    1,709Cash and cash equivalents at end of year
    
    $
    3,974
    
    
    $
    3,801
    
    
    $
    1,525
  88




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##### Table of Contents



NOTE 21  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
  March 31
    
    
    June 30
    
    
    September 30
    
    
    December 312009Interest income
    
    $
    11,665
    
    
    $
    11,795
    
    
    $
    12,185
    
    
    $
    11,886Interest expense
    
    
    3,157
    
    
    
    2,834
    
    
    
    2,763
    
    
    
    2,559Net interest income
    
    
    8,508
    
    
    
    8,961
    
    
    
    9,422
    
    
    
    9,327Provision for loan losses
    
    
    1,250
    
    
    
    2,650
    
    
    
    3,955
    
    
    
    4,050Other operating income
    
    
    3,003
    
    
    
    3,569
    
    
    
    2,991
    
    
    
    3,340Other operating expense
    
    
    9,210
    
    
    
    10,060
    
    
    
    9,128
    
    
    
    9,956Net income (loss) before tax
    
    
    1,051
    
    
    
    (180
    )
    
    
    (670
    )
    
    
    (1,339
    )Federal and state income tax (benefit)
    
    
    206
    
    
    
    (259
    )
    
    
    (462
    )
    
    
    (735
    )Net income (loss) after tax
    
    $
    845
    
    
    $
    79
    
    
    $
    (208
    )
    
    $
    (604
    )Basic earnings per share
    
    $
    0.37
    
    
    $
    0.03
    
    
    $
    (0.09
    )
    
    $
    (0.26
    )Diluted earnings per share
    
    $
    0.36
    
    
    $
    0.03
    
    
    $
    (0.09
    )
    
    $
    (0.26
    )
 March 31
    
    
    June 30
    
    
    September 30
    
    
    December 312008Interest income
    
    $
    15,689
    
    
    $
    13,913
    
    
    $
    13,788
    
    
    $
    12,987Interest expense
    
    
    6,700
    
    
    
    4,794
    
    
    
    4,556
    
    
    
    4,399Net interest income
    
    
    8,989
    
    
    
    9,119
    
    
    
    9,232
    
    
    
    8,588Provision for loan losses
    
    
    1,075
    
    
    
    2,100
    
    
    
    1,800
    
    
    
    2,425Other operating income
    
    
    2,413
    
    
    
    3,048
    
    
    
    2,926
    
    
    
    2,817Other operating expense
    
    
    9,747
    
    
    
    8,353
    
    
    
    7,917
    
    
    
    8,688Net income before tax
    
    
    580
    
    
    
    1,714
    
    
    
    2,441
    
    
    
    292Federal and state income tax (benefit)
    
    
    34
    
    
    
    505
    
    
    
    798
    
    
    
    (94
    )Net income after tax
    
    $
    546
    
    
    $
    1,209
    
    
    $
    1,643
    
    
    $
    386Basic earnings per share
    
    $
    0.24
    
    
    $
    0.52
    
    
    $
    0.71
    
    
    $
    0.17Diluted earnings per share
    
    $
    0.23
    
    
    $
    0.50
    
    
    $
    0.69
    
    
    $
    0.16
  89




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
 Managements Report on Internal Control Over Financial Reporting.
 Attestation Report of the Independent Registered Public Accounting Firm.
 Changes in Internal Controls Over Financial Reporting
     90




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##### Table of Contents



Item 9B. Other Information
  
 PART III
 
 Items 10. 11, 12, 13 and 14
   91




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##### Table of Contents



Part IV
 
 Item 15. Exhibits, Financial Statement Schedules
  Page Number in10-KManagements
Report on Internal Control over Financial Reporting
    
    
    55Reports
of Independent Registered Public Accounting Firms
    
    
    56Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    58Consolidated Statements of Income For the years ended December 31, 2009, 2008 and 2007
    
    
    59Consolidated Statements of Shareholders Equity For the years ended December 31, 2009, 2008 and 2007
    
    
    60Consolidated Statements of Cash Flows For the years ended December 31, 2009, 2008, and 2007
    
    
    62Notes to consolidated Financial Statements
    
    
    63
 (2)
    
    See response to Item 15 (a)(1). All other financial statement
schedules have been omitted because they are not applicable, or the
required information is shown in the consolidated financial statements
or notes thereto.
 (3)
    
    List of Exhibits
  92




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##### Table of Contents



EXHIBIT INDEX
 3.01
    
    
    Articles of Incorporation of the Corporation, filed as Exhibit 3(i) to the Corporations Form
10-QSB as of September 30, 1995 are incorporated by reference and Articles of Amendment filed
as Exhibit 3(i) to the Form 10-K for the fiscal year ended December 31, 20013.02
    
    
    Bylaws of the Corporation, filed as Exhibit 3(ii) to the Corporations Form 8-K filed July
30, 2009, are incorporated by reference10.01
    *
    
    1993 Key Employees Stock Option Plan of the Corporation, as amended, filed as Exhibit 10(a)
to the Form 10-K for the fiscal year ended December 31, 2004 is incorporated by reference10.02
    *
    
    1993 Directors Stock Option Plan of the Corporation, as amended, filed as Exhibit 10(b) to
the Corporations Form 10-Q as of June 30, 2001 is incorporated by reference10.03
    *
    
    1993 Restricted Stock Plan of the Corporation, as amended, filed as Exhibit 10(c) to the
Form 10-K for the fiscal year ended December 31, 2004 is incorporated by reference10.04
    *
    
    Form of agreement under the 1993 Key Employees Stock Option Plan, filed as Exhibit 10(d) to
the Form 10-K for the fiscal year ended December 31, 2004 is incorporated by reference10.05
    *
    
    Form of agreement under the 1993 Restricted Stock Plan, filed as Exhibit 10(e) to the Form
10-K for the fiscal year ended December 31, 2004 is incorporated by reference10.06
    *
    
    Schedule of Directors Compensation Arrangements, filed as Exhibit 10(f) to the Form 10-K for
the fiscal year ended December 31, 2004, is incorporated by reference10.07
    *
    
    Schedule of Named Executive Officers Compensation Arrangements, filed as Exhibit 10.07 to
the Corporations Form 8-K dated May 18, 2006 is incorporated by reference, as amended by the
Corporations Form 8-K filed January 9, 2009, the Corporations Form 8-K filed April 16, 2009,
and the Corporations Form 8-K filed January 11, 201010.08
    *
    
    The National Bank of Indianapolis Corporation 2005 Equity Incentive Plan, filed as Exhibit
10.01 to the Corporations Form 8-K dated June 22, 2005 is incorporated by reference10.09
    *
    
    Form of Restricted Stock Award Agreement for The National Bank of Indianapolis Corporation
2005 Equity Incentive Plan, filed as Exhibit 10.02 to the Corporations Form 8-K dated June
22, 2005 is incorporated by reference10.10
    *
    
    Form of Stock Option Award Agreement for The National Bank of Indianapolis Corporation 2005
Equity Incentive Plan, filed as Exhibit 10.03 to the Corporations Form 8-K dated June 22,
2005, is incorporated by reference10.11
    *
    
    Employment Agreement dated December 15, 2005 between Morris L. Maurer and the Corporation,
filed as Exhibit 10.06 to the Corporations Form 8-K dated December 21, 2005, and as amended
by Exhibit 10.06 to the Corporations Form 8-K dated November 26, 2008, is incorporated by
reference10.13
    *
    
    The National Bank of Indianapolis Corporation Executives Deferred Compensation Plan, filed
as Exhibit 10.08 to the Corporations Form 8-K dated December 21, 2005, and as amended by
Exhibit 10.08 to the Corporations Form 8-K dated November 26, 2008, is incorporated by
reference10.14
    *
    
    The National Bank of Indianapolis Corporation 401(K) Savings Plan (as amended and restated
generally effective January 1, 2006), filed as Exhibit 10.14 to the Corporations Form 10-K
dated December 31, 2005 is incorporated by reference21.00
    
    
    Subsidiaries of The National Bank of Indianapolis Corporation
  93




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##### Table of Contents



31.1
    
    
    Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended31.2
    
    
    Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended32.1
    
    
    Chief Executive Officer Certification pursuant to 18 U.S.C. Section 135032.2
    
    
    Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350
  94




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##### Table of Contents



SIGNATURES
  (Registrant)
    
    The National Bank of Indianapolis CorporationBy (Signature and Title)
    
    /S/ Morris L. Maurer

Morris L. Maurer, President (Principal Executive Officer)
    
    March 12, 2010

Date
  By (Signature and Title)
    
    /S/ Morris L. Maurer

Morris L. Maurer, President (Principal Executive Officer)
    
    March 12, 2010

DateBy (Signature and Title)
    
    /S/ Philip B. Roby

Philip B. Roby, Executive Vice President
    
    March 12, 2010

DateBy (Signature and Title)
    
    /S/ Debra L. Ross

Debra L. Ross, Senior Vice President (Principal
Financial and Accounting Officer)
    
    March 12, 2010

DateBy (Signature and Title)
    
    /S/ Michael S. Maurer

Michael S. Maurer, Chairman of the Board
    
    March 12, 2010

DateBy (Signature and Title)
    
    /S/ Kathryn G. Betley

Kathryn G. Betley, Director
    
    March 12, 2010

DateBy (Signature and Title)
    
    /S/ David R. Frick

David R. Frick, Director
    
    March 12, 2010

DateBy (Signature and Title)
    
    /S/ Andre B. Lacy

Andre B. Lacy, Director
    
    March 12, 2010

DateBy (Signature and Title)
    
    /S/ William S. Oesterle

William S. Oesterle, Director
    
    March 12, 2010

DateBy (Signature and Title)
    
    /S/ Todd H. Stuart

Todd H. Stuart, Director
    
    March 12, 2010

DateBy (Signature and Title)
    
    /S/ John T. Thompson

John T. Thompson, Director
    
    March 12, 2010

Date
  95




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##### Table of Contents



EXHIBIT INDEX
 3.01
    
    
    Articles of Incorporation of the Corporation, filed as Exhibit 3(i) to the Corporations
Form 10-QSB as of September 30, 1995 are incorporated by reference and Articles of Amendment
filed as Exhibit 3(i) to the Form 10-K for the fiscal year ended December 31, 20013.02
    
    
    Bylaws of the Corporation, filed as Exhibit 3(ii) to the Corporations Form 8-K filed July
30, 2009, are incorporated by reference10.01
    *
    
    1993 Key Employees Stock Option Plan of the Corporation, as amended, filed as Exhibit 10(a)
to the Form 10-K for the fiscal year ended December 31, 2004 is incorporated by reference10.02
    *
    
    1993 Directors Stock Option Plan of the Corporation, as amended, filed as Exhibit 10(b) to
the Corporations Form 10-Q as of June 30, 2001 is incorporated by reference10.03
    *
    
    1993 Restricted Stock Plan of the Corporation, as amended, filed as Exhibit 10(c) to the
Form 10-K for the fiscal year ended December 31, 2004 is incorporated by reference10.04
    *
    
    Form of agreement under the 1993 Key Employees Stock Option Plan, filed as Exhibit 10(d) to
the Form 10-K for the fiscal year ended December 31, 2004 is incorporated by reference10.05
    *
    
    Form of agreement under the 1993 Restricted Stock Plan, filed as Exhibit 10(e) to the Form
10-K for the fiscal year ended December 31, 2004 is incorporated by reference10.06
    *
    
    Schedule of Directors Compensation Arrangements, filed as Exhibit 10(f) to the Form 10-K for
the fiscal year ended December 31, 2004, is incorporated by reference10.07
    *
    
    Schedule of Named Executive Officers Compensation Arrangements, filed as Exhibit 10.07 to
the Corporations Form 8-K dated May 18, 2006 is incorporated by reference, as amended by the
Corporations Form 8-K filed January 9, 2009, the Corporations Form 8-K filed April 16, 2009,
and the Corporations Form 8-K filed January 11, 201010.08
    *
    
    The National Bank of Indianapolis Corporation 2005 Equity Incentive Plan, filed as Exhibit
10.01 to the Corporations Form 8-K dated June 22, 2005 is incorporated by reference10.09
    *
    
    Form of Restricted Stock Award Agreement for The National Bank of Indianapolis Corporation
2005 Equity Incentive Plan, filed as Exhibit 10.02 to the Corporations Form 8-K dated June
22, 2005 is incorporated by reference10.10
    *
    
    Form of Stock Option Award Agreement for The National Bank of Indianapolis Corporation 2005
Equity Incentive Plan, filed as Exhibit 10.03 to the Corporations Form 8-K dated June 22,
2005 is incorporated by reference10.11
    *
    
    Employment Agreement dated December 15, 2005 between Morris L. Maurer and the Corporation,
filed as Exhibit 10.06 to the Corporations Form 8-K dated December 21, 2005, and as amended
by Exhibit 10.06 to the Corporations Form 8-K dated November 26, 2008, is incorporated by
reference10.13
    *
    
    The National Bank of Indianapolis Corporation Executives Deferred Compensation Plan, filed
as Exhibit 10.08 to the Corporations Form 8-K dated December 21, 2005, and as amended by
Exhibit 10.08 to the Corporations Form 8-K dated November 26, 2008, is incorporated by
reference10.14
    *
    
    The National Bank of Indianapolis Corporation 401(K) Savings Plan (as amended and restated
generally effective January 1, 2006), filed as Exhibit 10.14 to the Corporations Form 10-K
dated December 31, 2005 is incorporated by reference21.00
    
    
    Subsidiaries of The National Bank of Indianapolis Corporation
  96




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31.1
    
    
    Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended31.2
    
    
    Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended32.1
    
    
    Chief Executive Officer Certification pursuant to 18 U.S.C. Section 135032.2
    
    
    Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350
 
  97