VIST VISTERRA, INC.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2009

Commission File Number No. 0-14555

VIST FINANCIAL CORP.
(Exact name of Registrant as specified in its charter)

Securities registered under Section 12(b) of the Exchange Act:

Securities registered under Section 12(g) of the Exchange Act:

        Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  o  No  ý

        Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o  No  ý

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý  No  o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  o  No  o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ý

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

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o  No  ý

        As of June 30, 2009, the aggregate market value of the voting and non-voting common stock of the registrant held by non-affiliates computed by reference to the price at which common stock was last sold was approximately $32.5 million.

        Number of Shares of Common Stock Outstanding at March 31, 2010: 5,855,976

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the registrant's definitive Proxy Statement prepared in connection with its Annual Meeting of Stockholders to be held on April 27, 2010 are incorporated in Part III hereof.

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PART I

FORWARD LOOKING STATEMENTS

        VIST Financial Corp. (the "Company"), may from time to time make written or oral "forward-looking statements," including statements contained in the Company's filings with the Securities and Exchange Commission (including this Annual Report on Form 10-K and the exhibits hereto and thereto), in its reports to shareholders and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.

        These forward-looking statements include statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond the Company's control). The words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause the Company's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services; the willingness of users to substitute competitors' products and services for the Company's products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes; acquisitions; changes in consumer spending and saving habits; the nature, extent, and timing of governmental actions and reforms, including the rules of participation for the Trouble Asset Relief Program voluntary Capital Purchase Plan under the Emergency Economic Stabilization Act of 2008, which may be changed unilaterally and retroactively by legislative or regulatory actions; and the success of the Company at managing the risks involved in the foregoing.

        The Company cautions that the foregoing list of important factors is not exclusive. Readers are also cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date of this report, even if subsequently made available by the Company on its website or otherwise. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company to reflect events or circumstances occurring after the date of this report.

Item 1.    Business

        On March 3, 2008, the Company changed its name from Leesport Financial Corp. to VIST Financial Corp. This re-branding initiative brought all the Leesport Financial family of companies under one new name and brand.

        The consolidated financial statements include the accounts of VIST Financial Corp. (the "Company"), a bank holding company, which has elected to be treated as a financial holding company, and its wholly-owned subsidiaries, VIST Bank (the "Bank"), VIST Insurance, LLC ("VIST Insurance") and VIST Capital Management, LLC ("VIST Capital"). As of December 31, 2009, the Bank's wholly-owned subsidiary was VIST Mortgage Holdings, LLC. All significant inter-company accounts and transactions have been eliminated.

        The Company is a Pennsylvania business corporation headquartered at 1240 Broadcasting Road, Wyomissing, Pennsylvania 19610. The Company was organized as a bank holding company on

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January 1, 1986. The Company's election with the Board of Governors of the Federal Reserve System to become a financial holding company became effective on February 7, 2002. The Company offers a wide array of financial services through its various subsidiaries. The Company's executive offices are located at 1240 Broadcasting Road, Wyomissing, Pennsylvania 19610.

        The Company's common stock is traded on the NASDAQ Global Market system under the symbol "VIST."

        At December 31, 2009, the Company had total assets of $1.3 billion, total shareholders' equity of $125.4 million, and total deposits of $1.0 billion.

        On December 19, 2008, the Company issued to the United States Department of the Treasury ("Treasury") 25,000 shares of Series A, Fixed Rate, Cumulative Perpetual Preferred Stock ("Series A Preferred Stock"), with a par value of $0.01 per share and a liquidation preference of $1,000 per share, and a warrant ("Warrant") to purchase 364,078 shares of the Company's common stock, par value $5.00 per share, for an aggregate purchase price of $25.0 million in cash (see note 18 of the consolidated financial statements). The issuance of the Series A Preferred Stock also carries certain restrictions with regards to the Company's declaration and payment of cash dividends on common stock and the redemption, purchase or acquisition any shares of Common Stock or other capital stock or other equity securities of any kind of the Company, or any junior subordinate debt (trust preferred securities) issued by the Company or any affiliate of the Company.

Subsidiary Activities

The Bank

        The Company's wholly-owned banking subsidiary is VIST Bank ("VIST Bank" or the "Bank"), a Pennsylvania chartered commercial bank. During the year ended December 31, 2000, the charters of The First National Bank of Leesport, incorporated under the laws of the United States of America as a national bank in 1909, and Merchants Bank of Pennsylvania, both wholly-owned banking subsidiaries of the Company at that time, were merged into a single charter. VIST Bank operates in Berks, Schuylkill, Philadelphia, Delaware and Montgomery counties in Pennsylvania.

        On October 1, 2004, the Company acquired 100% of the outstanding voting shares of Madison Bancshares Group, Ltd., the holding company for Madison Bank ("Madison"), a Pennsylvania state-chartered commercial bank and its mortgage banking division, Philadelphia Financial Mortgage Company, now known as VIST Mortgage. Madison and VIST Mortgage are both now divisions of VIST Bank. The transaction enhances the Bank's strong presence in Pennsylvania, particularly in the high growth counties of Berks, Philadelphia, Montgomery and Delaware.

        VIST Bank has one wholly-owned subsidiary as of December 31, 2009; VIST Mortgage Holdings, LLC.

        VIST Mortgage Holdings, LLC, a Pennsylvania limited liability company, provides mortgage brokerage services, including, without limitation, any activity in which a mortgage broker may engage. It is operated as a permissible "affiliated business arrangement" within the meaning of the Real Estate Settlement Procedures Act of 1974. VIST Mortgage Holdings, LLC is currently inactive.

Commercial and Retail Banking

        VIST Bank provides services to its customers through seventeen full service financial centers, which operate under VIST Bank's name in Leesport, Blandon, Bern Township, Wyomissing, Breezy Corner, Hamburg, Birdsboro, Northeast Reading, Exeter Township, and Sinking Spring all of which are in Berks County, Pennsylvania. VIST Bank also operates a financial center in Schuylkill Haven, which is located in Schuylkill County, Pennsylvania. VIST Bank also operates financial centers in Blue Bell, Conshohocken, Oaks and Centre Square all of which are in Montgomery County, Pennsylvania. The Bank also operates a financial center in Fox Chase (northeast Philadelphia) in Philadelphia County,

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Pennsylvania and Strafford in Delaware County, Pennsylvania. The Bank also operates a limited service facility in Wernersville and Flying Hills, both in Berks County, Pennsylvania. All full service financial centers provide automated teller machine services. Each financial center, except the Wernersville, Exeter and Breezy Corner locations, provides drive-in facilities.

        VIST Bank engages in full service commercial and consumer banking business, including such services as accepting deposits in the form of time, demand and savings accounts. Such time deposits include certificates of deposit, individual retirement accounts and Roth IRAs. The Bank's savings accounts include money market accounts, health savings accounts, club accounts, NOW accounts and traditional regular savings accounts. In addition to accepting deposits, the Bank makes both secured and unsecured commercial and consumer loans, finances commercial transactions, provides equipment lease and accounts receivable financing and makes construction and mortgage loans, including home equity loans. The Bank does not engage in sub-prime lending. The Bank also provides small business loans and other services including rents for safe deposit facilities.

        At December 31, 2009, the Company and VIST Bank had the equivalent of 283 and 184 full-time employees, respectively.

Mortgage Banking

        VIST Bank provides mortgage banking services to its customers through VIST Mortgage. VIST Mortgage operates offices in Reading, Schuylkill Haven and Blue Bell, which are located in Berks County, Pennsylvania, Schuylkill County, Pennsylvania and Montgomery County, Pennsylvania, respectively. VIST Mortgage had 12 full-time employees at December 31, 2009.

Insurance

        VIST Insurance, LLC ("VIST Insurance"), a full service insurance agency, offers a full line of personal and commercial property and casualty insurance as well as group insurance for businesses, employee and group benefit plans, and life insurance. VIST Insurance is headquartered in Wyomissing, Pennsylvania with sales offices at 1240 Broadcasting Road, Wyomissing, Pennsylvania, Pennsylvania; 460 Norristown Road, Blue Bell, Pennsylvania; and 55 Sunnybrook Road, Pottstown, Pennsylvania. VIST Insurance had 64 full-time employees at December 31, 2009.

Wealth Management

        VIST Capital Management LLC, ("VIST Capital"), a full service investment advisory and brokerage services company, offers a full line of products and services for individual financial planning, retirement and estate planning, investments, corporate and small business pension and retirement planning. VIST Capital is headquartered at 1240 Broadcasting Road, Wyomissing, Pennsylvania and had 6 full-time employees at December 31, 2009.

Equity Investments

        Health Savings Accounts —In July 2005, the Company purchased a 25% equity position in First HSA, LLC a national health savings account ("HSA") administrator. The investment formalized a relationship that existed since 2001. This relationship has allowed the Company to be a custodian for HSA customers throughout the country. At December 31, 2009, the Company has more than 34,145 accounts with approximately $72.4 million in deposits.

Junior Subordinated Debt

        The Company owns First Leesport Capital Trust I (the "Trust"), a Delaware statutory business trust formed on March 9, 2000, in which the Company owns all of the common equity. The Trust has outstanding $5 million of 10.875% fixed rate mandatory redeemable capital securities. These securities must be redeemed in March 2030, but may be redeemed on or after March 9, 2010. In October, 2002

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the Company entered into an interest rate swap agreement that effectively converts the securities to a floating interest rate of six month LIBOR plus 5.25%. In June, 2003 the Company purchased a six month LIBOR cap to create protection against rising interest rates for the interest rate swap.

        On September 26, 2002, the Company established Leesport Capital Trust II, a Delaware statutory business trust, in which the Company owns all of the common equity. Leesport Capital Trust II issued $10 million of mandatory redeemable capital securities carrying a floating interest rate of three month LIBOR plus 3.45%. These securities must be redeemed in September 2032, but may be redeemed on or after November 7, 2007. The Company opted not to redeem these capital securities in 2009 due to unfavorable economic conditions and interest rates. The Company will continue to evaluate the feasibility of redeeming these capital securities. In September 2008, the Company entered into an interest rate swap agreement that effectively converts the $10 million of adjustable-rate capital securities to a fixed interest rate of 7.25%.

        On June 26, 2003, Madison established Madison Statutory Trust I, a Connecticut statutory business trust. Pursuant to the purchase of Madison on October 1, 2004, the Company assumed Madison Statutory Trust I in which the Company owns all of the common equity. Madison Statutory Trust I issued $5 million of mandatory redeemable capital securities carrying a floating interest rate of three month LIBOR plus 3.10%. These securities must be redeemed in June 2033. The Company has opted not to redeem these capital securities in 2008 due to unfavorable economic conditions and interest rates. The Company will continue to evaluate the feasibility of redeeming these capital securities. In September 2008, the Company entered into an interest rate swap agreement that effectively converts the $5 million of adjustable-rate capital securities to a fixed interest rate of 6.90%.

Competition

        The Company faces substantial competition in originating loans, in attracting deposits, and generating fee-based income. This competition comes principally from other banks, savings institutions, credit unions, mortgage banking companies and, with respect to deposits, institutions offering investment alternatives, including money market funds. Competition also comes from other insurance agencies and direct writing insurance companies. Due to the passage of landmark banking legislation in November 1999, competition may increasingly come from insurance companies, large securities firms and other financial services institutions. As a result of consolidation in the banking industry, some of the Company's competitors and their respective affiliates may enjoy advantages such as greater financial resources, a wider geographic presence, a wider array of services, or more favorable pricing alternatives and lower origination and operating costs.

Supervision and Regulation

General

        The Company is registered as a bank holding company, which has elected to be treated as a financial holding company, and is subject to supervision and regulation by the Board of Governors of the Federal Reserve System under the Bank Holding Act of 1956, as amended. As a bank holding company, the Company's activities and those of its bank subsidiary are limited to the business of banking and activities closely related or incidental to banking. Bank holding companies are required to file periodic reports with and are subject to examination by the Federal Reserve Board. The Federal Reserve Board has issued regulations under the Bank Holding Company Act that require a bank holding company to serve as a source of financial and managerial strength to its subsidiary banks. As a result, the Federal Reserve Board, pursuant to such regulations, may require the Company to stand ready to use its resources to provide adequate capital funds to its bank subsidiary during periods of financial stress or adversity.

        The Bank Holding Company Act prohibits the Company from acquiring direct or indirect control of more than 5% of the outstanding shares of any class of voting stock, or substantially all of the assets of any bank, or from merging or consolidating with another bank holding company, without prior

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approval of the Federal Reserve Board. Additionally, the Bank Holding Company Act prohibits the Company from engaging in or from acquiring ownership or control of more than 5% of the outstanding shares of any class of voting stock of any company engaged in a non-banking business, unless such business is determined by the Federal Reserve Board to be so closely related to banking as to be a proper incident thereto. The types of businesses that are permissible for bank holding companies to own were expanded by the Gramm-Leach-Bliley Act in 1999.

        As a Pennsylvania bank holding company for purposes of the Pennsylvania Banking Code, the Company is also subject to regulation and examination by the Pennsylvania Department of Banking.

        The Company is under the jurisdiction of the Securities and Exchange Commission and of state securities commissions for matters relating to the offering and sale of its securities. In addition, the Company is subject to the Securities and Exchange Commission's rules and regulations relating to periodic reporting, proxy solicitation, and insider trading.

Regulation of VIST Bank

        VIST Bank is a Pennsylvania chartered commercial bank, and its deposits are insured (up to applicable limits) by the Federal Deposit Insurance Corporation (the "FDIC"). The Bank is subject to regulation and examination by the Pennsylvania Department of Banking and by the FDIC. The Community Reinvestment Act requires VIST Bank to help meet the credit needs of the entire community where VIST Bank operates, including low and moderate income neighborhoods. VIST Bank's rating under the Community Reinvestment Act, assigned by the FDIC pursuant to an examination of VIST Bank, is important in determining whether the Bank may receive approval for, or utilize certain streamlined procedures in, applications to engage in new activities.

        VIST Bank is also subject to requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of VIST Bank. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy.

Capital Adequacy Guidelines

        Bank holding companies are required to comply with the Federal Reserve Board's risk-based capital guidelines. The required minimum ratio of total capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) is 8%. At least half of the total capital is required to be "Tier 1 capital," consisting principally of common shareholders' equity, less certain intangible assets. The remainder ("Tier 2 capital") may consist of certain preferred stock, a limited amount of subordinated debt, certain hybrid capital instruments and other debt securities, and a limited amount of the general loan loss allowance. The risk-based capital guidelines are required to take adequate account of interest rate risk, concentration of credit risk, and risks of nontraditional activities.

        In addition to the risk-based capital guidelines, the Federal Reserve Board requires a bank holding company to maintain a leverage ratio of a minimum level of Tier 1 capital (as determined under the risk-based capital guidelines) equal to 3% of average total consolidated assets for those bank holding companies which have the highest regulatory examination ratings and are not contemplating or experiencing significant growth or expansion. All other bank holding companies are required to maintain a ratio of at least 1% to 2% above the stated minimum. The Pennsylvania Department of Banking requires state chartered banks to maintain a 6% leverage capital level and 10% risk based capital, defined substantially the same as the federal regulations. The Bank is subject to almost identical capital requirements adopted by the FDIC.

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Prompt Corrective Action Rules

        The federal banking agencies have regulations defining the levels at which an insured institution would be considered "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." The applicable federal bank regulator for a depository institution could, under certain circumstances, reclassify a "well-capitalized" institution as "adequately capitalized" or require an "adequately capitalized" or "undercapitalized" institution to comply with supervisory actions as if it were in the next lower category. Such a reclassification could be made if the regulatory agency determines that the institution is in an unsafe or unsound condition (which could include unsatisfactory examination ratings). The Company and the Bank each satisfy the criteria to be classified as "well capitalized" within the meaning of applicable regulations.

Regulatory Restrictions on Dividends

        Dividend payments made by VIST Bank to the Company are subject to the Pennsylvania Banking Code, the Federal Deposit Insurance Act, and the regulations of the FDIC. Under the Banking Code, no dividends may be paid except from "accumulated net earnings" (generally, retained earnings). The Federal Reserve Board and the FDIC have formal and informal policies which provide that insured banks and bank holding companies should generally pay dividends only out of current operating earnings, with some exceptions. The Prompt Corrective Action Rules, described above, further limit the ability of banks to pay dividends if they are not classified as well capitalized or adequately capitalized. Under these policies and subject to the restrictions applicable to the Bank, the Bank had approximately $6.6 million available for payment of dividends to the Company at December 31, 2009, without prior regulatory approval.

        Dividends payable by the Company are subject to guidance published by the Board of Governors of the Federal Reserve System. Consistent with the Federal Reserve guidance, companies are urged to strongly consider eliminating, deferring or significantly reducing dividends if (i) net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividend, (ii) the prospective rate of earnings retention is not consistent with the bank holding company's capital needs and overall current and prospective financial condition, or (iii) the company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy rations. As a result of this guidance, management intends to consult with the Federal Reserve Bank of Philadelphia, and provide the Reserve Bank with information on the Company's then current and prospective earnings and capital position, on a quarterly basis in advance of declaring any cash dividends for the foreseeable future.

FDIC Insurance Assessments

        The FDIC maintains the Deposit Insurance Fund ("DIF") by assessing depository institutions an insurance premium. The amount each institution is assessed is based upon a variety of factors that include the balance of insured deposits as well as the degree of risk the institution poses to the insurance fund. The FDIC recently increased the amount of deposits it insures from $100,000 to $250,000. This increase is temporary and will continue through December 31, 2013. The Bank pays an insurance premium into the DIF based on the quarterly average daily deposit liabilities net of certain exclusions. The FDIC uses a risk-based premium system that assesses higher rates on those institutions that pose greater risks to the DIF. The FDIC places each institution in one of four risk categories using a two-step process based first on capital ratios (the capital group assignment) and then on other relevant information (the supervisory group assignment). Subsequently, the rate for each institution within a risk category may be adjusted depending upon different factors that either enhance or reduce the risk the institution poses to the DIF, including the unsecured debt, secured liabilities and brokered deposits related to each institution. Finally, certain risk multipliers may be applied to the adjusted assessment. In 2009, the FDIC increased the amount assessed from financial institutions by increasing its risk-based deposit insurance assessment scale. The quarterly annualized assessment scale for 2009 ranged from twelve basis points of assessable deposits for the strongest institutions to 77.5 basis points

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for the weakest. In 2009, the FDIC also adopted a uniform special assessment rate for all institutions not to exceed 10 basis points on the individual bank's assessment base. The total amount expensed by the Bank for FDIC insurance for the year ended December 31, 2009 under these provisions was $2.2 million.

        On November 12, 2009, the FDIC approved a rule to require insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012. An insured institution's risk-based deposit insurance assessments will continue to be calculated on a quarterly basis, but will be paid from the amount the institution prepaid until the later of the date that amount is exhausted or June 30, 2013, at which point any remaining funds would be returned to the insured institution. Consequently, the Company's prepayment of DIF premiums made in December 2009 resulted in a prepaid asset of $5.7 million.

Federal Home Loan Bank System

        The Bank is a member of the Federal Home Loan Bank of Pittsburgh (the "FHLB"), which is one of 12 regional Federal Home Loan Banks. Each Federal Home Loan Bank serves as a reserve or central bank for its members within its assigned region. It is funded primarily from funds deposited by member institutions and proceeds from the sale of consolidated obligations of the Federal Home Loan Bank System. It makes loans to members (i.e., advances) in accordance with policies and procedures established by the board of directors of the Federal Home Loan Bank. At December 31, 2009, the Bank had no short-term FHLB advances outstanding and $20.0 million in longer-term FHLB advances outstanding (see note 12 of the consolidated financial statements).

        As a member, the Bank is required to purchase and maintain stock in the FHLB in an amount equal to the greater of 1% of its aggregate unpaid residential mortgage loans, home purchase contracts or similar obligations at the beginning of each year or 5% of its outstanding advances from the FHLB. At December 31, 2009, the Bank had $5.7 million in stock of the FHLB which was in compliance with this requirement.

Emergency Economic Stabilization Act of 2008 and Related Programs

        The Emergency Economic Stabilization Act of 2008 ("EESA") was enacted to enable the federal government, under terms and conditions developed primarily by the Secretary of the United States Department of Treasury, to restore liquidity and stabilize the U.S. economy, including through implementation of the Troubled Asset Relief Program ("TARP"). Under the TARP, Treasury authorized a voluntary Capital Purchase Program to purchase up to $250 billion of senior preferred shares of qualifying financial institutions that elected to participate by November 14, 2008. As previously disclosed, on December 19, 2008, the Company issued to Treasury, 25,000 shares of Series A Preferred Stock and a warrant to purchase 364,078 shares of the Company's common stock for an aggregate purchase price of $25.0 million under the TARP Capital Purchase Program (see note 18 to notes to consolidated financial statements). Companies participating in the TARP Capital Purchase Program were required to adopt certain standards relating to executive compensation. The terms of the TARP Capital Purchase Program also limit certain uses of capital by the issuer, including with respect to repurchases of securities and increases in dividends.

        The American Recovery and Reinvestment Act of 2009 ("ARRA") was intended to provide a stimulus to the U.S. economy in the wake of the economic downturn brought about by the subprime mortgage crisis and the resulting credit crunch. The bill includes federal tax cuts, expansion of unemployment benefits and other social welfare provisions, and domestic spending in education, healthcare, and infrastructure, including the energy structure. The new law also includes certain noneconomic recovery related items, including a limitation on executive compensation in federally aided financial institutions, including institutions, such as the Company, that had previously received an investment by Treasury under the TARP Capital Purchase Program. Under ARRA, an institution that either will receive funds or which had previously received funds under TARP, will be subject to certain

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restrictions and standards throughout the period in which any obligation arising under TARP remains outstanding (except for the time during which the federal government holds only warrants to purchase common stock of the issuer). The following summarizes the significant requirements of ARRA, which are to be included in standards to be established by Treasury:

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limits on compensation incentives for risks by senior executive officers;



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a requirement for recovery of any compensation paid based on inaccurate financial information;



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a prohibition on "golden parachute payments" to specified officers or employees, which term is generally defined as any payment for departure from a company for any reason;



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a prohibition on compensation plans that would encourage manipulation of reported earnings to enhance the compensation of employees;



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a prohibition on bonus, retention award, or incentive compensation to designated employees, except in the form of long-term restricted stock;



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a requirement that the board of directors adopt a luxury expenditures policy;



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a requirement that shareholders be permitted a separate nonbinding vote on executive compensation;



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a requirement that the chief executive officer and the chief financial officer provide a written certification of compliance with the standards, when established, to the SEC.

Under ARRA, subject to consultation with the appropriate federal banking agency, Treasury is required to permit a recipient of TARP funds to repay any amounts previously provided to or invested in the recipient by Treasury without regard to whether the institution has replaced the funds from any other source or to any waiting period.

        In November 2008, the FDIC created the Temporary Liquidity Guaranty Program to strengthen confidence and encourage liquidity in the banking system by guaranteeing newly issued senior unsecured debt of banks, thrifts, and certain holding companies via its Debt Guaranty Program, and by providing full coverage of noninterest bearing deposit transaction accounts and capped NOW accounts, regardless of dollar amount via its Temporary Account Guaranty Program. As of October 31, 2009, banks were no longer eligible to issue additional debt under the Temporary Liquidity Guaranty Program. The Company did not issue any debt under the Temporary Liquidity Guaranty Program, but continues to participate in the Transaction Account Guaranty Program.

Other Legislation

        The Gramm-Leach-Bliley Act, passed in 1999, dramatically changed certain banking laws. One of the most significant changes was that the separation between banking and the securities businesses mandated by the Glass-Steagall Act has now been removed, and the provisions of any state law that prohibits affiliation between banking and insurance entities have been preempted. Accordingly, the legislation now permits firms engaged in underwriting and dealing in securities, and insurance companies, to own banking entities, and permits bank holding companies (and in some cases, banks) to own securities firms and insurance companies. The provisions of federal law that preclude banking entities from engaging in non-financially related activities, such as manufacturing, have not been changed. For example, a manufacturing company cannot own a bank and become a bank holding company, and a bank holding company cannot own a subsidiary that is not engaged in financial activities, as defined by the regulators.

        The legislation creates a new category of bank holding company called a "financial holding company." In order to avail itself of the expanded financial activities permitted under the law, a bank holding company must notify the Federal Reserve Board ("Federal Reserve") that it elects to be a financial holding company. A bank holding company can make this election if it, and all its bank subsidiaries, are well capitalized, well managed, and have at least a satisfactory Community

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Reinvestment Act rating, each in accordance with the definitions prescribed by the Federal Reserve and the regulators of the subsidiary banks. Once a bank holding company makes such an election, and provided that the Federal Reserve does not object to such election by such bank holding company, the financial holding company may engage in financial activities (i.e., securities underwriting, insurance underwriting, and certain other activities that are financial in nature as to be determined by the Federal Reserve) by simply giving a notice to the Federal Reserve within thirty days after beginning such business or acquiring a company engaged in such business. This makes the regulatory approval process to engage in financial activities much more streamlined than under prior law. On February 7, 2002, the Company's election with the Board of Governors of the Federal Reserve System to become a financial holding company became effective.

        The Sarbanes-Oxley Act of 2002 was enacted to enhance penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures under the federal securities laws. The Sarbanes-Oxley Act generally applies to all companies, including the Company, that file or are required to file periodic reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934, or the Exchange Act. The legislation includes provisions, among other things, governing the services that can be provided by a public company's independent auditors and the procedures for approving such services, requiring the chief executive officer and chief financial officer to certify certain matters relating to the company's periodic filings under the Exchange Act, requiring expedited filings of reports by insiders of their securities transactions and containing other provisions relating to insider conflicts of interest, increasing disclosure requirements relating to critical financial accounting policies and their application, increasing penalties for securities law violations, and creating a new Public Company Accounting Oversight Board ("PCAOB"), a regulatory body subject to SEC jurisdiction with broad powers to set auditing, quality control and ethics standards for accounting firms. In connection with this legislation, the national securities exchanges and Nasdaq have adopted rules relating to certain matters, including the independence of members of a company's audit committee, as a condition to listing or continued listing. The Company does not believe that the application of these rules to the Company will have a material effect on its business, financial condition or results of operations.

        The USA PATRIOT Act, enacted in direct response to the terrorist attacks on September 11, 2001, strengthens the anti-money laundering provisions of the Bank Secrecy Act. Many of the new provisions added by the Act apply to accounts at or held by foreign banks, or accounts of or transactions with foreign entities. While the Bank does not have a significant foreign business, the new requirements of the Bank Secrecy Act still require the Bank to use proper procedures to identify its customers. The Act also requires the banking regulators to consider a bank's record of compliance under the Bank Secrecy Act in acting on any application filed by a bank. As the Bank is subject to the provisions of the Bank Secrecy Act (i.e., reporting of cash transactions in excess of $10,000), the Bank's record of compliance in this area will be an additional factor in any applications filed by it in the future. To the Bank's knowledge, its record of compliance in this area is satisfactory.

        The Fair and Accurate Credit Transaction Act was adopted in 2003. It extends and expands upon provisions in the Fair Credit Reporting Act, affecting the reporting of delinquent payments by customers and denials of credit applications. The revised act imposes additional record keeping, reporting, and customer disclosure requirements on all financial institutions, including the Bank. Also in late 2003, the Check 21 Act was adopted. This Act affects the way checks can be processed in the banking system, allowing payments to be converted to electronic transfers rather than processed as traditional paper checks.

        Congress is currently debating major legislation that may fundamentally change the regulatory oversight of banking institutions in the United States. Whether any legislation will be enacted or additional regulations will be adopted, and how they might impact the Company cannot be determined at this time.

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        VIST Insurance and VIST Capital are subject to additional regulatory requirements. VIST Insurance is subject to Pennsylvania insurance laws and the regulations of the Pennsylvania Department of Insurance. The securities brokerage activities of VIST Capital are subject to regulation by the SEC and the FINRA/SIPC, and VIST Capital is a registered investment advisor subject to regulation by the SEC.

Item 1A.    Risk Factors

Difficult market conditions and economic trends have adversely affected our industry and our business.

        We are particularly affected by downturns in the U. S. housing market. Dramatic declines in the housing market over the past year, with decreasing home prices and increasing delinquencies and foreclosures, may have a negative impact on the credit performance of mortgage, consumer, commercial and construction loan portfolios resulting in significant write-downs of assets by many financial institutions. In addition, the values of real estate collateral supporting many loans have declined and may continue to decline. General downward economic trends, reduced availability of commercial credit and increasing unemployment may negatively impact the credit performance of commercial and consumer credit, resulting in additional write-downs. Concerns over the stability of the financial markets and the economy have resulted in decreased lending by financial institutions to their customers and to each other. This market turmoil and tightening of credit has led to increased commercial and consumer deficiencies, lack of customer confidence, increased market volatility and widespread reduction in general business activity. Competition among depository institutions for deposits has increased significantly. Financial institutions have experienced decreased access to deposits or borrowings. The resulting economic pressure on consumers and businesses and the lack of confidence in the financial markets may adversely affect our business, financial condition, results of operations and stock price. We do not expect that the difficult market conditions will improve in the near future. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the industry. In particular, we may face the following risks in connection with these events:

•

We expect to face increased regulation of our industry. Compliance with such regulation may increase our costs and limit our ability to pursue business opportunities.



•

Our ability to assess the creditworthiness of customers and to estimate the losses inherent in our credit exposure is made more complex by these difficult market and economic conditions.



•

We also may be required to pay even higher Federal Deposit Insurance Corporation premiums than the recently increased level, because financial institution failures resulting from the depressed market conditions have depleted and may continue to deplete the deposit insurance fund and reduce its ratio of reserves to insured deposits.



•

Our ability to borrow from other financial institutions or the Federal Home Loan Bank on favorable terms or at all could be adversely affected by further disruptions in the capital markets or other events.



•

We may experience a prolonged decrease in dividend income from our investment in Federal Home Loan Bank stock.



•

We may experience increases in foreclosures, delinquencies and customer bankruptcies, as well as more restricted access to funds.

Current levels of market volatility are unprecedented.

        The capital and credit markets have been experiencing volatility and disruption for more than a year. In recent months, the volatility and disruption has reached unprecedented levels. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers

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without regard to those issuers' underlying financial strength. If current levels of market disruption and volatility continue or worsen, there can be no assurance that we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition, results of operations and cash flows.

The market value of our securities portfolio may continue to be impacted by the level of interest rates and the credit quality and strength of the underlying issuers.

        If a decline in market value of a security is determined to be other than temporary, under generally accepted accounting principles, we are required to write these securities down to their estimated fair value. As of December 31, 2009, we owned single issuer and pooled trust preferred securities and private label collateralized mortgage obligations whose aggregate historical cost basis is greater than their estimated fair value (see note 7 of the consolidated financial statements). We have reviewed these securities and, with the exception of those securities which we identified as other-than-temporarily impaired, we have determined that the decreases in estimated fair value are temporary. We perform an ongoing analysis of these securities utilizing both readily available market data and third party analytical models. Future changes in interest rates or the credit quality and strength of the underlying issuers may reduce the market value of these and other securities. If such decline is determined to be other than temporary, we will write them down through a charge to earnings to their then current fair value.

        The Company's banking subsidiary, VIST Bank, is a member of the FHLB and is required to purchase and maintain stock in the FHLB in an amount equal to the greater of 1% of its aggregate unpaid residential mortgage loans, home purchase contracts or similar obligations at the beginning of each year or 5% of its outstanding advances from the FHLB. At December 31, 2009, the Bank had $5.7 million in stock of the FHLB which was in compliance with this requirement. These equity securities are "restricted" in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other tradable equity securities, their fair value is equal to amortized cost, and no impairment write-downs have been recorded on these securities during 2009, 2008, or 2007.

        The FHLB announced in December 2008 that it voluntarily suspended the payment of dividends and the repurchase of excess capital stock from member banks. The FHLB cited a significant reduction in the level of core earnings resulting from lower short-term interest rates, the increased cost of maintaining liquidity and constrained access to the debt markets at attractive rates and maturities as the main reasons for the decision to suspend dividends and the repurchase excess capital stock. The FHLB last paid a dividend in the third quarter of 2008. Accounting guidance indicates that an investor in FHLB capital stock should recognize impairment if it concludes that it is not probable that it will ultimately recover the par value of its shares. The decision of whether impairment exists is a matter of judgment that should reflect the investor's view of the FHLB's long-term performance, which includes factors such as its operating performance, the severity and duration of declines in the market value of its net assets related to its capital stock amount, its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance, the impact of legislation and regulatory changes on FHLB, and accordingly, on the members of FHLB and its liquidity and funding position. After evaluating all of these considerations, the Company believes the par value of its shares will be recovered. Future evaluations of the above mentioned factors could result in the Company recognizing an impairment charge.

Changes in interest rates could reduce our income, cash flows and asset values.

        Our income and cash flows and the value of our assets depend to a great extent on the difference between the interest rates we earn on interest-earning assets, such as loans and investment securities, and the interest rates we pay on interest-bearing liabilities such as deposits and borrowings. These rates are highly sensitive to many factors which are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Board of

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Governors of the Federal Reserve System. Changes in monetary policy, including changes in interest rates, will influence not only the interest we receive on our loans and investment securities and the amount of interest we pay on deposits and borrowings but will also affect our ability to originate loans and obtain deposits and the value of our investment portfolio. If the rate of interest we pay on our deposits and other borrowings increases more or decreases less than the rate of interest we earn on our loans and other investments, our net interest income, and therefore our earnings, could be adversely affected. Our earnings also could be adversely affected if the rates on our loans and other investments fall more quickly than those on our deposits and other borrowings.

Our financial condition and results of operations would be adversely affected if our allowance for loan losses is not sufficient to absorb actual losses or if we are required to increase our allowance.

        Despite our underwriting criteria, we may experience loan delinquencies and losses. In order to absorb losses associated with nonperforming loans, we maintain an allowance for loan losses based on, among other things, historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. Determination of the allowance inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. At any time there are likely to be loans in our portfolio that will result in losses but that have not been identified as nonperforming or potential problem credits. We cannot be sure that we will be able to identify deteriorating credits before they become nonperforming assets or that we will be able to limit losses on those loans that are identified. We may be required to increase our allowance for loan losses for any of several reasons. State and federal regulators, in reviewing our loan portfolio as part of a regulatory examination, may request that we increase our allowance for loan losses. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in our allowance. In addition, if charge-offs in future periods exceed our allowance for loan losses, we will need additional increases in our allowance for loan losses. Any increases in our allowance for loan losses will result in a decrease in our net income and, possibly, our capital, and may materially affect our results of operations in the period in which the allowance is increased.

Recently enacted legislation, legislation enacted in the future, and government programs could subject us to increased regulation and may adversely affect us.

        The Emergency Economic Stabilization Act of 2008 ("EESA") provided the U.S. Treasury authority to, among other things, invest in financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets. Pursuant to this authority, the U.S. Treasury announced its Capital Purchase Program (the "CPP"), under which it purchased preferred stock and warrants in eligible institutions, including the Company, to increase the flow of credit to businesses and consumers and to support the economy. In accordance with the terms of the CPP, the Company issued to the U.S. Treasury 25,000 shares of Series A Preferred Stock and a stock purchase warrant to purchase 364,078 shares of the Company's common stock at $10.30 per share, for an aggregate purchase price of $25 million.

        Participation in the CPP subjects the Company to increased oversight by the U.S. Treasury, regulators and Congress. On February 17, 2009, EESA was amended by the American Recovery and Reinvestment Act of 2009 ("ARRA"). EESA, the ARRA and the rules issued under these acts contain executive compensation restrictions and corporate governance standards that apply to all CPP participants, including the Company. For example, participation in the CPP imposes restrictions on the Company's ability to pay cash dividends on or repurchase the Company's common stock. With regard to increased oversight, Treasury has the power to unilaterally amend the terms of the CPP purchase agreement to the extent required to comply with changes in applicable federal law and to inspect the Company's corporate books and records through its federal banking regulator. In addition, Treasury has the right to appoint two persons to the Company's board of directors if the Company misses dividend

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payments for six dividend periods, whether or not consecutive, on the preferred stock. EESA, the ARRA and the related rules subject the Company to substantial restrictions on executive compensation that could adversely affect the Company's ability to attract, motivate, and retain key executives and other key personnel. The ultimate impact that EESA, the ARRA and their implementing regulations, or any other legislation or governmental program, will have on the financial markets is unknown at this time. The failure of the financial markets to stabilize and a continuation or worsening of current financial market conditions could materially and adversely affect the Company's business, results of operations, financial condition, access to funding and the trading price of the Company's common stock.

The Company may be required to pay significantly higher FDIC premiums or special assessments that could adversely affect earnings.

        Recent bank failures have severely depleted the FDIC's deposit insurance fund. In response, the FDIC adopted a final rule effective April 1, 2009, which differentiates for risk in calculating assessment rates. The FDIC levied a special assessment on all insured institutions payable June 30, 2009 to replenish the fund and, at December 30, 2009, required insured institutions to pay 2010-2012 insurance premiums in advance. Any additional special assessments or premium increases could adversely affect the Company's earnings.

Competition may decrease our growth or profits.

        We face substantial competition in all phases of our operations from a variety of different competitors, including commercial banks, savings and loan associations, mutual savings banks, credit unions, consumer finance companies, factoring companies, leasing companies, insurance companies and money market mutual funds. There is very strong competition among financial services providers in our principal service area. Our competitors may have greater resources, higher lending limits or larger branch systems than we do. Accordingly, they may be able to offer a broader range of products and services as well as better pricing for those products and services than we can.

        In addition, some of the financial services organizations with which we compete are not subject to the same degree of regulation as is imposed on federally insured financial institutions. As a result, those non-bank competitors may be able to access funding and provide various services more easily or at less cost than we can, adversely affecting our ability to compete effectively.

We may be adversely affected by government regulation.

        The banking industry is heavily regulated. Banking regulations are primarily intended to protect the federal deposit insurance funds and depositors, not shareholders. Changes in the laws, regulations, and regulatory practices affecting the banking industry may increase our costs of doing business or otherwise adversely affect us and create competitive advantages for others. Regulations affecting banks and financial services companies undergo continuous change, and we cannot predict the ultimate effect of these changes, which could have a material adverse effect on our profitability or financial condition.

We rely on our management and other key personnel, and the loss of any of them may adversely affect our operations.

        We are and will continue to be dependent upon the services of our executive management team. In addition, we will continue to depend on our ability to retain and recruit key commercial loan officers. The unexpected loss of services of any key management personnel or commercial loan officers could have an adverse effect on our business and financial condition because of their skills, knowledge of our market, years of industry experience and the difficulty of promptly finding qualified replacement personnel.

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Environmental liability associated with lending activities could result in losses.

        In the course of our business, we may foreclose on and take title to properties securing our loans. If hazardous substances were discovered on any of these properties, we could be liable to governmental entities or third parties for the costs of remediation of the hazard, as well as for personal injury and property damage. Many environmental laws can impose liability regardless of whether we knew of, or were responsible for, the contamination. In addition, if we arrange for the disposal of hazardous or toxic substances at another site, we may be liable for the costs of cleaning up and removing those substances from the site even if we neither own nor operate the disposal site. Environmental laws may require us to incur substantial expenses and may materially limit use of properties we acquire through foreclosure, reduce their value or limit our ability to sell them in the event of a default on the loans they secure. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability.

Failure to implement new technologies in our operations may adversely affect our growth or profits.

        The market for financial services, including banking services and consumer finance services, is increasingly affected by advances in technology, including developments in telecommunications, data processing, computers, automation, internet-based banking and tele-banking. Our ability to compete successfully in our markets may depend on the extent to which we are able to exploit such technological changes. However, we can provide no assurance that we will be able to properly or timely anticipate or implement such technologies or properly train our staff to use such technologies. Any failure to adapt to new technologies could adversely affect our business, financial condition or operating results.

An investment in our common stock is not an insured deposit.

        Our common stock is not a bank deposit and, therefore, is not insured against loss by the Federal Deposit Insurance Corporation, commonly referred to as the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in our common stock is subject to the same market forces that affect the price of common stock in any company.

Our ability to pay dividends is limited by law and federal banking regulation.

        Our ability to pay dividends to our shareholders largely depends on our receipt of dividends from VIST Bank. The amount of dividends that VIST Bank may pay to us is limited by federal laws and regulations. We also may decide to limit the payment of dividends even when we have the legal ability to pay them in order to retain earnings for use in our business.

        Dividends payable by the Company are subject to guidance published by the Board of Governors of the Federal Reserve System. Consistent with the Federal Reserve guidance, companies are urged to strongly consider eliminating, deferring or significantly reducing dividends if (i) net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividend, (ii) the prospective rate of earnings retention is not consistent with the bank holding company's capital needs and overall current and prospective financial condition, or (iii) the company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy rations. As a result of this guidance, management intends to consult with the Federal Reserve Bank of Philadelphia, and provide the Reserve Bank with information on the Company's then current and prospective earnings and capital position, on a quarterly basis in advance of declaring any cash dividends for the foreseeable future.

        In addition, under the terms of the TARP CPP, the Company cannot increase its common stock dividend from the last quarterly dividend per share declared on its common stock prior to October 14, 2008 ($0.10) without the consent of Treasury while the Series A Preferred Stock remains outstanding.

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Federal and state banking laws, our articles of incorporation and our by-laws may have an anti-takeover effect.

        Federal law imposes restrictions, including regulatory approval requirements, on persons seeking to acquire control over us. Pennsylvania law also has provisions that may have an anti-takeover effect. In addition, our articles of incorporation and bylaws permit our board of directors to issue, without shareholder approval, preferred stock and additional shares of common stock that could adversely affect the voting power and other rights of existing common shareholders. These provisions may serve to entrench management or discourage a takeover attempt that shareholders consider to be in their best interest or in which they would receive a substantial premium over the current market price.

We plan to continue to grow and there are risks associated with continued growth.

        We intend to continue to expand our business and operations to increase deposits and loans. Continued growth may present operating and other problems that could adversely affect our business, financial condition and results of operations. Our growth may place a strain on our administrative and operational, personnel, and financial resources and increase demands on our systems and controls. Our ability to manage growth successfully will depend on our ability to attract qualified personnel and maintain cost controls and asset quality while attracting additional loans and deposits on favorable terms, as well as on factors beyond our control, such as economic conditions and interest rate trends. If we grow too quickly and are not able to attract qualified personnel, control costs and maintain asset quality, this continued rapid growth could materially adversely affect our financial performance.

Our legal lending limits are relatively low and restrict our ability to compete for larger customers.

        At December 31, 2009, our lending limit per borrower was approximately $15.2 million, or approximately 12% of our capital. Accordingly, the size of loans that we can offer to potential borrowers (without participation by other lenders) is less than the size of loans that many of our competitors with larger capitalization are able to offer. Our legal lending limit also impacts the efficiency of our lending operation because it tends to lower our average loan size, which means we have to generate a higher number of transactions to achieve the same portfolio volume. We may engage in loan participations with other banks for loans in excess of our legal lending limits. However, there can be no assurance that such participations will be available at all or on terms which are favorable to us and to our customers.

If we are unable to identify and acquire other financial institutions and successfully integrate their acquired businesses, our business and earnings may be negatively affected.

        Acquisition of other financial institutions is a component of our growth strategy. The market for acquisitions remains highly competitive, and we may be unable to find acquisition candidates in the future that fit our acquisition and growth strategy.

        Acquisitions of financial institutions involve operational risks and uncertainties, and acquired companies may have unforeseen liabilities, exposure to asset quality problems, key employee and customer retention problems and other problems that could negatively affect our organization. We may not be able to complete future acquisitions and, if completed, we may not be able to successfully integrate the operations, management, products and services of the entities that we acquire and eliminate redundancies. The integration process may also require significant time and attention from our management that they would otherwise direct at servicing existing business and developing new business. Our failure to successfully integrate the entities we acquire into our existing operations may increase our operating costs significantly and adversely affect our business and earnings.

The market price for our common stock may be volatile.

        The market price for our common stock has fluctuated, ranging between $5.00 and $9.40 per share during the 12 months ended December 31, 2009. The overall market and the price of our common stock may continue to be volatile. There may be a significant impact on the market price for our

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common stock due to, among other things, developments in our business, variations in our anticipated or actual operating results, changes in investors' or analysts' perceptions of the risks and conditions of our business and the size of the public float of our common stock. The average daily trading volume for our common stock as reported on NASDAQ was 5,906 shares during the twelve months ended December 31, 2009, with daily volume ranging from a low of zero shares to a high of 109,794 shares. There can be no assurance that a more active or consistent trading market in our common stock will develop. As a result, relatively small trades could have a significant impact on the price of our common stock.

Market conditions may adversely affect our fee based investment and insurance business.

        The revenues of our fee based insurance business are derived primarily from commissions from the sale of insurance policies, which commissions are generally calculated as a percentage of the policy premium. These insurance policy commissions can fluctuate as insurance carriers from time to time increase or decrease the premiums on the insurance products we sell. Similarly, we receive fee based revenues from commissions from the sale of securities and investment advisory fees. In the event of decreased stock market activity, the volume of trading facilitated by VIST Capital Management, LLC will in all likelihood decrease resulting in decreased commission revenue on purchases and sales of securities. In addition, investment advisory fees, which are generally based on a percentage of the total value of an investment portfolio, will decrease in the event of decreases in the values of the investment portfolios, for example, as a result of overall market declines.

Item 1B.    Unresolved Staff Comments

   None

Item 2.    Properties

        The Company's principal office is located in the administration building at 1240 Broadcasting Road, Wyomissing, Pennsylvania.

        Listed below are the locations of properties owned or leased by the Company and its subsidiaries. Owned properties are not subject to any mortgage, lien or encumbrance.

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        VIST Insurance shares offices in the Company's administration building located at 1240 Broadcasting Road, Wyomissing, Pennsylvania. VIST Insurance is charged a pro rata amount of the total lease expense.

        VIST Capital also shares office space in the Company's administration building in Wyomissing as well as in VIST Insurance's office in Blue Bell and are accordingly charged a pro rata amount of the total lease expense.

Item 3.    Legal Proceedings

        A certain amount of litigation arises in the ordinary course of the business of the Company, and the Company's subsidiaries. In the opinion of the management of the Company, there are no proceedings pending to which the Company, or the Company's subsidiaries are a party or to which their property is subject, that, if determined adversely to the Company or its subsidiaries, would be material in relation to the Company's shareholders' equity or financial condition, nor are there any proceedings pending other than ordinary routine litigation incident to the business of the Company and its subsidiaries. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Company or its subsidiaries by governmental authorities.

Item 4.    [Removed and Reserved]

Item 4A.    Executive Officers of the Registrant

        Certain information, as of December 31, 2009, including principal occupation during the past five years, relating to each executive officer of the Company is as follows:

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PART II

Item 5.    Market For Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Performance Graph

        Set forth below is a graph and table comparing the yearly percentage change in the cumulative total shareholder return on the Company's common stock against the cumulative total return on the NASDAQ-Total US Index, and the SNL Mid-Atlantic Bank Index for the five-year period commencing December 31, 2004, and ending December 31, 2009.

        Cumulative total return on the Company's common stock, the NASDAQ Combination Bank Index, and the SNL Mid-Atlantic Bank Index equals the total increase in value since December 31, 2004, assuming reinvestment of all dividends. The graph and table were prepared assuming that $100 was invested on December 31, 2004, in Company common stock, the NASDAQ-Total US Index, and the SNL Mid-Atlantic Bank Index.

VIST Financial Corp.

        As of December 31, 2009, there were 892 record holders of the Company's common stock. The market price of the Company's common stock for each quarter in 2009 and 2008 and the dividends declared on the Company's common stock for each quarter in 2009 and 2008 are set forth below.

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Market Price of Common Stock

        The Company's common stock is traded on the NASDAQ Global Select Market under the symbol "VIST." The following table sets forth, for the fiscal quarters indicated, the high and low bid and asked price per share of the Company's common stock, as reported on the NASDAQ Global Select Market:

Series A Preferred Stock and Common Stock Dividends

        On December 19, 2008, the Company issued to the Treasury 25,000 shares of Series A Preferred Stock which pays cumulative dividends at a rate of 5% per annum for the first five years, and 9% per annum thereafter. Under ARRA, the Series A Preferred Stock may be redeemed at any time following consultation by the Company's primary bank regulator and Treasury in 25% increments.

        Prior to the earlier of the third anniversary date of the issuance of the Series A Preferred Stock (December 19, 2011) or the date on which the Series A Preferred Stock has been redeemed in whole or the Treasury has transferred all of the Series A Preferred Stock to third parties which are not affiliates of the Treasury, the Company cannot increase its common stock dividend from the last quarterly cash dividend per share ($0.10) declared on the common stock prior to October 14, 2008 without the consent of the Treasury,

        Cash dividends on the Company's common stock have historically been payable on the 15 ^th  of January, April, July, and October. In 2008, cash dividends were paid in the months of January, April, July and November. In 2009, cash dividends were paid in the months of February, May, August and November. In 2009, cumulative cash dividends on the Series A Preferred Stock and cash dividends on common stock are payable on the 15 ^th  of February, May, August, and November.

        The Company can derive a portion of its income from dividends paid to it by the Bank. For a description of certain regulatory restrictions on the payment of dividends by the Bank to the Company and by the Company, see "Business—Regulatory Restrictions on Dividends."

        Stock Repurchase Plan.     On July 17, 2007, the Company announced that it has increased the number of shares remaining for repurchase under its stock repurchase plan, originally effective January 1, 2003, and extended May 20, 2004, to 150,000 shares. During 2009, the Company did not

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repurchase any of its outstanding shares of common stock. At December 31, 2009, the maximum number of shares that may yet be purchased under the plan remained at 115,000.

        The following table sets forth certain information relating to shares of the Company's common stock repurchased by the company during the fourth quarter of 2009.

        As a result of the issuance of the Series A Preferred Stock, prior to the earlier of the third anniversary date of the issuance of the Series A Preferred Stock (December 19, 2011) or the date on which the Series A Preferred Stock has been redeemed in whole or the Treasury has transferred all of the Series A Preferred Stock to third parties which are not affiliates of the Treasury, the Company is generally restricted against redeeming, purchasing or acquiring any shares of Common Stock or other capital stock or other equity securities of any kind of the Company without the consent of the Treasury.

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Item 6.    Selected Financial Data

        The selected consolidated financial and other data and management's discussion and analysis of financial condition and results of operation set forth below and in Item 7 hereof is derived in part from, and should be read in conjunction with, the consolidated financial statements and notes thereto contained elsewhere herein.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        The Company is a financial services company. As of December 31, 2009, VIST Bank, VIST Insurance, LLC, and VIST Capital Management, LLC were wholly-owned subsidiaries of the Company. As of December 31, 2009, VIST Mortgage Holdings, LLC was a wholly-owned, non-bank subsidiary of VIST Bank.

        During 2000, VIST Realty Solutions, LLC was formed as a subsidiary of VIST Bank for the purpose of providing title insurance and other real estate related services to its customers through limited partnership arrangements with third parties involved in the real estate services industry. On October 29, 2008, VIST Realty Solutions, LLC dissolved its operations by selling its partnership interest for an amount which approximated its initial capital contribution.

        In May 2002, the Company's subsidiary, VIST Bank, jointly formed VIST Mortgage Holdings, LLC with another real estate company. VIST Bank's initial investment was $15,000. In May 2004, VIST Bank dissolved its investment with the real estate company. In May 2004, VIST Bank formed VIST Mortgage Holdings, LLC to provide mortgage brokerage services, including, without limitation, any activity in which a mortgage broker may engage. It is operated as a permissible "affiliated business arrangement" within the meaning of the Real Estate Settlement Procedures Act of 1974. VIST Mortgage Holdings, LLC is currently inactive.

        On September 1, 2008, the Company paid cash of $1.8 million for Fisher Benefits Consulting, an insurance agency specializing in Group Employee Benefits, located in Pottstown, Pennsylvania. Fisher Benefits Consulting has become a part VIST Insurance. As a result of the acquisition, VIST Insurance continues to expand its retail and commercial insurance presence in southeastern Pennsylvania counties. The results of Fisher Benefits Consulting operations have been included in the Company's consolidated financial statements since September 2, 2008.

        Included in the $1.8 million purchase price for Fisher Benefits Consulting was goodwill of $0.2 million and identifiable intangible assets of $1.6 million. Contingent payments totaling $750,000, or $250,000 for each of the first three years following the acquisition, will be paid if certain predetermined revenue target ranges are met. These payments are expected to be added to goodwill when paid. The contingent payments could be higher or lower depending upon whether actual revenue earned in each of the three years following the acquisition is less than or exceeds the predetermined revenue goals. Contingent payments totaling $250,000 were paid in 2009.

        On October 1, 2004, the Company acquired 100% of the outstanding voting shares of Madison Bancshares Group, Ltd. ("Madison"), the holding company for Madison Bank, a Pennsylvania state-chartered commercial bank and its mortgage banking division, VIST Mortgage. Madison Bank has become a division of VIST Bank. For each share of Madison common stock, the Company exchanged 0.6028 shares of the Company's common stock resulting in the issuance of 1,311,010 shares of the Company's common stock and a cash payment of $11,790. The total purchase price was $34.6 million. The value of the common shares issued was determined based on the average market price of the Company's common shares five days before and five days after the date of the announcement. In connection with the transaction, Madison paid cash of $7.1 million and recognized the expense for 699,122 Madison options and warrants outstanding at September 30, 2004. In addition, Madison paid cash of $2.3 million and recognized the expense for the termination of existing contractual arrangements.

Critical Accounting Policies

        Disclosure of the Company's significant accounting policies is included in Note 1 to the consolidated financial statements. Certain of these policies are particularly sensitive requiring significant judgments, estimates and assumptions to be made by management. Additional information is contained in Management's Discussion and Analysis and the Notes to the Consolidated Financial Statements for the most sensitive of these issues. These include, the provision and allowance for loan losses, revenue recognition for insurance activities, stock based compensation, derivative financial instruments, goodwill

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and intangible assets and investment securities other-than-temporary impairment evaluation. These discussions, analysis and disclosures identify and address key variables and other qualitative and quantitative factors that are necessary for an understanding and evaluation of the Company and its results of operations.

Allowance for Loan Losses

        The provision for loan losses charged to operating expense reflects the amount deemed appropriate by management to provide for known and inherent losses in the existing loan portfolio. Management's judgment is based on the evaluation of individual loans past experience, the assessment of current economic conditions, and other relevant factors. Loan losses are charged directly against the allowance for loan losses and recoveries on previously charged-off loans are added to the allowance.

        The allowance for loan losses has been established based on certain impaired loans where it is recognized that the cash flows are discounted or where the fair value of the collateral is lower than the carrying value of the loan. The Company has also established an allowance on classified loans which are not impaired but are included in categories such as "doubtful", "substandard" and "special mention". Though being classified to one of these categories does not necessarily mean that the loan is impaired, it does indicate that the loan has identified weaknesses that increase its credit risk of loss. The Company has also established a general allowance on non-classified and non-impaired loans to recognize the probable losses that are associated with lending in general, though not due to a specific problem loan.

        Management uses significant estimates to determine the allowance for loan losses. Consideration is given to a variety of factors in establishing these estimates including current economic conditions, diversification of the loan portfolio, delinquency statistics, borrowers' perceived financial and managerial strengths, the adequacy of underlying collateral, if collateral dependent, or present value of future cash flows, and other relevant factors. Since the sufficiency of the allowance for loan losses is dependent, to a great extent, on conditions that may be beyond our control, it is possible that management's estimates of the allowance for loan losses and actual results could differ in the near term. Although we believe that we use the best information available to establish the allowance for loan losses, future additions to the allowance may be necessary if certain future events occur that may cause actual results to differ from the assumptions used in making the evaluation. For example, a downturn in the local economy could cause increases in non-performing loans. Additionally, a decline in real estate values could cause some of our loans to become inadequately collateralized. In either case, this may require us to increase our provisions for loan losses, which would negatively impact earnings. Additionally, a large loss could deplete the allowance and require increased provisions to replenish the allowance, which would negatively impact earnings. In addition, regulatory authorities, as an integral part of their examination, periodically review the allowance for loan losses. They may require additions to the allowance for loan losses based upon their judgments about information available to them at the time of examination. Future increases to our allowance for loan losses, whether due to unexpected changes in economic conditions or otherwise, could adversely affect our future results of operations.

Revenue Recognition for Insurance Activities

        Insurance revenues are derived from commissions and fees. Commission revenues, as well as the related premiums receivable and payable to insurance companies, are recognized the later of the effective date of the insurance policy or the date the client is billed, net of an allowance for estimated policy cancellations. The reserve for policy cancellations is periodically evaluated and adjusted as necessary. Commission revenues related to installment premiums are recognized as billed. Commissions on premiums billed directly by insurance companies are generally recognized as income when received. Contingent commissions from insurance companies are generally recognized as revenue when the data necessary to reasonably estimate such amounts is obtained. A contingent commission is a commission paid by an insurance company that is based on the overall profit and/or volume of the business placed with the insurance company. Fee income is recognized as services are rendered.

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Stock-Based Compensation

        Prior to 2006, the Company accounted for stock-based compensation in accordance with Accounting Principals Board Opinion ("APB") No. 25, as permitted by FASB ASC 718. Under APB No. 25, no compensation expense was recognized in the statement of operations related to any option granted under the Company's stock option plans.

        FASB Accounting Standards Codification ("ASC") 718, "Share-Based Payment" addresses the accounting for share-based payment transactions subsequent to 2006 in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments. FASB ASC 718 requires an entity to recognize the grant-date fair-value of stock options and its other equity-based compensation issued to the employees in the income statement. The revised Statement generally requires that an entity account for those transactions using the fair-value-based method, and eliminates the intrinsic value method of accounting in APB Opinion No. 25. "Accounting for Stock Issued to Employees," which was permitted under FASB ASC 718, as originally issued.

        Effective January 1, 2006, the Company adopted FASB ASC 718 using the modified prospective method. Using the modified prospective method, the Company's total stock-based compensation expense, net of related tax effects, was $130,000 for the year ending December 31, 2009. Any additional impact that the adoption of this statement will have on our results of operations will be determined by share-based payments granted in future periods.

Derivative Financial Instruments:

        The Company maintains an overall interest rate risk-management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings that are caused by interest rate volatility. The Company's goal is to manage interest rate sensitivity by modifying the repricing or maturity characteristics of certain balance sheet assets and liabilities so that the net interest margin is not, on a material basis, adversely affected by movements in interest rates. As a result of interest rate fluctuations, hedged assets and liabilities will appreciate or depreciate in market value. The effect of this unrealized appreciation or depreciation will generally be offset by income or loss on the derivative instruments that are linked to the hedged assets and liabilities. The Company views this strategy as a prudent management of interest rate sensitivity, such that earnings are not exposed to undue risk presented by changes in interest rates.

        By using derivative instruments, the Company is exposed to credit and market risk. If the counterparty fails to perform, credit risk exists to the extent of the fair value gain in a derivative. When the fair value of a derivative contract is positive, this generally indicates that the counterparty owes the Company, and, therefore, creates a repayment risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, it has no repayment risk. The Company minimizes the credit (or repayment) risk in the derivative instruments by entering into transactions with high quality counterparties.

        Market risk is the adverse effect that a change in interest rates, currency, or implied volatility rates has on the value of a financial instrument. The Company manages the market risk associated with interest rate contracts by establishing and monitoring limits as to the types and degree of risk that may be undertaken. The Company periodically measures this risk by using value-at-risk methodology.

        During 2002, the Company entered into an interest rate swap to convert its fixed rate trust preferred securities to floating rate debt. Both the interest rate swap and the related debt are recorded on the balance sheet at fair value through adjustments to other income in the consolidated results of operations (see Note 19 of the consolidated financial statements).

        During 2003, the Company also entered into an interest rate cap agreement to limit its exposure to the variable rate interest achieved through the interest rate swap. The interest rate cap was not designated as a cash flow hedge and thus, it is carried on the balance sheet in other assets at fair value

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through adjustments to other income in the consolidated results of operations (see Note 19 of the consolidated financial statements).

        During 2008, the Company entered into two interest rate swaps to manage its exposure to interest rate risk. The interest rate swap transactions involved the exchange of the Company's floating rate interest rate payment on its $15 million in floating rate junior subordinated debt for a fixed rate interest payment without the exchange of the underlying principal amount. Notional principal amounts are often used to express the magnitude of these transactions, but the amounts due or payable are much smaller. These interest rate swaps are recorded on the balance sheet at fair value through adjustments to other income in the consolidated results of operations (see Note 19 of the consolidated financial statements).

Goodwill and Other Intangible Assets

        The Company has goodwill and other intangible assets of $44.2 million at December 31, 2009 related to the acquisition of its banking, insurance and wealth management companies. The Company utilizes a third party valuation service to perform its annual goodwill impairment test in the fourth quarter of each calendar year. A fair value is determined for the banking and financial services, insurance services and investment services reporting units. If the fair value of the reporting business unit exceeds the book value, no write down of goodwill is necessary (a Step One evaluation). If the fair value is less than the book value, an additional test (a Step Two evaluation) is necessary to assess goodwill for potential impairment. As a result of the goodwill impairment valuation analysis, the Company determined that no goodwill impairment write-off for any of its reporting units was necessary during 2009, 2008 and 2007, however a Step Two goodwill impairment evaluation test was required for the banking and financial services reporting unit.

        Reporting unit valuation is inherently subjective, with a number of factors based on assumption and management judgments. Among these are future growth rates, discount rates and earnings capitalization rates. Changes in assumptions and results due to economic conditions, industry factors and reporting business unit performance could result in different assessments of the fair value and could result in impairment charges in the future.

Framework for Interim Impairment Analysis

        The Company utilizes the following framework from FASB ASC 350 "Intangibles-Goodwill & Other" ("ASC 350") to evaluate whether an interim goodwill impairment test is required, given the occurrence of events or if circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Examples of such events or circumstances include:

•

a significant adverse change in legal factors or in the business climate;



•

an adverse action or assessment by a regulator;



•

unanticipated competition;



•

a loss of key personnel;



•

a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of;



•

the testing for recoverability under FASB ASC 860, "Accounting for Transfers of Financial Assets and Repurchase Financing Transactions," of a significant asset group within a reporting unit; and



•

recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit.

        When applying the framework above, management additionally considers that a decline in the Company's market capitalization could reflect an event or change in circumstances that would more likely than not reduce the fair value of reporting business unit below its carrying value. However, in considering potential impairment of our goodwill, management does not consider the fact that our

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market capitalization is less than the carrying value of our Company to be determinative that impairment exists. This is because there are factors, such as our small size and small market capitalization, which do not take into account important factors in evaluating the value of our Company and each reporting business unit, such as the benefits of control or synergies. Consequently, management's annual process for evaluating potential impairment of our goodwill (and evaluating subsequent interim period indicators of impairment) involves a detailed level analysis and incorporates a more granular view of each reporting business unit than aggregate market capitalization, as well as significant valuation inputs.

Annual and Interim Impairment Tests and Results

        Management estimates fair value annually utilizing multiple methodologies which include discounted cash flows, comparable companies and comparable transactions. Each valuation technique requires management to make judgments about inputs and assumptions which form the basis for financial projections of future operating performance and the corresponding estimated cash flows. The analyses performed require the use of objective and subjective inputs which include market-price of non-distressed financial institutions, similar transaction multiples, and required rates of return. Management works closely in this process with third party valuation professionals, who assist in obtaining comparable market data and performing certain of the calculations, based on information provided by management and assumptions developed with management.

        ASC Topic 820 "Fair Value Measurements and Disclosures" defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell or transfer the asset or transfer the liability occurs in the principal market for the asset or liability, or in the absence of a principal market, the most advantageous market for the asset or liability. ASC Topic 820 further defines market participants as buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

        ASC Topic 820 establishes a fair value hierarchy to prioritize the inputs used in valuation techniques:

1.

Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets.



2.

Level 2 inputs are inputs other than quoted prices included in level 1 that are observable for the asset or liability through corroboration with observable market data



3.

Level 3 inputs are unobservable inputs, such as a company's own data

        The Company will continue to monitor the interim indicators noted in ASC 350 to evaluate whether an interim goodwill impairment test is required, given the occurrence of events or if circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, absent those events, the Company will perform its annual goodwill impairment evaluation during the fourth quarter of 2010.

Consideration of Market Capitalization in Light of the Results of Our Annual and Interim Goodwill Assessments

        The Company's stock price, like the stock prices of many other financial services companies, is trading below both book value as well as tangible book value. We believe that the Company's current market value does not represent the fair value of the Company when taken as a whole and in consideration of other relevant factors. Because the Company is viewed by investors predominantly as a community bank, we believe our market capitalization is based on net tangible book value, reduced by nonperforming assets in excess of the allowance for loan and lease losses. We believe that the market place ascribes effectively no value to the Company's fee-based reporting units, the assets of which are composed principally of goodwill and intangibles. Management believes that as a stand-alone business each of these reporting units has value which is not being incorporated in the market's valuation of

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VIST reflected in its share price. Management also believes that if these reporting units were carved out of the Company and sold, they would command a sales price reflective of their current performance. Management further believes that if these reporting units were sold, the results of the sale would increase both the tangible book value (resulting from, among other things, the reduction in associated goodwill) and therefore market capitalization, given the market's current valuation approach described above.

        In summary, management believes that its goodwill in its reporting units is not impaired as of December 31, 2009.

Investment Securities Impairment Evaluation

        Management evaluates investment securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Factors that may be indicative of impairment include, but are not limited to, the following:

•

Fair value below cost and the length of time



•

Adverse condition specific to a particular investment



•

Rating agency activities (e.g., downgrade)



•

Financial condition of an issuer



•

Dividend activities



•

Suspension of trading



•

Management intent



•

Changes in tax laws or other policies



•

Subsequent market value changes



•

Economic or industry forecasts

        Other-than-temporary impairment means management believes the security's impairment is due to factors that could include its inability to pay interest or dividends, its potential for default, and/or other factors. When a held to maturity or available for sale debt security is assessed for other-than-temporary impairment, management has to first consider (a) whether the Company intends to sell the security, and (b) whether it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost basis. If one of these circumstances applies to a security, an other-than-temporary impairment loss is recognized in the statement of operations equal to the full amount of the decline in fair value below amortized cost. If neither of these circumstances applies to a security, but the Company does not expect to recover the entire amortized cost basis, an other-than-temporary impairment loss has occurred that must be separated into two categories: (a) the amount related to credit loss, and (b) the amount related to other factors. In assessing the level of other-than-temporary impairment attributable to credit loss, management compares the present value of cash flows expected to be collected with the amortized cost basis of the security. The portion of the total other-than-temporary impairment related to credit loss is recognized in earnings (as the difference between the fair value and the present value of the estimated cash flows), while the amount related to other factors is recognized in other comprehensive income. The total other-than-temporary impairment loss is presented in the statement of operations, less the portion recognized in other comprehensive income. When a debt security becomes other-than-temporarily impaired, its amortized cost basis is reduced to reflect the portion of the total impairment related to credit loss.

        If a decline in market value of a security is determined to be other than temporary, under generally accepted accounting principles, we are required to write these securities down to their estimated fair value. As of December 31, 2009, we owned single issuer and pooled trust preferred securities of other financial institutions, private label collateralized mortgage obligations and equity securities whose aggregate historical cost basis is greater than their estimated fair value (see note 7 of

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the consolidated financial statements). We reviewed all investment securities and have identified those securities that are other-than-temporarily impaired. The losses associated with these other-than-temporarily impaired securities have been bifurcated into the portion of non-credit impairment losses recognized in other comprehensive loss and into the portion of credit impairment losses recorded in earnings (see Note 3 of the consolidated financial statements). We perform an ongoing analysis of all investment securities utilizing both readily available market data and third party analytical models. Future changes in interest rates or the credit quality and strength of the underlying issuers may reduce the market value of these and other securities. If such decline is determined to be other than temporary, we will write them down through a charge to earnings to their then current fair value.

Federal Home Loan Bank Stock Impairment Evaluation

        The Company's banking subsidiary, VIST Bank, is required to maintain certain amounts of FHLB stock as a member of the FHLB. These equity securities are "restricted" in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other tradable equity securities, their fair value is equal to amortized cost, and no impairment write-downs have been recorded on these securities during 2009, 2008, or 2007.

        The FHLB of Pittsburgh announced in December 2008 that it voluntarily suspended the payment of dividends and the repurchase of excess capital stock from member banks. The FHLB cited a significant reduction in the level of core earnings resulting from lower short-term interest rates, the increased cost of maintaining liquidity and constrained access to the debt markets at attractive rates and maturities as the main reasons for the decision to suspend dividends and the repurchase excess capital stock. The FHLB last paid a dividend in the third quarter of 2008. Accounting guidance indicates that an investor in FHLB Pittsburgh capital stock should recognize impairment if it concludes that it is not probable that it will ultimately recover the par value of its shares. The decision of whether impairment exists is a matter of judgment that should reflect the investor's view of FHLB Pittsburgh's long-term performance, which includes factors such as its operating performance, the severity and duration of declines in the market value of its net assets related to its capital stock amount, its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance, the impact of legislation and regulatory changes on FHLB Pittsburgh, and accordingly, on the members of FHLB Pittsburgh and its liquidity and funding position. After evaluating all of these considerations, the Company believes the par value of its shares will be recovered. Future evaluations of the above mentioned factors could result in the Company recognizing an impairment charge.

Results of Operations

        Net loss available to common shareholders for 2009 was $1,042,000 or ($0.18) per share diluted compared to net income available to common shareholders of $565,000 or $0.10 per share diluted for 2008 and net income available to common shareholders of $7.5 million or $1.31 per share diluted for 2007. These changes are a result of preferred stock dividends and discount accretion, increased provision for loan losses, decreased investment securities losses and by changes in other income each year, net of changes in other expenses. Details regarding changes in net income and diluted earnings per share follows.

        Return on average assets was 0.05% for 2009, 0.05% for 2008 and 0.70% for 2007. Return on average shareholders' equity was 0.51% for 2009, 0.54% for 2008, and 7.15% for 2007.

        Included in the operating results for the twelve months ended December 31, 2009 was a pre-tax loss of $2.5 million, or $1.6 million after-tax, relating to other-than-temporary impairment ("OTTI") in the Company's available for sale investment portfolio. Included in the operating results for the twelve months ended December 31, 2008 were realized losses of approximately $7.3 million, or $4.8 million after-tax, relating to the Company's perpetual preferred stock associated with the federal takeover of Fannie Mae and Freddie Mac.

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Net Interest Income

        Net interest income is a primary source of revenue for the Company. This income results from the difference between the interest and fees earned on loans and investments and the interest paid on deposits to customers and other non-deposit sources of funds, such as repurchase agreements and borrowings from the Federal Home Loan Bank and other correspondent banks. Net interest margin is the difference between the gross (tax-effected) yield on earning assets and the cost of interest bearing funds as a percentage of earning assets. All discussion of net interest margin is on a fully taxable equivalent basis ("FTE"). Both FTE net interest income and FTE net interest margin are influenced by the frequency, magnitude and direction of interest rate changes and by product concentrations and volumes of earning assets and funding sources.

Average Balances, Rates and Net Yield

        The following table sets forth the average daily balances of major categories of interest earning assets and interest bearing liabilities, the average rate paid thereon, and the net interest margin for each of the periods indicated.

        FTE net interest income increased to $37.2 million, or 1.1%, for the year ended December 31, 2009, compared to $36.7 million for 2008. The increase in FTE interest income during 2009 was primarily the result of an increase in average earning assets, due mainly to strong commercial loan growth and an increase in available for sale investment security yields. Average loans increased by $39.8 million, or 4.6%, from 2008 to 2009. Management attributes this increase in organic commercial loan growth to a well established market in the Reading area and continued penetration into the Philadelphia market through successful marketing initiatives. Average available for sale investment securities increased by $39.3 million, or 19.4%, from 2008 to 2009. The increase in FTE interest income during 2009 was also the result of a decrease in rates on interest bearing liabilities, particularly time deposits, which more than offset the reduction in the rate earned on interest earning assets. Time

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deposit balances increased by $109.4 million, or 31.2%, from 2008 to 2009. The decrease in both long and short-term borrowing interest rates also contributed to the decrease in interest expense on interest bearing liabilities.

        FTE net interest income increased to $36.7 million or 6.7% for the year ended December 31, 2008, compared to $34.4 million for 2007. The increase FTE interest income during 2008 was primarily the result of an increase in average earning assets, due mainly to strong commercial loan growth and an increase in available for sale security investment yields as a result of the $64.1 million balance sheet restructuring in early 2007. Average loans increased by $67.8 million or 8.6% from 2007 to 2008. Management attributes the increase in organic commercial loan growth to a well established market in the Reading area and continued penetration into the Philadelphia market through successful marketing initiatives.

        Interest expense decreased during 2009 along with an increase in the overall growth in funding sources. The overall cost of funds decreased from 3.23% in 2008 to 2.67% in 2009. Interest bearing deposit rates decreased from 3.10% in 2008 to 2.38% in 2009. The decrease in interest-bearing deposit rates was the result of management's disciplined approach to deposit pricing in response to the decrease in short-term interest rates. Average interest bearing deposits increased $166.0 million or 24.6% from 2008 to 2009 due primarily to growth in time deposits. The growth in interest bearing deposits provided all of the funding needed for the $79.2 million in average loan and investment security growth. Average balances for federal funds purchased and repurchase agreements for the year 2009 were $2.7 million and $121.0 million, respectively, compared to average balances for federal funds purchased and repurchase agreements for the year 2008 of $76.3 million and $120.6 million, respectively. Average rates paid for federal funds purchased and repurchase agreements for the year 2009 were 0.66% and 3.60%, respectively compared to average rates paid for federal funds purchased and repurchase agreements for the year 2008 of 2.35% and 3.37%, respectively. Average short-term borrowings, average repurchase agreements and average long-term borrowings decreased by $91.3 million or 35.7% from 2008 to 2009.

        Interest expense decreased during 2008 along with an increase in the overall growth in funding sources. The overall cost of funds decreased from 4.12% in 2007 to 3.23% in 2008. Interest bearing deposit rates decreased from 3.85% in 2007 to 3.10% in 2008. The decrease in interest-bearing deposit rates was the result of management's disciplined approach to deposit pricing in response to the decrease in short-term interest rates. Average interest bearing deposits increased $38.6 million or 6.1% from 2007 to 2008 due primarily to growth in time deposits. Total average short and long term borrowings grew by $66.0 million and, combined with the growth in interest bearing deposits, provided all of the funding needed for the $104.6 million in average loan and investment security growth. Average balances for federal funds purchased and repurchase agreements for the year 2008 were $76.3 million and $120.6 million, respectively, compared to average balances for federal funds purchased and repurchase agreements for the year 2007 of $76.8 million and $95.2 million, respectively. Average rates paid for federal funds purchased and repurchase agreements for the year 2008 were 2.35% and 3.37%, respectively compared to average rates paid for federal funds purchased and repurchase agreements for the year 2007 of 5.06% and 4.05%, respectively. Average long-term borrowings increased $41.1 million or 232.0% from 2007 to 2008.

        In 2009, as a result of an increase in the volume of commercial loans originated offset by a decrease in commercial loan yields along with a decreased yield in the available for sale investment portfolio, tax-equivalent net interest income increased as a result of a decrease in overall cost of funds. FTE net interest margin decreased to 3.22% in 2009 from 3.45% in 2008.

        In 2008, as a result of an increase in the volume of commercial loans originated offset by a decrease in commercial loan yields along with an increased yield in the available for sale investment portfolio, tax-equivalent net interest income increased as a result of a decrease in overall cost of funds. Tax-equivalent net interest margin decreased to 3.45% in 2008 from 3.59% in 2007.

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Changes in Interest Income and Interest Expense

        The following table sets forth certain information regarding changes in interest income and interest expense of the Company for the periods indicated. For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to (1) changes in volume (period to period changes in average balance multiplied by beginning rate), and (2) changes in rate (period to period changes in rate multiplied by beginning average balance).

Analysis of Changes in Interest Income/Expense (1) (2) (3)

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Other Income

        The following table details non-interest income as follows:

        The Company's non-interest income for the year ended December 31, 2009 totaled $17.4 million, representing an increase of $5.4 million or 45.5% as compared to 2008. The Company's primary source of other income for 2009 was commissions and other revenue generated through sales of insurance products through its insurance subsidiary, VIST Insurance. Revenues from insurance operations totaled $12.3 million in 2009 compared to $11.3 million in 2008 and $11.4 million in 2007. The increase in revenue in 2009 from insurance operations was due mainly to an increase in commission income on group insurance products due to the acquisition of Fisher Benefits Consulting in September 2008. Revenues from broker and investment advisory commissions generated through VIST Capital, the Company's investment subsidiary, decreased to $714,000 in 2009 from $813,000 in 2008 and $886,000 in 2007 due to a decrease in investment and advisory services. Also, annuity and other insurance commissions generated by VIST Capital of $108,000, $113,000 and $130,000 are included in commissions and fees from insurance sales for the years 2009, 2008 and 2007, respectively.

        The Company also relies on several other sources for its other income, including sales of newly originated mortgage loans and service charges on deposit accounts. The income recognized from mortgage banking activities was $1.3 million in 2009 and $897,000 in 2008. The increase in mortgage banking revenue from 2008 to 2009 is mainly attributable to an increase in the volume of mortgage loan originations sold into the secondary mortgage market through the Company's mortgage banking division, VIST Mortgage.

        The income recognized from mortgage banking activities was $897,000 in 2008 and $1.9 million in 2007. The decrease in mortgage banking revenue from 2007 to 2008 is mainly attributable to a decrease in the volume of mortgage loan originations sold into the secondary mortgage market through the Company's mortgage banking division, VIST Mortgage. The decrease in mortgage loan originations and sales is related to a general slowdown in the housing market as a result of the industry wide effects of the ongoing sub-prime credit crisis. VIST Mortgage does not underwrite any sub-prime loans.

        The income recognized from customer service fees was approximately $2.4 million, $3.0 million and $2.7 million for the years ended 2009, 2008 and 2007, respectively. The changes in income from customer service fees reflect an expanded customer base, new products and services and an annual review of the fee pricing. The decrease in service charge revenue during 2009 resulted primarily from decreases in retail and commercial uncollected funds charges and non-sufficient funds charges. During

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2008, the Company completed a thorough review of its service charge routines. As a result of its service charge analysis, the Company was able to increase service charge revenue in 2008.

        Also included in other income are net gains on other loan sales, not included with VIST Mortgage loan sales, of $0 in 2009, $47,000 in 2008, and $164,000 in 2007 from no sales, $740,000 in sales and $2.0 million in sales, respectively, of fixed and adjustable rate portfolio residential mortgage loans, SBA loans and USDA loans.

        Earnings on investment in life insurance represent the change in cash value of Bank Owned Life Insurance (BOLI) policies. The BOLI policies of the Company are designed to offset the costs of employee benefit plans and to enhance tax-free earnings. The investment in BOLI totaled $19.0 million and $18.6 million at December 31, 2009, 2008. The income recognized from earnings on investment in life insurance was approximately $391,000, $690,000 and $806,000 for the years ended 2009, 2008 and 2007, respectively. The decrease in earnings on investment in life insurance in 2009 and 2008 is due primarily to decreased earnings credited on the Company's BOLI.

        Other commissions and fees include ATM network and fees from debit card transactions and various other charges and commission related to checkbook fees, internet banking fees and other fees and commissions. The most significant volume of income in this category is derived from ATM surcharge fees and interchange fees from the Bank's ATM network and fees from debit card transactions. These fees totaled $1.4 million in 2009 which represents a 27.2% increase over $1.1 million in 2008. The increase in fee income is attributed primarily to an increase in interchange transaction volume related to the Bank's debit card program. Throughout the year, the Bank has initiated marketing campaigns to encourage its customers to use debit cards as a convenient alternative to traditional check transactions. ATM surcharge fees and interchange fees from the Bank's ATM network and fees from debit card transactions totaled $1.1 million in 2008 which represents a 10.0% increase over $1.0 million in 2007.

        Other income includes dividend income from Federal Home Loan Bank stock, market value adjustments for both junior subordinated debt and interest rate swaps, SBA service fee income, as well as, other miscellaneous income items. Other income in 2009 decreased to $565,000, or 31.6%, from $826,000 in 2008 due primarily to the suspension of dividend income paid on FHLB stock. Other income in 2008 increased to $826,000, or 25.0%, from $661,000 in 2007 due primarily to a net increase in the fair value of the Company's junior subordinated debt and interest rate swaps.

        Net realized gains on sales of available for sale securities were $344,000 for 2009, net realized losses on sales of available for sale securities were $7.2 million for 2008 and net realized losses on sales of available for sale securities were $2.3 million for 2007. Sales of available for sale securities during 2009, 2008 and 2007 were primarily related to the management of the Company's liquidity and asset/liability management strategies. Net securities losses for 2008 were primarily due to the sale of perpetual preferred stock associated with the federal takeover of government sponsored enterprises ("GSE's") Fannie Mae and Freddie Mac, placed into conservatorship by the Federal Housing Finance Agency and the U.S. Treasury. Net securities losses for 2007 were primarily due to the sale of $64.1 million in lower-yielding available for sale securities as part of a balance sheet restructuring completed in the first quarter of 2007.

        Net credit impairment losses recognized in earnings were $2.5 million in 2009 and no net credit impairment losses recognized in earnings in 2008 and 2007. In 2009, the net credit impairment losses recognized in earnings include OTTI charges for estimated credit losses on five pooled trust preferred securities and one equity holding (see Note 7 of the consolidated financial statements).

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Other Expenses

        The following table details non-interest expense as follows:

        Non-interest expense consists primarily of costs associated with personnel, occupancy and equipment, data processing, marketing and professional fees.

        The Company's non-interest expense for the year ended December 31, 2009 totaled $45.7 million, representing an increase of $2.1 million or 4.7% as compared to 2008. Salaries and employee benefits, the largest component of non-interest expense, increased slightly from 2008. Full-time equivalent (FTE) employees for the Company are 283 and 293 for the years ended December 31, 2009 and 2008, respectively. The decrease in FTE employees from 2008 to 2009 was primarily attributed to a decrease in operational staff as a result of improved efficiencies through the implementation of corporate-wide cost reduction initiatives. Included in salaries and benefits for 2009 and 2008 were stock-based compensation costs of $198,000 and $319,000, respectively. Total commissions paid for the year ended December 31, 2009 and 2008 were $1.4 million and $1.6 million, respectively.

        The Company's non-interest expense for the year ended December 31, 2008 totaled $43.6 million, representing an increase of $2.8 million or 6.8% as compared $40.9 million in non-interest expense for 2007. Salaries and employee benefits, the largest component of non-interest expense, increased $517,000 or 2.4% from 2007 to 2008. Full-time equivalent (FTE) employees for the Company were 293 and 317 for the years ended December 31, 2008 and 2007, respectively. The increase in salaries and employee benefits from 2007 to 2008 was primarily attributed to merit increases and increased health benefits costs. The decrease in FTE employees from 2007 to 2008 was primarily attributed to a decrease in operational staff as a result of improved efficiencies through the implementation of new programs such as Check 21. Included in salaries and benefits for 2008 and 2007 were stock-based compensation costs of $319,000 and $255,000, respectively. Total commissions paid for the year ended December 31, 2008 and 2007 were $1.6 million and $1.6 million, respectively.

        Total occupancy expense and equipment expense decreased 10.0% in 2009 compared to 2008 primarily due to decreases in building lease expense, equipment maintenance and equipment depreciation expenses.

        Total occupancy expense and equipment expense increased 7.9% in 2008 compared to 2007 primarily due to an increase in building lease expense including a lease termination for a planned branch consolidation and an increase in general building repairs and maintenance.

        Total marketing expense decreased $624,000 or 38.2% in 2009 compared to 2008 primarily due to a reduction in marketing costs associated with market research, media space, media production and special events.

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        Total marketing expense decreased $37,000 or 2.2% in 2008 compared to 2007 primarily due to a decrease in re-branding initiative expenses of changing the Company's name to VIST Financial Corp. A significant portion of these expenses occurred in 2007. The new Company name and logo increased visibility for the Company, setting the stage for continued commercial loan and core franchise growth in the Reading and Philadelphia markets. The decrease is also due to reduced costs for market research and media advertisement.

        Total amortization of identifiable intangible assets increased $19,000 or 3.0% in 2009 as compared to 2008 due primarily to the acquisition of Fisher Benefits Consulting in 2008.

        Total amortization of identifiable intangible assets increased $7,000 or 1.1% in 2008 as compared to 2007 due primarily to the acquisition of Fisher Benefits Consulting in 2008.

        Outside processing services increased $649,000 or 19.5% in 2009 as compared to 2008 due to services rendered for core operating system and computer network and systems upgrades and enhancements.

        Outside processing services increased $131,000 or 4.1% in 2008 as compared to 2007 due to an increase in network fees and computer services.

        FDIC and other insurance expense increased $1.2 million in 2009 as compared to 2008 primarily due to higher FDIC deposit insurance premiums including a special industry-wide FDIC deposit insurance premium assessment of $574,000 levied in the third quarter of 2009. The special assessment was fully accrued for and expensed by the Bank in the second quarter of 2009.

        FDIC and other insurance expense increased $648,000 or 105.5% in 2008 as compared to 2007 due to an increase in FDIC deposit insurance assessments.

        Total professional services decreased $114,000 or 4.4% in 2009 as compared to 2008. The decrease in professional services is due primarily to the outsourcing of the Company's internal audit function and fewer general Company projects.

        Total professional services increased $759,000 or 41.4% in 2008 as compared to 2007. The increase in professional services is due primarily to an increase in legal fees associated with the Company's name change to VIST Financial Corp. and general corporate counsel, costs associated with the outsourcing of the internal audit function and other consulting, accounting and tax services and general Company business.

        Other real estate owned expense increased $1.7 million or 206.8% in 2009 as compared to 2008. The increase in other real estate expense is due primarily to an increase in legal and other costs associated with an increase in the amount of other real estate owned in 2009.

        Other real estate owned expense increased $461,000 or 123.3% in 2008 as compared to 2007. The increase in other real estate expense was due primarily to an increase in legal and other costs associated with an increase in the amount of other real estate owned in 2008.

        Other expense includes utility expense, postage expense, stationary and supplies expense, as well as, other miscellaneous expense items. These costs totaled $3.8 million in 2009 which is a 3.2% decrease to 2008. Decreases in other expenses were primarily attributable to decreases in postage and stationary and supplies expenses.

        Other expense includes utility expense, postage expense, stationary and supplies expense, as well as, other miscellaneous expense items. These costs totaled $3.9 million in 2008 which represents a 6.4% decrease to 2007. Decreases in other expenses were primarily attributable to decreases in utility, postage, travel and entertainment and stationary and supplies expenses.

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Income Taxes

        The effective income tax rate for the Company for the years ended December 31, 2009, 2008 and 2007 was 142.7%, 143.7% and 19.0%, respectively. The effective tax rate for 2009 decreased from 2008 and 2007 primarily due to the increase in the income tax benefit resulting from an increase in tax advantaged investment securities and loans. Included in the income tax provision is a federal tax benefit from our $5.0 million investment in an affordable housing, corporate tax credit limited partnership of $550,000, $600, 000 and $600,000, respectively, for each of the years ended December 31, 2009, 2008 and 2007.

Financial Condition

        The Company's total assets at December 31, 2009 and 2008 were $1.3 billion and $1.2 billion, respectively.

Cash and Securities Portfolio

        Cash and balances due from banks increased to $27.4 million at December 31, 2009 from $19.3 million at December 31, 2008.

        The securities portfolio increased 18.0% to $271.1 million at December 31, 2009, from $229.7 million at December 31, 2008 primarily due to available for sale investments in U.S. Government agency securities, agency mortgage-backed debt securities and obligations of state and political subdivisions (see Note 7 of the consolidated financial statements). Securities are used to supplement loan growth as necessary, to generate interest and dividend income, to manage interest rate risk, and to provide pledging and liquidity. To accomplish these ends, most of the purchases in the portfolio during 2009 and 2008 were of agency mortgage-backed securities.

        The securities portfolio included a net unrealized loss on available for sale securities of $6.8 million and $11.9 million at December 31, 2009 and 2008, respectively. In addition, net unrealized losses of $1.2 million and $1.1 million were present in the held to maturity securities at December 31, 2009 and 2008, respectively. Changes in longer-term treasury interest rates, government monetary policy, the easing of underlying collateral and credit concerns, and dislocation in the current market were primarily responsible for the change in the fair market value of the securities.

        Debt securities that management has the positive ability and intent to hold to maturity are classified as held-to-maturity and recorded at amortized cost. Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company's assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Securities available for sale are carried at fair value. Unrealized gains and losses are reported in other comprehensive income or loss, net of the related deferred tax effect. Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Purchased premiums and discounts are recognized in interest income using a method which approximates the interest method over the terms of the securities. Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses.

        Management evaluates investment securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Factors that may be indicative of impairment include, but are not limited to, the following:

•

Fair value below cost and the length of time



•

Adverse condition specific to a particular investment



•

Rating agency activities (e.g., downgrade)

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•

Financial condition of an issuer



•

Dividend activities



•

Suspension of trading



•

Management intent



•

Changes in tax laws or other policies



•

Subsequent market value changes



•

Economic or industry forecasts

        Other-than-temporary impairment means management believes the security's impairment is due to factors that could include its inability to pay interest or dividends, its potential for default, and/or other factors. When a held to maturity or available for sale debt security is assessed for other-than-temporary impairment, management has to first consider (a) whether the Company intends to sell the security, and (b) whether it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost basis. If one of these circumstances applies to a security, an other-than-temporary impairment loss is recognized in the statement of operations equal to the full amount of the decline in fair value below amortized cost. If neither of these circumstances applies to a security, but the Company does not expect to recover the entire amortized cost basis, an other-than-temporary impairment loss has occurred that must be separated into two categories: (a) the amount related to credit loss, and (b) the amount related to other factors. In assessing the level of other-than-temporary impairment attributable to credit loss, management compares the present value of cash flows expected to be collected with the amortized cost basis of the security. The portion of the total other-than-temporary impairment related to credit loss is recognized in earnings (as the difference between the fair value and the present value of the estimated cash flows), while the amount related to other factors is recognized in other comprehensive income. The total other-than-temporary impairment loss is presented in the statement of operations, less the portion recognized in other comprehensive income. When a debt security becomes other-than-temporarily impaired, its amortized cost basis is reduced to reflect the portion of the total impairment related to credit loss.

Federal Home Loan Bank Stock

        The Bank is a member of the Federal Home Loan Bank of Pittsburgh (the "FHLB"), which is one of 12 regional Federal Home Loan Banks. Each Federal Home Loan Bank serves as a reserve or central bank for its members within its assigned region. It is funded primarily from funds deposited by member institutions and proceeds from the sale of consolidated obligations of the Federal Home Loan Bank System. It makes loans to members (i.e., advances) in accordance with policies and procedures established by the board of directors of the Federal Home Loan Bank.

Loans

        Loans, net of deferred loan fees, increased to $911.0 million at December 31, 2009 from $886.3 million at December 31, 2008, an increase of $24.7 million or 2.8%. Management has targeted the commercial loan portfolio as a key to the Company's continuing growth. Specifically, the Company has a commercial lending focus within the Reading and Philadelphia market areas targeting higher yielding commercial loans made to small and medium sized businesses. Through a strong commercial lending footprint in the Reading market and through acquisition and the expansion of the commercial lending staff in the Philadelphia market, the year over year growth in commercial and construction loans originated underscores the commercial customer focus as the commercial loan portfolio increased to $613.9 million at December 31, 2009, from $590.2 million at December 31, 2008, an increase of $23.7 million or 4.0%.

        Loans secured by 1 to 4 family residential real estate decreased to $169.0 million at December 31, 2009, from $185.9 million as of December 31, 2008, a decrease of $16.9 million or 9.1%. Loans secured

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by multi-family residential real estate increased to $39.0 million at December 31, 2009, from $34.9 million as of December 31, 2008, an increase of $4.1 million or 11.8%. The overall decrease in residential real estate loans is attributable to a decrease in the volume of mortgage loan originations generated through VIST Mortgage.

        Home equity and consumer lending increased to $90.0 million at December 31, 2009, from $76.1 million as of December 31, 2008. Consumer demand for these types of loans increased in 2009. Although the Company's focus primarily centered on the commercial customer, management remained disciplined in its pricing of consumer loans. Despite the numerous economic challenges faced in 2009, the Company was able to increase our outstanding balances through the successful marketing of its Equilock consumer loan product which carries both a fixed and variable component allowing the consumer to lock and unlock the loan at the prevailing interest rate.

        The loans held for sale category is composed of $2.0 million of mortgage loans committed for sale through VIST Mortgage to other institutions and the secondary market at December 31, 2009 versus $2.3 million at December 31, 2008. The decrease in loans held for sale is primarily due to a decrease in the inventory of loans held for sale at December 31, 2009 and 2008, respectively.

        The sales of residential real estate loans in the secondary market reflects the Company's strategy of de-emphasizing the retention of long-term, fixed rate loans in the portfolio utilizing these loans sales to generate fees, mitigate interest-rate risk and fund growth in higher yielding assets.

Premises and Equipment

        Premises and equipment, net of accumulated depreciation and amortization, decreased to $6.1 million for 2009 from $6.6 million in 2008. Purchases of premises and equipment totaled $1.2 million in 2009 and $1.2 million in 2008. During 2009, the Company completed building renovations and purchased Check 21 and scanning equipment totaling approximately $667,000. In 2009, the Company retired $2.3 million in furniture and equipment with an accumulated depreciation balance of $2.3 million. Also in 2009, the Company consolidated its insurance operations and sold its VIST Insurance building in Reading, Pennsylvania. The Company recognized proceeds from the sale of the VIST Insurance building in the amount of approximately $259,000 which includes a gain of approximately $25,000. During 2008, as a result of the Company's re-branding initiative, the Company purchased new signage totaling approximately $595,000. Depreciation expense and amortization of leasehold improvements totaled $1.3 million in 2009 and $1.5 million in 2008.

Goodwill and Identifiable Intangible Assets

        Goodwill increased to $40.0 million for the year ended December 31, 2009 from $39.7 million for 2008. During 2009, the Company recorded goodwill of $250,000 representing contingent payments as part of the Fisher Benefits Consulting purchase agreement. Identifiable intangible assets, included in other assets, decreased to $4.2 million from $4.8 million for the years ended December 31, 2009 and 2008, respectively. The decrease in identifiable intangible assets is due mainly to amortization. Amortization of identifiable intangible assets was $647,000 in 2009 and $629,000 in 2008.

Bank Owned Life Insurance

        Bank owned life insurance increased $398,000 to $19.0 million at December 31, 2009 from $18.6 million at December 31, 2008. The increase in bank owned life insurance is due primarily to earnings on the cash surrender value of the underlying policies.

Deposits and Borrowings

        Total deposits at December 31, 2009 and 2008 were $1.0 billion and $850.6 million, respectively.

        Non-interest bearing deposits decreased to $102.3 million at December 31, 2009, from $108.6 million at December 31, 2008, a decrease of $6.3 million or 5.8%. The decrease in non-interest

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bearing deposits is primarily due to a decrease in non-interest bearing personal accounts. Management continues its efforts to promote growth in these types of deposits, such as offering a free checking product, as a method to help reduce the overall cost of the Company's funds. Interest bearing deposits increased by $176.6 million or 23.8%, from $742.0 million at December 31, 2008 to $918.6 million at December 31, 2009. The increase in interest bearing deposits is due primarily to an increase in interest bearing core deposits including time deposits maturing in one year or less. Management continues to promote these types of deposits through a disciplined pricing strategy as a means of managing the Company's overall cost of funds, as well as, management's continuing emphasis on commercial and retail marketing programs and customer service.

        Borrowed funds from various sources are generally used to supplement deposit growth. There were no Federal funds purchased from the Federal Home Loan Bank ("FHLB") at December 31, 2009, compared to $53.4 million purchased at December 31, 2008. This decrease is primarily the result of an increase in core deposits. Both short and long-term securities sold under agreements to repurchase were $115.2 million at December 31, 2009 and $120.1 million at December 31, 2008. Increases in commercial loan demand and investment securities were funded primarily by increases in interest-bearing deposits. Long-term borrowings consisting of advances from the FHLB decreased to $20.0 million from $50.0 million at December 31, 2009 and 2008, respectively, and long-term securities sold under agreements to repurchase remained at $100.0 million at both December 31, 2009 and 2008.

Shareholders' Equity

        Total equity, including common and preferred stock, surplus, retained earnings, treasury stock and accumulated other comprehensive loss, increased by $1.8 million or 1.5% to $125.4 million at December 31, 2009 from $123.6 million at December 31, 2008. The increase for 2009 is primarily the result of a decrease in accumulated other comprehensive loss of $3.3 million offset by $1.3 million in cash dividends to preferred shareholders and $1.7 million in cash dividends paid to common shareholders.

        On December 19, 2008, the Company issued to the United States Department of the Treasury ("Treasury") 25,000 shares of Series A, Fixed Rate, Cumulative Perpetual Preferred Stock ("Series A Preferred Stock"), with a par value of $0.01 per share and a liquidation preference of $1,000 per share, and a warrant ("Warrant") to purchase 364,078 shares of the Company's common stock, par value $5.00 per share, for an aggregate purchase price of $25,000,000 in cash.

        The Series A Preferred Stock qualifies as Tier 1 capital and will pay cumulative dividends at a rate of 5% per annum for the first five years, and 9% per annum thereafter. Under ARRA, the Series A Preferred Stock may be redeemed at any time following consultation by the Company's primary bank regulator and Treasury, not withstanding the terms of the original transaction documents. Under FAQ's issued recently by Treasury, participants in the Capital Purchase Program desiring to repay part of an investment by Treasury must repay a minimum of 25% of the issue price of the preferred stock.

        Prior to the earlier of the third anniversary date of the issuance of the Series A Preferred Stock (December 19, 2011) or the date on which the Series A Preferred Stock have been redeemed in whole or the Treasury has transferred all of the Series A Preferred Stock to third parties which are not affiliates of the Treasury, the Company can not increase its common stock dividend from the last quarterly cash dividend per share ($0.10) declared on the common stock prior to October 14, 2008 without the consent of the Treasury,

        The Warrant has a 10-year term and is immediately exercisable upon its issuance, with an exercise price, subject to anti-dilution adjustments, equal to $10.30 per share of common stock. In the event that the Company redeems the Series A Preferred Stock, the Company can repurchase the warrant at "fair value" as defined in the investment agreement with Treasury.

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Interest Rate Sensitivity

        Through the years, the banking industry has adapted to an environment in which interest rates have fluctuated dramatically and in which depositors have been provided with liquid, rate sensitive investment options. The industry utilizes a process known as asset/liability management as a means of managing this adaptation.

        Asset/liability management is intended to provide for adequate liquidity and interest rate sensitivity by analyzing and understanding the underlying cash flow structures of interest rate sensitive assets and liabilities and coordinating maturities and repricing characteristics on those assets and liabilities.

        Interest rate risk management involves managing the extent to which interest-sensitive assets and interest-sensitive liabilities are matched. Interest rate sensitivity is the relationship between market interest rates and earnings volatility due to the repricing characteristics of assets and liabilities. The Company's net interest income is affected by changes in the level of market interest rates. In order to maintain consistent earnings performance, the Company seeks to manage, to the extent possible, the repricing characteristics of its assets and liabilities.

        One major objective of the Company when managing the rate sensitivity of its assets and liabilities is to stabilize net interest income. The management of and authority to assume interest rate risk is the responsibility of the Company's Asset/Liability Committee ("ALCO"), which is comprised of senior management and Board members. The ALCO meets quarterly to monitor the ratio of interest sensitive assets to interest sensitive liabilities. The process to review interest rate risk management is a regular part of management of the Company. In addition, there is an annual process to review the interest rate risk policy with the Board of Directors which includes limits on the impact to earnings and value from shifts in interest rates.

        To manage the interest rate sensitivity position, an asset/liability model called "gap analysis" is used to monitor the difference in the volume of the Company's interest sensitive assets and liabilities that mature or reprice within given periods. A positive gap (asset sensitive) indicates that more assets reprice during a given period compared to liabilities, while a negative gap (liability sensitive) has the opposite effect.

        During 2002, the Company entered into its first interest rate swap agreement with a notional amount of $5 million. This derivative financial instrument effectively converted fixed interest rate obligations of outstanding junior subordinated debt to variable interest rate obligations, decreasing the asset sensitivity of its balance sheet by more closely matching the Company's variable rate assets with variable rate liabilities. The Company considers the credit risk inherent in the contracts to be negligible.

        During 2008, the Company entered into two interest rate swap agreements with an aggregate notional amount of $15 million. This interest rate swap transaction involved the exchange of the Company's floating rate interest rate payment on $15.0 million in floating rate junior subordinated debt for a fixed rate interest payment without the exchange of the underlying principal amount.

        Interest rate caps are generally used to limit the exposure from the repricing and maturity of liabilities and to limit the exposure created by interest rate swaps. In June of 2003, the Company purchased a six month LIBOR cap to create protection against rising interest rates for the above mentioned $5 million interest rate swap. The initial premium related to this interest rate cap was $102,000. At December 31, 2009 and 2008, the carrying value and market value of the interest rate cap was zero, respectively.

        Also, the Bank sells fixed and adjustable rate residential mortgage loans to limit the interest rate risk of holding longer-term assets on the balance sheet. In 2009, 2008 and 2007, the Company sold $0, $0.7 million and $2.0 million, respectively, of fixed and adjustable rate loans.

        At December 31, 2009, the Company was in a positive one-year cumulative gap position. Commercial adjustable rate loans increased $16.3 million or 3.4% from $475.4 million at December 31,

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2008 to $491.7 million at December 31, 2009. Installment adjustable rate loans increased $15.9 million or 27.5% from $57.9 million at December 31, 2008 to $73.8 million at December 31, 2009. During 2009, targeted short-term interest rates remained low. Both the national prime rate and the overnight federal funds rates remained unchanged throughout 2009. The lack of increase in interest rates throughout 2009 contributed to margin compression as the yields on the Bank's adjustable and variable rate commercial and consumer loan portfolio tied to the national prime rate repriced lower during the year. Increases in interest-bearing core deposits carried interest rates that were higher than overnight borrowings but, due to the low rate environment, the Bank's overall cost of funds repriced lower during the year. As a result of an ongoing industry-wide economic crisis fueled in part by a continued downturn in the housing market, the mortgage refinance market remained stagnant effectively extending the maturities for the existing portfolios of fixed rate loans and investments. In order to augment the funding needs for new commercial and consumer loan originations and investment security purchases during 2009, interest-bearing core deposits, which include interest-bearing NOW and time deposits, increased $176.6 million or 23.8% from $742.0 million at December 31, 2008 to $918.6 million at December 31, 2009. These factors contributed to the Company's positive one-year cumulative gap position. In 2010, the Company will continue its strategy to originate fixed and adjustable rate commercial and consumer loans and use investment security cash flows and interest-bearing and non-interest bearing deposits to rebalance wholesale borrowings to maintain a more neutral gap position.

Interest Sensitivity Gap at December 31, 2009

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        Certain shortcomings are inherent in the method of analysis presented in the above table. Although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets and liabilities may lag behind changes in market interest rates. Certain assets, such as adjustable-rate mortgages, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. In the event of a change in interest rates, prepayment and early withdrawal levels may deviate significantly from those assumed in calculating the table. The ability of many borrowers to service their adjustable-rate debt may decrease in the event of an interest rate increase.

        The Company also measures its near-term sensitivity to interest rate movements through simulations of the effects of rate changes upon its net interest income. Net interest income simulations evaluate the effect that interest rate changes have on the prepayment, repricing and maturity attributes of the Company's interest earning assets and interest bearing liabilities over the next twelve months. Interest rate movements of up 100, 200 and 300 basis points and down 100, 200 and 300 basis points, adjusted for activity in the current and forecasted interest rate environment, were applied to the Company's interest earning assets and interest bearing liabilities as of December 31, 2009. The results of these simulations on net interest income for 2009 are as follows:

        The Company also measures its longer-term sensitivity to interest rate movements through simulations of the effects of rate changes upon its economic value of shareholders' equity. Economic value of shareholders' equity simulations evaluate the effect that interest rate changes have on the prepayment, repricing and maturity attributes of the Company's interest earning assets and interest bearing liabilities over the life of each financial instrument. Interest rate movements of up 100, 200 and 300 basis points and down 100, 200 and 300 basis points, adjusted for activity in the current and forecasted interest rate environment, were applied to the Company's interest earning assets and interest bearing liabilities as of December 31, 2009. The results of these simulations on economic value of shareholders' equity for 2009 are as follows:

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