stock and minority interests in equity accounts of consoli- dated subsidiaries, less goodwill and certain other intangible assets. Supplementary (Tier 2) capital includes, among other things, cumulative perpetual and long-term limited-life preferred stock, mandatory convertible securities, certain hybrid capital instruments, term subordinated debt and the allowance for loan losses, subject to certain limitations, less required deductions. The Bancorp and the Bank are required to maintain a total risk-based capital ratio of 8%, of which 4% must be Tier 1 capital. In addition, the FRB and FDIC regulations provide for a minimum Tier 1 leverage ratio (Tier 1 capital to adjusted average assets) of 3% for financial institutions that meet certain specified criteria, including that they have the highest regulatory rating and are not  experiencing or anticipating significant growth. All other financial institutions are required to maintain a Tier 1 leverage ratio of 3% plus an additional cushion of at least one to two percent.  The following table shows that, at December 31, 2010, the Bancorp’s capital exceeded all regulatory capital require- ments. At December 31, 2010, the Bancorp’s and the Bank’s regulatory capital ratios were substantially the same. The dollar amounts are in millions. (43.6%). The net interest margin was 4.04% for 2010 compared to 3.74% for 2009. During 2010, the Bancorp continued to focus on reducing its effective tax rate by investing in tax-exempt securities and loans. As a result, the Bancorp’s tax equivalent net interest margin for 2010 was 4.25% compared to 3.97% for 2009.  During 2010, interest income from loans decreased by $1.9 million (7.5%) compared to 2009. The change was primarily due to a decrease in the weighted-average yield of the loan portfolio, lower average balances and an increase in non-accrual loans. The weighted-average yield on loans outstanding was 5.39% for 2010 compared to 5.50% for 2009. Loan balances averaged $446.6 million for 2010, a decrease of $25.9 million (5.5%) from $472.5 million for 2009. During 2010, interest income from securities and other interest earning assets decreased by $165 thousand (2.7%) compared to 2009. The decrease was due to a decrease in average yield. The weighted-average yield on securities and other interest earning assets was 3.45% for 2010 compared to 4.11% for 2009. Securities and other interest earning assets averaged $175.1 million for 2010, up $24.1 million (16.0%) from $151.0 million for 2009.  Interest expense for deposits decreased by $3.2 million (44.7%) during 2010 compared to 2009. The change was due to a decrease in the weighted-average rate paid on deposits. The weighted-average rate paid on deposits for 2010 was 0.71% compared to 1.31% for 2009. Total deposit balances averaged $552.9 million for 2010, an increase of $12.2 million (2.3%) from $540.7 million for 2009. Interest expense on borrowed funds decreased by $683 thousand (38.9%) during 2010 due to a decrease in the cost of borrowing. The weighted-average cost of borrowed funds was 2.04% for 2010 compared to 2.58% for 2009. Borrowed funds averaged $52.8 million during 2010,  a decrease of $15.5 million (22.7%) from $68.3 million  for 2009. Net income for 2010 was $5.2 million, compared to $2.5 million for 2009, an increase of $2.7 million (108.2%). The increase in net income for 2010 was the result of strong net interest income and lower required provisions for loan losses. The earnings represent a return on average assets of 0.77% for 2010 compared to 0.37% for 2009. The return on average equity was 9.03% for 2010 compared to 4.55% for 2009. Noninterest income for 2010 was $5.8 million, an increase of $188 thousand (3.4%) from $5.6 million for 2009. During 2010, fees and service charges totaled $2.5 million, a decrease of $123 thousand (4.6%) from $2.7 million for 2009. Fees from Wealth Management operations totaled $1.2 million for 2010, an increase of $232 thousand (24.9%) from $933 thousand for 2009. The increase in Wealth Management income is related to consistent asset growth that has occurred during the past twelve months and an increase in asset market values. Gains from the sale of securities totaled $913 thousand for the current year, an increase of $177 thousand (24.0%) from $736 thousand for 2009. Current market conditions provided opportunities to manage securities cash flows, while shortening the duration of cash flows. Gains from loan sales totaled $1.3 million for the year, an increase of $124 thousand (10.9%), compared to $1.1 million for 2009. The increase in gains from the sale of loans is a result of increased customer refinancing activity to low fixed rate mortgages. Additionally, a one-time sale of portfolio fixed rate mortgage loans, which the Bancorp sold to reduce interest rate risk on its balance sheet, attributed  for $217 thousand of gains realized from loan sales. Income from the increase in the cash value of bank owned life  insurance totaled $403 thousand for 2010, a decrease of  Net interest income for 2010 was $25.1 million,  an increase of $1.7 million (7.5%) from $23.3 million for 2009. The increase in net interest income has been positively impacted by the decrease in the Bancorp’s cost of funds as a result the Federal Reserve’s continued action in maintaining a low short-term interest rate environment. The weighted- average yield on interest-earning assets was 4.84% for 2010 compared to 5.16% for 2009. The weighted-average cost  of funds was 0.82% for 2010 compared to 1.45% for 2009. The impact of the 4.84% return on interest earning assets and the 0.82% cost of funds resulted in a net interest spread of 4.02% for 2010 compared to 3.71% for 2009. During 2010, total interest income decreased by $2.1 million  (6.5%) while total interest expense decreased by $3.9 million 16 Results of Operations -  Comparison of 2010 to 2009 Minimum Required To Be Well Capitalized Under Prompt Minimum Required for Corrective Action At December 31, 2010 Actual Adequacy Purposes Regulations ______________________ _______________ ______________ _____________ Amount Ratio Amount Ratio Amount Ratio Total capital to risk-weighted assets................. $61,500 12.9% $38,000 8.0% $47,600 10.0% Tier 1 capital to risk-weighted assets................. $55,500 11.7% $19,000 4.0% $28,500 6.0% Tier 1 capital to  adjusted average assets............. $55,500 8.5% $19,500 3.0% $32,600 5.0%