Mars National Bank Annual Report 2011 · PDF fileMars National Bank ... coverage at 1.38%. •Higher non-interest income as ATM processing ... •Lower non-interest expense of 2.3%

www.MarsBank.com

Mars National BankAnnual Report

2011

Mars National Bank

is committed to remaining a relationship

driven, independent community bank, which offers

competitive products and services, made up of dedicated professionals

who are passionate about serving our customers in a personal, efficient and

friendly manner.

TABLE OF CONTENTS

Message to Shareholders 1

Financial Highlights 4

Independent Auditors’ Report 5

Consolidated Balance Sheets 6

Consolidated Statements of Income 7

Consolidated Statements of Stockholders’ Equity 8

Consolidated Statements of Cash Flows 9

Notes to Consolidated Financial Statements 10

Community Reinvestment Act Program 32

Board of Directors and Officers 33

INTRODUCTIONMars National Bank remains squarely focused on our locally owned independent com-munity bank mission of managing by sound financial principles, following traditional lending practices, protecting the deposits of our customers, contributing to the well being of our communities and providing a fair return to our shareholders. We remain relation-ship driven, offer competitive products and services and employ dedicated profession-als who are passionate about serving our customers in a personal, efficient and friendly manner. Throughout 2011, the Bank did not aggressively chase marginal or high risk strategies in order to satisfy short-term earnings objectives. We continued to take actions which strengthen and protect your investment for the long term.

KEY ACCOMPLISHMENTSDuring 2011, despite continued economic challenges, we achieved our targeted operating objectives and generated stable financial results. While remaining committed to our core operating principles, through hard work and focus, the Bank:

•Developed and implemented effective marketing plans to promote loan growth.•Implemented software to streamline consumer and mortgage loan originations.•Continued to strengthen our commercial lending and credit infrastructure.•Grew total loans outstanding for a second consecutive year, primarily residential and commercial real estate related.

•Monitored and effectively complied with the growing number of complex consumer lending regulations.

•Successfully rolled-out new/improved overdraft, remote deposit and bill pay products.•Continued to upgrade information technology hardware and data security services.•Expanded the focus and breadth of our Community Reinvestment Act activities.•Successfully recruited diverse and seasoned staff for key positions, specifically in com-mercial banking and information technology.

•Continued to evaluate and implement initiatives to more efficiently and effectively manage the Bank’s operating processes and related costs.

FINANCIAL RESULTSEarnings for the current year totaled $1.636 million. This represented a slight increase over the 2010 results of $1.559 million. While earnings continue to be adversely impacted by a weak economy, historically low interest rates, declining net interest margin, growing liquidity, limited commercial lending opportunities and higher operating costs, we deliv-ered solid results and maintained our annual dividend. Key factors that influenced our financial results included:

•Lower net interest income as new/refinanced loans originated and continued maturi-ties/calls of investment securities reinvested at historically low yields resulted in lower interest income, which was only partially offset by lower rates paid on deposit products.

MESSAGE TO SHAREHOLDERS

“We achieved our targeted

operating objectives and

generated stable

financial results.”

Mars National Bank

is committed to remaining a relationship

driven, independent community bank, which offers

competitive products and services, made up of dedicated professionals

who are passionate about serving our customers in a personal, efficient and

friendly manner.

TABLE OF CONTENTS

Message to Shareholders 1

Financial Highlights 4

Independent Auditors’ Report 5

Consolidated Balance Sheets 6

Consolidated Statements of Income 7

Consolidated Statements of Stockholders’ Equity 8

Consolidated Statements of Cash Flows 9

Notes to Consolidated Financial Statements 10

Community Reinvestment Act Program 32

Board of Directors and Officers 33

•Less provision for loan losses expense as the Bank’s credit quality remained very strong with delinquencies at 0.52% of total loans and the allowance for loan losses to loans coverage at 1.38%.

•Higher non-interest income as ATM processing fees, investment services income and gains from the selective sale of investment securities were realized. Contrary to our prior year concerns, the Bank’s debit card interchange income, a significant source of non-interest income, was not negatively impacted by the new financial reform legisla-tion.

•Lower non-interest expense of 2.3% was realized through a meaningful reduction in our FDIC insurance premiums, more selective marketing activities resulting in lower advertising expense and lower core computer system operating costs. As you may re-call, significantly higher FDIC premiums were imposed on all banks as a result of the financial crisis which began in late 2008.

FOCUSThe Bank and its customers are benefiting from our commitment to the completion of core initiatives, dating back to 2008, surrounding the enhancement of business development activities, diversification of staffing, development of leadership skills, investments made in core processes, development of new products and continued upgrades to our technology platform. We remain dedicated to advancing these initiatives in 2012.

Our key initiatives for the coming year include:•Growing the commercial loan pipeline and portfolio by strengthening existing cus-tomer relationships and executing a targeted external calling effort.

•Solidifying our commercial credit administration processes and infrastructure with a focus on efficiency and effectiveness.

•Generating incremental residential real estate loan volume through dedicated staff and targeted promotions.

•Maximizing fee income opportunities through refinement/improvement to our busi-ness deposit products ensuring a fair price to our customers and a fair return to our shareholders.

•Continuing to stabilize/optimize our information technology infrastructure and strengthen our information security activities.

•Remaining focused on implementing and complying with the multitude of new con-sumer banking regulations.

•Strengthening our policies and practices surrounding funds availability that is fair and properly balances the interests of both the customer and Bank.

•Managing/controlling the Bank’s operating costs by leveraging infrastructure, technol-ogy and third party providers.

•Continuing to expand our community development focus and efforts.

YEAR AHEADWhile there have been some signs of economic recovery and easing of legislative reactions to the financial crisis, with no change in interest rates anticipated in the near term, we expect ongoing and similar challenges for the Bank in 2012. As a community bank, we

2

“The Bank and its

customers are benefiting

from our commitment

to the completion of

core initiatives.”

are heavily dependent on revenues generated from our loan and securities portfolios. Ex-pecting another year of historically low interest rates, modest loan demand and continued yield pressures on these earning assets, we anticipate our net interest income and margin to contract again in 2012. Continuing to look for more efficient and effective ways to manage the Bank’s infrastructure and leverage its technology to hold the line on operating costs, will remain a key focus for our management team in the year ahead.

Despite the challenges and uncertainty surrounding our country’s eventual economic re-covery, we remain excited about helping our customers achieve their goals while bringing prosperity to our communities. We are optimistic about future growth opportunities available to a strong, relationship focused and capable independent community bank. Mars National Bank is well positioned to increase its profitability in a rising interest rate environment, effectively compete in the market place and grow your investment.

CLOSINGWe thank our Board of Directors for their dedication and counsel. We thank our custom-ers for their trust in us. We thank our employees for their hard work and commitment. We thank our communities for providing a wonderful environment in which to live and work. And as always, we thank you, our shareholders, for your continued support and confidence.

Sincerely,

James V. Dionise Robert M. OdomPresident Executive Vice PresidentChief Executive Officer Chief Lending Officer

3

“Mars National Bank

is well positioned to increase its

profitability in a rising

interest rate environment,

effectively compete in the market place

and grow your investment.”

4

1.34%

$436.30$441.81

$34.9

$331.8

FINANCIAL HIGHLIGHTS

2011 2010 Change

For the Year(dollars in thousands, except per share data)

EARNINGS Net interest income $10,025 $10,361 -3.2% Provision for loan losses 110 200 -45.0%

Non-interest income 1,832 1,789 2.4%

Non-interest expense 10,083 10,320 -2.3%

Income taxes 28 71 -60.4%

Net income 1,636 1,559 4.9%

SHARE DATA Earnings per share $ 20.45 $ 19.49 5.0%

Cash dividends per share 15.00 15.00 0.0%

PERFORMANCE RATIOS Return on average assets 0.49% 0.47% 2bps

Return on average equity 4.53% 4.37% 16bps

Net interest margin 3.38% 3.58% -20bps

E�ciency ratio 85.04% 84.94% 10bps

At December 31(dollars in millions, except per share data)

BALANCE SHEET Assets $ 342.2 $ 331.8 3.1%

Loans 148.7 147.7 0.7%

Deposits 303.6 295.0 2.9%

Stockholders’ equity 37.3 34.9 6.8%

CAPITAL Book value per share $465.87 $436.30 6.8%

Total risk-based capital ratio 20.25% 19.98% 27bps

CREDIT QUALITYDelinquent loans $ 0.9 $ 0.4 113.0%

Nonaccrual loans 2.6 2.9 -9.7%

Delinquent loans/loans 0.52% 0.24% 14bps

Nonaccrual loans/loans 1.76% 1.96% -20bps

Allowance for loan losses/loans 1.38% 1.34% 4bps

2011 2010 2009Net Income

2011 2010 2009Return on Average Assets

0.47%0.54%$1,559

$1,537

2011 2010 2009Cash Dividends per Share

$15.00

Net Interest Margin2011 2010 2009

$21.473.58%3.58%

2011 2010 2009Loans

$144.1

2011 2010 2009Assets

$319.6$147.7

2011 2010 2009Deposits

$295.0

2011 2010 2009Stockholders’ Equity

$281.8$35.3

2011 2010 2009Book Value per Share

2011 2010 2009Total Risk-Based Capital Ratio

19.98%

17.56%

2011 2010 2009Delinquent Loans/Loans

0.43%

0.24%

1.29%

2011 2010 2009Allowance/Loans

$1,636

0.49%

3.38%

$342.2 $148.7

$303.6 $37.3

$465.87 20.25%

0.52% 1.38%

$15.00

INDEPENDENT AUDITORS’ REPORT

Board of Directors and Stockholders Mars National Bank and Subsidiary

We have audited the accompanying consolidated balance sheets of Mars National Bank and Subsidiary (the “Bank”) as of December 31, 2011 and 2010, and the related consolidated statements of income, stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mars National Bank and Subsidiary as of December 31, 2011 and 2010, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Pittsburgh, PennsylvaniaMarch 8, 2012

5

See notes to consolidated financial statements

Consolidated Balance SheetsDecember 31,

ASSETS Cash and due from banks $ 13,517,210 $ 24,849,148 Interest-bearing deposits with banks 385,962 16,067,743

Cash and Cash Equivalents 13,903,172 40,916,891

Securities available for sale 172,842,632 135,895,847 Loans (net of unearned income of $267,742 in 2011 and $292,131 in 2010) 148,705,384 147,651,868 Less allowance for loan losses 2,044,727 1,974,949 Net Loans 146,660,657 145,676,919 Premises and equipment, net 5,207,307 5,385,393Restricted investments in bank stock 709,700 823,700Accrued interest receivable and other assets 2,845,534 3,115,714

Total Assets $342,169,002 $331,814,464

LiAbiLiTiES

Deposits: Non-interest-bearing demand $ 70,365,846 $ 64,025,408 Interest-bearing demand 42,747,973 40,888,682 Savings 68,930,087 66,910,315 Money market 57,834,057 53,364,913 Time 63,672,768 69,785,927

Total Deposits 303,550,731 294,975,245 Treasury tax and loan notes - 612,765Accrued interest payable and other liabilities 1,348,739 1,322,456

Total Liabilities 304,899,470 296,910,466

STockhoLdErS’ EquiTy

Common stock, par value $5 per share; 80,000 shares authorized, issued and outstanding 400,000 400,000 Capital surplus 400,000 400,000 Undivided profits 33,755,799 32,720,141Accumulated other comprehensive income 2,713,733 1,383,857

Total Stockholders’ Equity 37,269,532 34,903,998

Total Liabilities and Stockholders’ Equity $342,169,002 $331,814,464

2011 2010

6

Consolidated Statements of Income Years Ended December 31,

inTErEST incomE

Loans, including fees $ 6,892,377 $ 7,272,147Interest-bearing deposits with banks 49,320 193,646Federal funds sold - 1,502Securities: Taxable 3,264,965 3,561,425 Exempt from federal income tax 1,421,465 1,362,457

Total Interest Income 11,628,127 12,391,177

inTErEST ExpEnSE

Deposits 1,603,298 2,029,982 Total Interest Expense 1,603,298 2,029,982

Net Interest Income 10,024,829 10,361,195

Provision for Loan Losses 110,000 200,000

Net Interest Income after Provision for Loan Losses 9,914,829 10,161,195

non-inTErEST incomE

Service charges on deposits 157,130 168,186 NSF fees 195,277 203,933ATM processing fees 519,908 500,979Investment services 185,489 175,191Gain on sales of mortgages originated for sale 24,476 107,366Gain on sales of available for sale securities 266,884 118,529Other 482,685 514,360

Total Non-Interest Income 1,831,849 1,788,544

non-inTErEST ExpEnSE

Salaries and employee benefits 5,170,769 5,154,956Occupancy 717,135 656,625Furniture and equipment 860,718 798,745Pennsylvania shares tax 307,370 311,651FDIC insurance 268,415 398,836Other 2,758,613 2,998,904

Total Non-Interest Expense 10,083,020 10,319,717

Income before Income Taxes 1,663,658 1,630,022

Income Taxes 28,000 70,748

Net Income $ 1,635,658 $ 1,559,274

Earnings per Share $ 20.45 $ 19.49


2011 2010

7

Consolidated Statements of Stockholders’ Equity

ACCUmULATED OThER COmmON CAPITAL UNDIvIDED COmPREhENSIvE STOCk SURPLUS PROFITS INCOmE TOTAL

Balance at December 31, 2009 $400,000 $400,000 $ 32,360,867 $ 2,184,092 $ 35,344,959 Comprehensive income: Net income - - 1,559,274 - 1,559,274 Change in unrealized gains on securities available for sale, net of tax - - - (800,235) (800,235) Comprehensive income 759,039 Cash dividends declared on common stock at $15.00 per share - - (1,200,000) - (1,200,000) Balance at December 31, 2010 400,000 400,000 32,720,141 1,383,857 34,903,998

Comprehensive income: Net income - - 1,635,658 - 1,635,658 Change in unrealized gains on securities available for sale, net of tax - - - 1,329,876 1,329,876 Comprehensive income 2,965,534 Cash dividends declared on common stock at $7.50 per share - - (600,000) - (600,000) Balance at December 31, 2011 $400,000 $400,000 $33,755,799 $2,713,733 $37,269,532

See notes to consolidated financial statements 8

cASh FLowS From opErATing AcTiviTiESNet income $ 1,635,658 $ 1,559,274Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 110,000 200,000 Provision for depreciation and amortization 593,159 560,007 Net amortization of securities premiums and discounts 870,259 482,277 Deferred income tax benefit (209,468) (128,442) Amortization of deferred loan fees and costs 118,058 159,740 Net realized gain on sale of securities available for sale (266,884) (118,529) Proceeds from sales of mortgage loans originated for sale 1,810,500 8,087,606 Net gain on sale of mortgage loans originated for sale (24,476) (107,366) Mortgage loans originated for sale (1,898,774) (7,709,740) Net loss on disposal of premises and equipment 39,392 - Net gain on sale of foreclosed real estate (61,909) - Decrease in accrued interest receivable and other assets 125,180 210,293 Decrease in accrued interest payable and other liabilities (449,821) (478,233)

Net Cash Provided by Operating Activities 2,390,874 2,716,887

cASh FLowS From invESTing AcTiviTiESInvestment securities available for sale: Purchase of securities (99,928,076) (63,979,834) Proceeds from maturities, calls and principal repayments of securities 41,382,227 46,855,347 Proceeds from sales of securities 23,011,137 16,507,348Net increase in loans receivable (1,099,046) (4,251,067)Repurchases of restricted bank stock 114,000 42,100Purchases of premises and equipment (454,465) (178,363)Proceeds from sale of foreclosed real estate 206,909 41,000

Net Cash Used in Investing Activities (36,767,314) (4,963,469)

cASh FLowS From FinAncing AcTiviTiESNet increase in deposits 8,575,486 13,185,251Net (decrease) increase in treasury tax and loan notes (612,765) 471,770Cash dividends paid (600,000) (1,200,000)

Net Cash Provided by Financing Activities 7,362,721 12,457,021

Net (Decrease) Increase in Cash and Cash Equivalents (27,013,719) 10,210,439

Cash and Cash Equivalents, Beginning of Year 40,916,891 30,706,452

Cash and Cash Equivalents, End of Year $13,903,172 $40,916,891

SuppLEmEnTAL inFormATion

Interest paid $ 1,604,962 $ 2,039,413

Income taxes paid $ 190,000 $ 250,000

Other real estate acquired in settlement of loans $ - $ 145,000


Consolidated Statements of Cash FlowsYears Ended December 31,

9

2011 2010

noTE 1 - nATurE oF opErATionS And bASiS oF prESEnTATion

The accompanying consolidated financial statements include the accounts of Mars National Bank (“Bank”) and its wholly-owned subsidiary, Mars National Insurance Services, LLC. All material intercompany transactions have been eliminated.

The Bank is a national association located in Pennsylvania. The Bank derives its principal sources of revenue from its investment securities portfolio, residential and commercial real estate portfolios, commercial, industrial and consumer loans, as well as a variety of deposit services offered to its customers through six branch offices, which are located primarily in northern Allegheny and southern Butler counties. The Bank is subject to regulation and supervision by the Office of the Comptroller of the Currency (“OCC”).

Mars National Insurance Services, LLC provides real estate settlement services and title insurance to the Bank’s customers in connection with its residential and commercial real estate lending activities. Mars National Insurance Services, LLC is subject to review and conducts business under the jurisdiction of the OCC and the Pennsylvania Insurance Department (“PID”).

In addition, as a division of the Bank, Mars National Advisors offers securities, brokerage and insurance services, investment advisory services and trusts, executor and custodial services to Bank customers and the general public. Mars National Advisors is subject to review and conducts business under the jurisdiction of the OCC, the Pennsylvania Securities Commission and the PID.

The Bank has evaluated events and transactions occurring subsequent to the balance sheet date of December 31, 2011 for items that should potentially be recognized or disclosed in the financial statements. The evaluation was conducted through March 8, 2012, the date these financial statements were available to be issued.

noTE 2 - SummAry oF AccounTing poLiciES

A summary of significant accounting and reporting policies applied in the presentation of the accompanying consolidated financial statements follows:

EstimatesThe preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America (“GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the potential impairment of restricted stock, the valuation of deferred tax assets and the determination of other-than-temporary impairment on securities.

Significant Concentrations of Credit RiskMost of the Bank’s activities are with customers located within its local trade area. Note 3 discusses the types of securities in which the Bank invests. Note 4 discusses the types of loans that the Bank originates. The Bank does not have any significant concentrations to any one industry or customer. Although the Bank has a diversified loan portfolio, exposure to credit loss can be adversely impacted by downturns in local economic and employment conditions.

10

Notes to Consolidated Financial Statements

Securities Currently, the Bank’s investment securities portfolio is classified as available for sale. The portfolio serves principally as a source of liquidity and is carried at fair value, with unrealized gains and losses reported as increases or decreases to other comprehensive income, net of tax, until realized. Debt securities acquired with the intent to hold to maturity would be classified as held to maturity and carried at amortized cost. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Realized gains and losses on sales of securities available for sale are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.

Restricted Investments in Bank Stock The Bank owns restricted stock investments in the Federal Home Loan Bank of Pittsburgh (“FHLB”) and the Federal Reserve Bank (“FRB”). The investment in FHLB stock at December 31, 2011 and 2010 totaled $685,700 and $799,700, respectively. The FRB stock investment was $24,000 at December 31, 2011 and 2010. The investments are required by law according to predetermined formulas. These investments are carried at cost.

In December 2008, the FHLB of Pittsburgh notified member banks that it was suspending dividend payments and the repurchase of capital stock. The dividend suspension remained in place at the end of 2011. In February 2012, the FHLB reinstated a dividend payment at an annualized rate of 0.10%. In addition, the FHLB stated that it will continue to repurchase excess capital stock consistent with its practice in past quarters. Repurchase of capital stock totaled $114,000 and $42,100 in 2011 and 2010 respectively.

Management evaluates the restricted stock for impairment in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 942-325-35, Accounting by Certain Entities (Including Entities With Trade Receivables) That Lend to or Finance the Activities of Others. Management’s determination of whether these investments are impaired is based on its assessment of the ultimate recoverability of their cost, rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management believes no impairment charge is necessary related to the FHLB restricted stock as of December 31, 2011.

Other-Than-Temporary ImpairmentThe Bank reviews its investment portfolio on a quarterly basis for indications of other-than-temporary impairment (“OTTI”). This review includes analyzing the length of time and the extent to which fair value has been lower than cost, the financial condition and near-term prospects of the issuer, including any specific events that may influence the operations of the issuer, and the Bank’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market.

The Bank recognizes credit-related OTTI on debt securities in earnings while noncredit-related OTTI on debt securi-ties not expected to be sold is recognized in accumulated Other Comprehensive Income (“OCI”). The Bank assesses whether the credit loss existed by considering whether (1) the Bank has the intent to sell the security, (2) it is more likely than not that the Bank will be required to sell the security before recovery, or (3) the Bank does not expect to recover the entire amortized cost basis of the security. The Bank can bifurcate the OTTI on securities not expected to be sold or where the entire amortized cost of the security is not expected to be recovered into the components repre-


11

12

Notes to Consolidated Financial Statements senting credit loss and the component representing loss related to other factors. The portion of the fair value decline attributable to credit loss is recognized through earnings.

LoansLoans that the Bank has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. The loans receivable portfolio is segmented into commercial and industrial, consumer and real estate loans. Real estate loans consist of the following classes: residential and commercial.

For all classes of loans, the accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on non-accrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectibility of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.

Loan Origination Fees and CostsLoan origination fees and certain direct loan origination costs are being deferred. The net amount is amortized as an adjustment to the related loan’s yield. Management is amortizing these amounts over the contractual life of the related loans. As of December 31, 2011 and 2010, the net amount of these fees and costs totaled $280,117 and $305,704, respectively.

Commitment fees that are based on a percentage of a customer’s unused lines of credit and fees related to standby letters of credit are recognized as income during the commitment period.

Mortgages Held for SaleMortgages originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Mortgages held for sale are sold with servicing rights released. Gains and losses on sales of mortgages are based on the difference between the selling price and the carrying value of the related mortgage sold.

Allowance for Credit Losses The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending com-mitments. The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other lia-bilities on the consolidated balance sheet. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. No portion of the allowance for loan losses is restricted to any individual

loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The allowance for loan losses is maintained at a level considered adequate to absorb losses that can be reasonably anticipated. Management’s periodic evaluation of the adequacy of the allowance is based on past loan loss experi-ence, known and inherent risks in the portfolio, adverse situations that may affect a borrower’s ability to repay, esti-mated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the dis-counted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan type including commercial and commer-cial real estate loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity and other consumer loans and further segmented by risk ratings of pass, special mention, substandard, and doubtful.

An unallocated component of the Bank’s allowance for loan losses is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

Pass pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include:

• Changes in lending policies and procedures, including underwriting standards and collection, chargeoff, and recovery practices;

• Changes in national and local economic and business conditions, including the condition of various market segments;

• Changes in the nature and volume of the portfolio;

• Changes in the experience, ability, and depth of lending management and staff;

• Changes in the volume and severity of past due and classified loans; and in the volume of non-accruals, troubled debt restructurings, and other loan modifications;

• Changes in the quality of the Bank’s loan review system and the degree of oversight by the Bank’s Board of Directors;

• The existence and effect of any concentrations of credit, and changes in the level of such concentrations;

• The effect of external factors, such as competition and legal and regulatory requirements, on the level of estimated credit losses in the Bank’s current portfolio.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are sup-ported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.


13

Included in the Bank’s loan assets are loans to business owners of many types. The Bank makes commercial loans for real estate development and other business purposes required by the customer base.

The Bank’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial and industrial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversions of assets. Com-mercial real estate loans include long-term loans financing commercial properties. Repayment of this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 80% and vary in terms.

Residential mortgages and home equity loans are secured by the borrower’s residential real estate in either a first or subordinate lien position. Residential mortgages and home equity loans have varying loan rates depending on the loan to value ratio. Residential mortgages have amortizations up to 30 years and home equity loans have maturi-ties up to 20 years. Other consumer loans include student loans, installment loans, car loans, and overdraft lines of credit.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management deter-mines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and borrower, including the length of the delay, reasons for the delay, borrower’s prior payment record and amount of the shortfall in relation to the principal and interest owed. Impair-ment is measured on a loan-by-loan basis for commercial and industrial loans and commercial real estate loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, loan’s obtainable market price or fair value of the collateral if the loan is collateral dependent.

The estimated fair values of substantially all of the Bank’s impaired loans are measured based on the estimated fair value of the loan’s collateral. For commercial loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated appraisal of the real estate is necessary. This decision is based on various consider-ations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted by the estimated costs to sell the property to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value.

For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, ac-counts receivable agings or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.


14

15

Loans whose terms are modified are classified as troubled debt restructurings if the Bank grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. Loans classified as troubled debt restructurings are designated as impaired.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized special mention have potential weaknesses that deserve manage-ment’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment pros-pects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current con-ditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

Foreclosed Assets Foreclosed assets are comprised of property acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. Such properties are included in other assets. The Bank did not have any foreclosed assets at December 31, 2011. Total foreclosed assets as of December 31, 2010 were $145,000.

Foreclosed assets initially are recorded at fair value, net of estimated selling costs, at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or fair value minus estimated costs to sell. Revenues are included in other income and expenses from operations and changes in the valuation allowance are included in other expense.

Premises and EquipmentPremises and equipment are carried at cost less accumulated depreciation and amortization. For financial statement reporting and income tax purposes, depreciation is computed using both the straight-line and accelerated methods over the estimated useful lives of the premises and equipment. Charges for maintenance and repairs are expensed as incurred.

Advertising CostsThe Bank follows the policy of charging the costs of advertising to expense as incurred. Total advertising expense for the years ended December 31, 2011 and 2010 was $135,570 and $186,101, respectively.

Income Taxes Certain income and expense items are accounted for in different years for financial reporting purposes than for income tax purposes. Deferred taxes are provided to recognize these temporary differences. The principal items involved are investment securities, provision for loan losses and benefit plans. Income tax expense is not proportionate to


earnings before taxes, principally because income from obligations of states and political subdivisions is nontaxable. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

A tax position is recognized as a benefit at the largest amount that is more-likely-than-not to be sustained in a tax examination based solely on its merits. An uncertain tax position will not be recognized if it has less than 50% likelihood of being sustained. Under the threshold guidelines, the Bank believes no significant uncertain tax positions exist, either individually or in the aggregate, that would result in recognition of a liability for unrecognized tax benefits as of December 31, 2011 and 2010.

Earnings per ShareThe Bank has a simple capital structure. Basic earnings per share represents income available to common stockholders divided by the weighted average number of common shares outstanding during each period. The average weighted shares outstanding were 80,000 for the years ended December 31, 2011 and 2010.

Cash and Cash Equivalents The Bank has defined cash and cash equivalents as those amounts included in the balance sheet captions cash and due from banks and interest-bearing deposits with banks.

Off-Balance Sheet Financial InstrumentsIn the ordinary course of business, the Bank has entered into off-balance sheet financial instruments, consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded in the balance sheet when they are funded.

Comprehensive IncomeAccounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on securities available for sale, are reported as a separate component in the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. The only component of other comprehensive income for the years ended December 31, 2011 and 2010 is the net unrealized gain on securities available for sale.

The components of other comprehensive income and related tax effects for the years ended December 31, 2011 and 2010 are as follows:


2011 2010

Unrealized net holding gains (losses) on available for sale securities $2,015,448 $(1,212,962)

Income tax effect (685,572) 412,727 Net of Tax Amount $1,329,876 $ (800,235)

16

Notes to Consolidated Financial Statements Reclassifications Certain comparative amounts for the prior year have been reclassified to conform to current year classifications. Such reclassifications had no effect on net income or stockholders’ equity.

Recent Accounting Standards In April 2011, the FASB issued ASU 2011-02, “A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring,” which clarifies the accounting principles applied to loan modifications, as defined by FASB ASC Subtopic 310-40, “Receivables - Troubled Debt Restructurings by Creditors.” This guidance clarifies credi-tors’ evaluations of whether or not a concession has been granted, with an emphasis on evaluating all aspects of the modification rather than a focus on specific criteria, such as the effective interest rate test, to determine a concession. Guidance is also provided on specific types of modifications such as changes in the interest rate of the borrowing, and insignificant delays in payments, as well as guidance on the creditor’s evaluation of whether or not a debtor is experiencing financial difficulties. For nonpublic entities, this guidance is effective for annual periods ending on or after December 15, 2012, and should be applied retrospectively to the beginning of the annual period of adoption. Adoption is not expected to have a material effect on the Bank’s financial statements.

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurements and Dis-closure Requirements in U.S. GAAP and IFRSs,” which amends FASB ASC Topic 820, “Fair Value Measurements,” to bring U.S. GAAP for fair value measurements in line with International Accounting Standards. The amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and disclos-ing information about fair value measurements. For nonpublic entities, this guidance is effective for annual periods beginning after December 15, 2011. Early adoption is not permitted. Adoption will have no impact on the Bank’s financial statements, but will require expanded disclosure.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income,” to amend FASB ASC Topic 220, “Comprehensive Income,” to facilitate the continued alignment of U.S. GAAP with International Accounting Standards. This guidance prohibits the presentation of the components of comprehensive income in the statement of stockholder’s equity. Reporting entities are allowed to present either: a statement of comprehensive income, which reports both net income and other comprehensive income; or separate, but consecutive, statements of net income and other comprehensive income. Regardless of the presentation selected, the reporting entity is required to pres-ent all reclassifications between other comprehensive and net income on the face of the statement. This guidance is effective for fiscal years ending after December 15, 2012 for nonpublic entities. As the two remaining options for presentation existed prior to the issuance of this guidance, early adoption is permitted. The Bank is currently evalu-ating the impact this guidance will have on the consolidated financial statements.

In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date to the Presentation of Reclassifica-tions of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update 2011-05,” which defers the implementation date of ASU 2011-05 in response to stakeholder concerns regarding the operational ramifications of the presentation of these reclassifications for current and previous years to allow time for further consideration. The requirements in ASU 2011-05, “Presentation of Comprehensive Income”, for the presentation of a combined statement of comprehensive income or separate, but consecutive, statements of net income and other comprehensive income is still effective for fiscal years ending after December 15, 2012 for nonpublic companies. The Bank is currently evaluating the impact this guidance will have on the consolidated financial statements.

17

Due after one year through five years $ 22,634,468 $ 22,791,126 Due after five years through ten years 77,205,290 79,700,063 Due after ten years 68,891,157 70,351,443

dEcEmbEr 31, 2010U.S. government agencies and corporations $ 40,975,854 $ 585,019 $ (32,160) $ 41,528,713

Obligations of states and political subdivisions 39,641,469 283,197 (649,306) 39,275,360

Mortgage-backed securities 53,182,255 2,080,780 (171,261) 55,091,774

Total $ 133,799,578 $ 2,948,996 $(852,727) $ 135,895,847

dEcEmbEr 31, 2011U.S. government agencies and corporations $ 58,538,820 $ 449,202 $ (18,133) $ 58,969,889

Obligations of states and political subdivisions 34,347,423 1,334,844 - 35,682,267

Mortgage-backed securities 75,844,672 2,419,576 (73,772) 78,190,476

Total $168,730,915 $4,203,622 $ (91,905) $172,842,632


GROSS GROSS AmORTIzED UNREALIzED UNREALIzED FAIR COST GAINS LOSSES vALUE

All mortgaged-backed securities represent residential mortgages as of December 31, 2011 and 2010.

18

Investment securities available for sale with a carrying value of $22,287,004 and $21,739,033 at December 31, 2011 and 2010, respectively, were pledged to secure public deposits as required by law.

Sales of securities generated proceeds of $23,011,137 and $16,507,348 in 2011 and 2010, respectively. The Bank realized gross gains and losses on sales of these securities of $266,884 and $0 in 2011 and $129,539 and $11,010 in 2010.

Total $168,730,915 $172,842,632

AmORTIzED COST FAIR vALUE

The amortized cost and estimated market value of securities available for sale at December 31, 2011, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

noTE 3 - SEcuriTiES AvAiLAbLE For SALE

The amortized cost and estimated fair value of securities available for sale at December 31, 2011 and 2010 are summarized as follows:


19

dEcEmbEr 31, 2011 U.S. government agencies and corporations $ 6,559,053 $ 18,133 $ - $ - $ 6,559,053 $ 18,133Mortgage-backed securities 9,971,571 73,772 - - 9,971,571 73,772 Total $16,530,624 $ 91,905 - - $16,530,624 $ 91,905

dEcEmbEr 31, 2010 U.S. government agencies and corporations $ 2,024,329 $ 32,160 $ - $ - $ 2,024,329 $ 32,160Obligations of states and political subdivisions 19,794,428 649,306 - - 19,794,428 649,306 Mortgage-backed securities 11,458,971 171,261 - - 11,458,971 171,261 Total $ 33,277,728 $852,727 $ - $ - $ 33,277,728 $852,727

LESS ThAN 12 mONThS 12 mONThS OR mORE TOTAL FAIR UNREALIzED FAIR UNREALIzED FAIR UNREALIzED vALUE LOSSES vALUE LOSSES vALUE LOSSES

The following tables show the Bank’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2011 and 2010:

At December 31, 2011, nine securities were in a loss position. Management believes that the unrealized losses are temporary in nature and are a result of the current interest rate environment and not a reflection of credit quality.

noTE 4 - LoAnS

The Bank loan portfolio is segmented to enable management to monitor risk and performance. The real estate loans are further classified into two classes. Residential mortgages include those secured by first and second lien residential properties while commercial mortgages are comprised of loans to commercial or income producing residential real estate. The commercial and industrial segment consists of loans to finance the activities of commercial customers. The consumer segment consists primarily of student, auto loans and personal loans.

Residential mortgage loans are typically longer-term loans which generally entail greater interest rate risk than consumer and commercial loans. Under certain economic conditions, housing values may decline, which may increase the risk that the collateral values are insufficient. Commercial real estate loans generally present a higher level of risk than loans secured by residences. This greater risk is due to several factors including but not limited to concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties and the increased difficulty in monitoring these types of loans. Furthermore, the repayment of commercial real estate loans is typically dependent upon successful operation of the related real estate project. If the cash flow from the project is reduced by such occurrences as leases not being obtained, renewed or not entirely fulfilled, the borrower’s ability to repay the loan may be impaired. Commercial and industrial loans are

primarily secured by business assets, inventories and accounts receivable which present collateral risk. Consumer loans generally have higher interest rates and shorter terms than residential mortgage loans, however, they have additional credit risk due to the type of collateral securing the loan.

Major classifications of loans receivable at December 31, 2011 and 2010 are summarized as follows:

Real Estate: Residential $ 65,463,868 $ 136,142 $ 975,243 $ - $ 66,575,253 Commercial 44,010,228 1,133,349 2,146,599 - 47,290,176 Commercial and industrial 26,584,118 1,389,298 1,105,354 - 29,078,770Consumer 6,028,927 - - - 6,028,927 Total $142,087,141 $2,658,789 $ 4,227,196 $ - $148,973,126

In the normal course of business, loans are extended to directors, executive officers and their related interests and affiliates. In management’s opinion, all of these loans are on substantially the same terms and conditions as loans to other individuals and businesses of comparable creditworthiness. The aggregate amount of credit extended to these directors and executive officers at December 31, 2011 and 2010 was $1,041,317 and $1,159,639, respectively. During 2011, $104,105 of new loans and principal advances were made and repayments totaled $222,427.

Mortgages held for sale totaled $208,250 and $95,500 as of December 31, 2011 and 2010, respectively, and are included in the residential real estate balances above.

noTE 5 - ALLowAncE For LoAn LoSSES

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of December 31, 2011:

Real Estate: Residential $ 66,575,253 $ 58,008,345 Commercial 47,290,176 47,129,416Commercial and industrial 29,078,770 36,007,787Consumer 6,028,927 6,798,451

Total 148,973,126 147,943,999Less Unearned Income (267,742) (292,131) 148,705,384 147,651,868Less allowance for loan losses 2,044,727 1,974,949

Net Loans $146,660,657 $ 145,676,919


20

PASS SPECIAL mENTION SUBSTANDARD DOUBTFUL TOTAL

2011 2010

With no related allowance recorded Real Estate: Commercial $ 897,390 $ - $ 1,350,192 $1,012,317 $ - Commercial and industrial 463,822 - 489,307 479,687 - Total $1,361,212 $ - $ 1,839,499 $1,492,004 $ -

With an allowance recorded Real Estate: Commercial $ 334,713 $ 49,389 $ 352,405 $ 339,055 $ - Commercial and industrial 414,010 91,841 486,535 513,397 - Total $ 748,723 $141,230 $ 838,940 $ 852,452 $ -

Total Real Estate: Commercial $1,232,103 $ 49,389 $ 1,702,597 $ 1,351,372 $ - Commercial and industrial 877,832 91,841 975,842 993,084 - Total $2,109,935 $141,230 $2,678,439 $2,344,456 $ -

Real Estate: Residential $ 66,205,762 $249,942 $ 3,219 $116,330 $ 369,491 $ 66,575,253 $ 384,645 $ - Commercial 47,029,243 235,942 - 24,991 260,933 47,290,176 1,257,094 -Commercial and industrial 28,867,056 - 130,579 81,135 211,714 29,078,770 970,947 -Consumer 5,681,134 110,610 105,271 131,912 347,793 6,028,927 - 131,912 Total $147,783,195 $596,494 $239,069 $354,368 $1,189,931 $148,973,126 $2,612,686 $131,912

LOANS RECEIvABLE 30-59 60-89 GREATER TOTAL TOTAL NON- 90 DAYS PAST DAYS DAYS ThAN PAST LOANS ACCRUAL DUE AND CURRENT PAST DUE PAST DUE 90 DAYS DUE RECEIvABLE LOANS ACCRUING

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receiv-able as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of December 31, 2011:

UNPAID AvERAGE INTEREST RECORDED RELATED PRINCIPAL RECORDED INCOmE INvESTmENT ALLOWANCE BALANCE INvESTmENT RECOGNIzED


21

Loans on which the accrual of interest has been discontinued amounted to $2,892,249 at December 31, 2010. There was $72,677 in loan balances at December 31, 2010, that were past due 90 days or more and still accruing, all of which were student loans.

The following tables summarize information in regards to impaired loans by loan portfolio class as of December 31, 2011:

The average recorded investment in impaired loans was $1,889,549 in 2010. No interest income on impaired loans was recognized for cash payments received in 2010.

2010Balance, January 1 $1,862,564 Provision for loan losses 200,000Loans charged-off (118,761)Recoveries 31,146

Balance, December 31 $1,974,949

ENDING ENDING BALANCE: BALANCE: INDIvIDUALLY COLLECTIvELY EvALUATED EvALUATED ENDING FOR FOR BALANCE ImPAIRmENT ImPAIRmENT

Real Estate: Residential $ 326,326 $ - $ - $212,587 $ 538,913 $ - $ 538,913 Commercial 656,324 - 3,711 (3,722) 656,313 49,389 606,924 Commercial and industrial 910,997 (28,944) - (389,246) 492,807 91,841 400,966Consumer 7,811 (14,989) - 13,848 6,670 - 6,670Unallocated 73,491 - - 276,533 350,024 - 350,024 Total $1,974,949 $(43,933) $3,711 $110,000 $2,044,727 $141,230 $1,903,497

ENDING ENDING BALANCE: BALANCE: INDIvIDUALLY COLLECTIvELY EvALUATED EvALUATED BEGINNING ChARGE- ENDING FOR FOR BALANCE OFFS RECOvERIES PROvISIONS BALANCE ImPAIRmENT ImPAIRmENT

The primary segments of the allowance for loan losses, segregated into the amount required for loans individually evalu-ated for impairment and the amount required for loans collectively evaluated for potential losses as of December 31, 2011:

Real Estate: Residential $ 66,575,253 $ - $ 66,575,253 Commercial 47,290,176 1,232,103 46,058,073Commercial and industrial 29,078,770 877,832 28,200,938Consumer 6,028,927 - 6,028,927 Total $148,973,126 $2,109,935 $146,863,191


PRE-mODIFICATION POST-mODIFICATION NUmBER OF OUTSTANDING OUTSTANDING CONTRACTS RECORDED INvESTmENTS RECORDED INvESTmENTS

The following table summarizes information in regards to troubled debt restructurings during the year ended De-cember 31, 2011:

22

The Bank has not acquired any loans with deteriorated credit quality.

Real Estate: Commercial 4 $348,867 $358,147Commercial and industrial 1 158,306 158,306 Total 5 $507,173 $516,453

The Bank had no troubled debt restructurings that subsequently defaulted during the year ended December 31, 2011.

Changes in the allowance for loan losses for the year ended December 31, 2010 is as follows:

The following table summarizes loans evaluated both individually and collectively for impairment as of December 31, 2011:


23

noTE 6 - FinAnciAL inSTrumEnTS wiTh oFF-bALAncE ShEET riSk

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit written is represented by the contract or notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The following table identifies the contract or notional amount of those instruments at December 31, 2011 and 2010:

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Some of the commitments are expected to expire without being drawn upon. The total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties. At December 31, 2011 and 2010, the Bank’s fixed rate loan commitments totaled $4,704,066 and $575,758, respectively.

Outstanding letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The majority of these standby letters of credit expire within the next twelve months. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Bank requires collateral supporting these letters of credit as deemed necessary. Management believes that the proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees. The current amount of the liability as of December 31, 2011 and 2010 for guarantees under standby letters of credit issued is not material.

noTE 7 - prEmiSES And EquipmEnT

Major classifications of premises and equipment at December 31, 2011 and 2010 are summarized as follows:

2011 2010

Financial instruments whose contract amounts represent credit risk: Commitments to grant loans $ 6,378,864 $ 1,545,611 Unfunded commitments under lines of credit 41,880,346 41,806,863 Standby letters of credit 1,013,195 128,438

2011 2010

Land $ 2,250,339 $ 2,066,660 Buildings and leasehold improvements 5,959,322 6,123,476 Furniture and fixtures 3,328,382 3,172,181 Computer software 1,026,328 939,825

12,564,371 12,302,142Accumulated depreciation and amortization (7,357,064) (6,916,749)

Total $ 5,207,307 $ 5,385,393

Depreciation and amortization charged to operations was $593,159 and $560,007 in 2011 and 2010, respectively.


noTE 8 - dEpoSiTS

Time deposits include certificates of deposit in denominations of $100,000 or more. Such deposits aggregated $18,609,570 and $21,136,929 at December 31, 2011 and 2010, respectively.

The following schedule represents the maturity of time deposits at December 31, 2011:

Deposit overdrafts reclassified to loans receivable at December 31, 2011 and 2010 were $1,004 and $534, respectively.

noTE 9 - AvAiLAbLE crEdiT ArrAngEmEnTS

The Bank maintains a credit arrangement, which includes a revolving line of credit with the FHLB. Under this credit arrangement, the Bank has a borrowing limit of approximately $82.2 million at December 31, 2011 that is subject to annual renewal and typically incurs no service charges. Any loans generated with this credit facility are secured by a blanket security agreement on outstanding residential mortgage loans, other real estate related collateral and U.S. government agencies and mortgage-backed securities. For the years ended December 31, 2011 and 2010, there were no borrowings outstanding.

During 2009, the Bank established borrowing access through the FRB discount window. This access allows the Bank to borrow money, usually on a short-term basis, to meet temporary liquidity needs. As of December 31, 2011, the Bank had a borrowing capacity of approximately $16.9 million. Discount window borrowings are fully secured through a pledge of mortgage-backed securities to the FRB of Cleveland. The Bank had no outstanding borrowings as of December 31, 2011 and 2010.

In addition, the Bank has an established $10,000,000 guidance line of credit with SunTrust Bank for repurchase and reverse repurchase transactions and a $4,000,000 guidance line of credit for the purchase of federal funds. The $4,000,000 guidance line of credit has no prescribed termination date and is not a committed facility, as SunTrust Bank reserves the right to cancel the line at any time at its sole discretion. The Bank also has an $8,800,000 and $5,000,000 federal funds purchase line of credit with Zions First National Bank and PNC Bank, respectively, both of which has no prescribed termination date and is not a committed facility. The facilities are intended to provide for short-term liquidity needs. For the years ended December 31, 2011 and 2010, there were no borrowings outstanding.

noTE 10 - incomE TAxES

The provision for federal income taxes for the years ended December 31, 2011 and 2010 is summarized as follows:

24

2012 $42,706,5352013 13,242,0072014 3,967,4322015 2,567,4442016 1,189,350

Total $63,672,768

2011 2010

Current $ 237,468 $ 199,190Deferred (209,468) (128,442)

Total Provision $ 28,000 $ 70,748


25

The components of the net deferred tax liability at December 31, 2011 and 2010 are as follows:

As of December 31, 2011, the Bank had no unrecognized tax benefits as defined by FASB ASC 740-10-25, Accounting for Uncertainty in Income Taxes. The Bank does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. As of December 31, 2011 and 2010, the Bank has not incurred any interest or penalties associated with its tax position. Any amount, if applicable, would be included as part of other non-operating expense. The Bank is subject to federal income tax as well as a capital-based state franchise tax. The Bank is no longer subject to examination by taxing authorities for years before 2008.

The total tax provision for financial reporting purposes differed from the amount computed by applying the federal statutory income tax rate of 34% to income before income taxes. The differences are as follows:

2011 2010

Allowance for loan losses $ 575,595 $ 551,870 Post-retirement benefit plan 59,691 55,912 Non-accrual loan interest 336,801 275,541 Alternative Minimum Tax credit carry forward 28,491 67,158 Other 41,056 40,846

Total Deferred Tax Assets 1,041,634 991,327

Net unrealized gain on securities 1,397,984 712,412 Depreciation 15,499 180,072Deferred origination fees and costs, net 78,674 85,720Investment securities accretion 80,777 68,319

Total Deferred Tax Liabilities 1,572,934 1,046,523

Net Deferred Tax Liability $ (531,300) $ (55,196)

noTE 11 - conTingEnciES And commiTmEnTS

There are no material legal proceedings to which the Bank is party to except proceedings which arise in the normal course of business and, in the opinion of management, will not have any material effect on the consolidated financial position of the Bank.

The Bank leases certain office facilities over terms ranging from one year to four years with multiple renewal options. Annual rental amounts may be based on changes in the consumer price index.

2011 2010

Tax at statutory rate $ 565,644 $ 554,208 Effect of tax-exempt income (553,933) (497,097)Other 16,289 13,637

Actual Tax Expense $ 28,000 $ 70,748

Minimum future lease payments at December 31, 2011 are as follows:

noTE 12 - EmpLoyEE bEnEFiTS

Profit Sharing PlanThe Bank has a non-contributory profit sharing and integrated contributory 401(k) plan in which eligible employees participate. The Bank is required to make a “safe harbor” contribution to the plan of at least three percent of eligible employee compensation. This “safe harbor” contribution is fully vested and is referred to as a non-elective contribution. In addition, the Bank makes discretionary contributions to the profit sharing plan as determined by the Board of Directors. The total plan contribution expense for both of the years ended 2011 and 2010 was $266,674 and $260,000, respectively. In addition, eligible employees’ contribution to the 401(k) plan may be matched, subject to discretionary approval of the Board of Directors, up to a maximum of six percent of such employees’ pre-tax compensation. The Bank made no matching contributions in 2011 or 2010.

Post-Retirement Life Insurance BenefitsThe Bank provides term life insurance benefits for its retired employees. All employees may become eligible for these benefits, provided they do not retire prior to reaching age sixty-two. The projected accumulated post-retirement benefit obligation, which is unfunded, totaled $178,619 and $167,419 as of December 31, 2011 and 2010, respectively. It is computed using various actuarially determined assumptions regarding participant mortality, withdrawal and retirement rates, salary scales, discount rates and disabled mortality rates. The Bank has the right to amend or terminate these benefits. The net periodic post-retirement benefit cost, which consists primarily of service costs and interest on the accumulated benefit obligation, totaled $18,916 and $17,318 in 2011 and 2010, respectively. For 2011 and 2010, interest cost was computed using a discount rate of 5.50% and 5.75%, respectively. For 2011 and 2010, service cost was computed using a discount rate of 5.50% and 5.75%, respectively.


26

2012 $ 63,5562013 58,2002014 58,200Thereafter -

Total $179,956

In October 2011, the Bank did not exercise its lease renewal option and closed its Russellton branch office effective January 31, 2012, which resulted in a reduction of the previously reported presentation of future minimum lease payments. Total lease expense for building and equipment included in net occupancy expense was $88,566 in 2011 and $86,986 in 2010.

noTE 14 - FAir vALuE mEASurEmEnTS And FAir vALuE oF FinAnciAL inSTrumEnTS

Management uses its best judgment in estimating the fair value of the Bank’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Bank could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these financial instruments subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.


27

2011 2010

Computer services $ 417,957 $ 479,830Professional fees 596,358 581,664ATM processing expense 371,291 353,510Advertising 135,570 186,101Director fees 184,400 184,200Corporate insurance 101,664 119,598OCC assessments 99,376 106,186Student loan servicing fees 66,036 76,909Office supplies 68,407 88,338Telecommunications 101,609 96,309Charitable contributions 108,268 15,900Other 507,677 710,359

Total $2,758,613 $2,998,904

noTE 13 - oThEr ExpEnSES

The following is an analysis of other expenses for the years ended December 31, 2011 and 2010:

Impaired loans $ 607,493 $ - $ - $ 607,493

Impaired loans $ 1,033,482 $ - $ - $1,033,482

2010 LEvEL 1 LEvEL 2 LEvEL 3

The following information should not be interpreted as an estimate of the fair value of the entire Bank, since a fair value calculation is only provided for a limited portion of the Bank’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Bank’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Bank’s financial instruments at December 31, 2011 and 2010:

Cash and Due from Banks and Interest-Bearing Deposits with Banks (Carried at Cost)The carrying amount of cash and short-term instruments approximate their fair value.

Notes to Consolidated Financial Statements 2011 LEvEL 1 LEvEL 2 LEvEL 3

For financial assets measured at fair value on a non-recurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2011 and 2010 are as follows:

U.S. government agencies and corporations $ 58,969,889 $21,319,263 $ 37,650,626 $ -Obligations of states and political subdivisions 35,682,267 - 35,682,267 -Mortgage-backed securities 78,190,476 3,187,669 75,002,807 -

Total $172,842,632 $24,506,932 $148,335,700 $ -

U.S. government agencies and corporations $ 41,528,713 $4,327,178 $ 37,201,535 $ -Obligations of states and political subdivisions 39,275,360 498,380 38,776,980 -Mortgage-backed securities 55,091,774 4,075,357 51,016,417 -

Total $135,895,847 $8,900,915 $126,994,932 $ -

28

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2011 and 2010 are as follows:




Securities Available for Sale (Carried at Fair Value)The fair value of securities available for sale is determined by obtaining quoted market prices in nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. There were no Level 3 investments held at December 31, 2011 and 2010.

Loans (Carried at Cost)The fair value of loans, excluding impaired loans subject to specific loss allowances, is estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and repayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, the fair value is based on carrying value.

Mortgages Held for Sale (Carried at Lower of Cost or Fair Value)The carrying amount of mortgages held for sale approximate their fair value.

Impaired Loans With Specific Loss Allowances (Carried at Fair Value)The fair value of impaired loans with specific loss allowances is measured using the estimated fair market value of the collateral less the estimated costs to sell. Fair value of the collateral is typically determined by appraisal.

Foreclosed Real Estate (Net Realizable Value)The fair value of foreclosed real estate is measured using the estimated fair value of the collateral less the estimated costs to sell. Fair value is typically determined by an appraisal. As of December 31, 2011, the Bank had no foreclosed real estate. As of December 31, 2010, the fair value of the collateral was determined to be $145,000. A write-down of $90,275 was recorded against the allowance for loan losses at the time of transfer.

Restricted Investments in Bank Stock (Carried at Cost)The carrying amount of restricted investments in bank stock approximates fair value and considers the limited marketability of such securities.

Accrued Interest Receivable and Payable (Carried at Cost)The carrying amount of accrued interest receivable and accrued interest payable approximates their fair value.

Deposits (Carried at Cost)The fair value disclosed for non-interest and interest-bearing checking, statement and passbook savings and money market accounts is, by definition, equal to the amount payable on demand at the reporting date (i.e., the carrying amounts). Fair value for fixed-rate certificates of deposit is estimated using a discounted cash flow calculation that applies interest rates currently being offered in the marketplace on similar certificates to a schedule of aggregated expected monthly maturities on time deposits.

29

30


noTE 15 - rEguLATory mATTErS

Cash and Due from BanksThe Federal Reserve Board requires the Bank to maintain a reserve requirement against specified deposit liabilities. As of December 31, 2011 and 2010, the Bank’s reserve requirement was $5,590,000 and $5,329,000, respectively. The Bank satisfied the reserve requirement with a combination of vault cash and a depository account held with the FRB of Cleveland.

DividendsThe Bank is subject to a dividend restriction, which generally limits the amount of dividends that can be paid by a national bank. Prior approval of the OCC is required if the total of all dividends declared by a national bank in any calendar year exceeds net profits, as defined for the year, combined with its retained net profits for the two preceding calendar years less any required transfers to surplus. Using this formula, the amount available for payment of dividends by the Bank in 2012 without approval of the OCC will be limited to $1,394,932 plus 2012 net profits retained up to the date of the dividend declaration.

CARRYING FAIR CARRYING FAIR AmOUNT vALUE AmOUNT vALUE

2011 2010

FinAnciAL ASSETS Cash and due from banks $ 13,517,210 $ 13,517,210 $ 24,849,148 $ 24,849,148Interest-bearing deposits with banks 385,962 385,962 16,067,743 16,067,743Securities available for sale 172,842,632 172,842,632 135,895,847 135,895,847Net loans 146,660,657 149,792,000 145,676,919 146,260,000Restricted investments in bank stock 709,700 709,700 823,700 823,700Accrued interest receivable 1,384,320 1,384,320 1,397,958 1,397,958 FinAnciAL LiAbiLiTiES Deposits $303,550,731 $300,846,000 $294,975,245 $292,070,000Treasury tax and loan notes - - 612,765 612,765 Accrued interest payable 53,935 53,935 55,599 55,599 oFF-bALAncE ShEET FinAnciAL inSTrumEnTS Commitments to extend credit $ - $ - $ - $ -Standby letters of credit - - - -

Treasury Tax and Loan Notes (Carried at Cost)The carrying amount of short-term borrowings approximate their fair value. As of December 31, 2011, the Bank had no treasury tax and loan notes outstanding.

Off-Balance Sheet Financial Instruments (Disclosed at Cost)The fair value of the Bank’s off-balance sheet financial instruments (lending commitments and letters of credit) is based on fees currently charged in the market to enter similar agreements, taking into account the remaining term of the agreements and the counterparties’ credit score standing.

The estimated fair values of the Bank’s financial instruments were as follows at December 31, 2011 and 2010:


Capital RequirementsThe Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets, and of Tier 1 capital to average assets. Management believes, as of December 31, 2011, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2011, the most recent notification from the Federal Deposit Insurance Corporation (“FDIC”)categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts and ratios and the minimum amounts and ratios required for capital adequacy purposes and to be well capitalized under the prompt corrective action provisions are as follows:

31

dEcEmbEr 31, 2011 Total risk-based capital to risk-weighted assets $36,611,000 20.25% ≥$14,461,920 ≥8.00% ≥$18,077,400 ≥10.00% Tier 1 capital to risk-weighted assets 34,556,000 19.12% ≥ 7,230,960 ≥4.00% ≥ 10,846,440 ≥ 6.00% Tier 1 capital to average assets 34,556,000 10.17% ≥ 13,593,040 ≥4.00% ≥ 16,991,300 ≥ 5.00% dEcEmbEr 31, 2010 Total risk-based capital to risk-weighted assets $ 35,505,000 19.98% ≥$ 14,216,080 ≥8.00% ≥$ 17,770,100 ≥10.00% Tier 1 capital to risk-weighted assets 33,520,000 18.86% ≥ 7,108,040 ≥4.00% ≥ 10,662,060 ≥ 6.00% Tier 1 capital to average assets 33,520,000 9.96% ≥ 13,468,440 ≥4.00% ≥ 16,835,550 ≥ 5.00%

TO BE WELL CAPITALIzED UNDER PROmPT FOR CAPITAL ADEqUACY CORRECTIvE ACTION ACTUAL PURPOSES PROvISIONS

AmOUNT RATIO AmOUNT RATIO AmOUNT RATIO

32

Mars National Bank is committed to serving the credit needs of the communities in which we do business. It is our policy to respond to all creditworthy segments of our market. We believe that doing so is basic to good business practice, and to the Bank’s own long-term vitality. This policy has been the basis of our success in the past and will remain a foundation on which we plan our future.

We recognize that this requires us to take a proactive, rather than a passive approach to determining and meeting community credit needs, including those of creditworthy low-income and moderate-income areas and individuals.

All Bank personnel are expected to support our CRA program through lending, investments and service to our local communities.

It is the policy of the Bank to make an active effort to determine the credit needs of our entire community, including those of low-income to moderate-income areas and individuals. The Bank will ensure that this is done by identify-ing people who can speak to these needs, such as community organizations, government officials, non-profit groups, businesses, trade associations and church and educational leaders.

The Bank will make an active effort to know the people in local organizations concerned with community develop-ment and the needs of low-income and moderate-income people. Our needs assessment contacts will be a regular vehicle for ensuring good communication with them.

The OCC performs a periodic evaluation of the performance of national banks under the CRA. Mars National Bank received a “Satisfactory” rating on our last CRA Performance Evaluation dated January 4, 2010. Copies of the Performance Evaluation are available from the Bank upon request or can be obtained through the OCC website at www.occ.treas.gov.

The Bank welcomes your CRA requests, comments or suggestions. Please send them in writing to:

Mars National BankJudy V. CaldwellCompliance OfficerP.O. Box 927Mars, PA 16046

COmmUNITY REINvESTmENT ACT PROGRAm

Dallas C. HippleChairmanMars National Bank-Retired

Janet L. van Buskirk BalentineVice ChairmanNorthwood Settlement Services

R. Bruce MenschSecretaryFugh Refrigeration, Inc.-Retired

Harry G. Austin, IIIJames Austin Company

Dr. Daniel J. ColeThree Rivers Urology

James V. DioniseMars National Bank

Kenneth R. FleesonLectromat, Inc.

Dianne Dobson HowardLord Corporation-Retired

Robert M. OdomMars National Bank

J. Jay ThierByrnes & Kiefer Company

Charles A. NortonEmeritus

H. Paul Starr, Jr.Emeritus

Patricia Sutton van BuskirkEmeritus

BOARD OF DIRECTORS

OFFICERS

EXECUTIVE James V. DionisePresidentChief Executive Officer

Robert M. OdomExecutive Vice PresidentChief Lending Officer

COMMERCIAL BANKINGWilliam M. LonettCommercial Banking Officer

Carolyn P. McBrideCommercial Banking Officer

John C. WalcheskyCommercial Banking Officer

CONSUMER/MORTGAGE LENDINGShawn R. ProperVice PresidentConsumer/Mortgage Lending Manager

Kimberly A. LadaskyConsumer Lending Officer

MARS NATIONAL ADVISORSKaren M. BostickVice PresidentInvestment Advisor Representative

RETAIL BANKINGCinthia M. SmithVice PresidentRetail Banking Manager

Adam R. FalcoArea Manager

Donna L. GasparinBranch ManagerPenn Office

Marcia L. RiegerBranch ManagerCranberry Office

Vicki L. SaytiBranch ManagerMars Office/Heritage Creek Office

Amy Van WinkleHead Teller/Teller Training SupervisorCranberry Office

ADMINISTRATIONDaniel F. DoyleVice PresidentAdministrative Services Manager

Robin E. VancheriExecutive Assistant

Tracie L. WilliamsHuman Resources Officer

CREDITKathryn W. DiscoCredit Officer

FINANCEMichael J. KirkSenior Vice PresidentChief Financial Officer

James M. HeinController

INFORMATION TECHNOLOGYMichael W. McGrawVice PresidentInformation Technology Manager

Richard C. LayoSenior Network Administrator

OPERATIONSLori L. KillmeyerSenior Vice PresidentOperations Manager

Deborah L. BrillDeposit Operations Manager

Linda E. LeesConsumer Loan Administration Officer

Karen A. Spinetti-LeberLoan Operations Manager

RISK MANAGEMENTRonald J. DambaughSenior Vice PresidentRisk Manager

Judy V. CaldwellCompliance Officer

Lynn A. HraboskyLoan Review Officer

HEADQUARTERS 145 Grand Avenue Mars, PA 16046 724.625.1555

BRANCH OFFICES

Adams645 Route 228

Mars, PA 16046 724.625.1555

Cranberry 20246 Route 19

Cranberry Township, PA 16066 724.776.3800

Heritage Creek211 Scharberry Lane

Mars, PA 16046724.742.2800

Mars 145 Grand Avenue Mars, PA 16046 724.625.1555

Penn 600 Pittsburgh Road

Butler, PA 16002 724.586.6767

Richland 5552 William Flynn Highway

Gibsonia, PA 15044 724.443.5901

MAILING ADDRESS P.O. Box 927

Mars, PA 16046

WEB ADDRESS www.MarsBank.com

Member FDIC Equal Housing Lender

Documents

Mars National Bank Annual Report 2011 · PDF fileMars National Bank ... coverage at 1.38%. •Higher non-interest income as ATM processing ... •Lower non-interest expense of 2.3%