N AV I G AT IN G T HE C H A L L E N GE S O F C H A N GEN AV I G AT IN G T HE C H A L L E N GE S O F C H A N GEN AV I G AT IN G T HE C H A L L E N GE S O F C H A N GEN AV I G AT IN G T HE C H A L L E N GE S O F C H A N GEN AV I G AT IN G T HE C H A L L E N GE S O F C H A N GEN AV I G AT IN G T HE C H A L L E N GE S O F C H A N GE

2010

W h a t y o u ’ d e x p e c t f r o m a f r i e n d .

A NNU A L R E P OR T

2

Kelley AyresPresident

We live in interesting times! There is a yearning to return to “normal,” so much so that we

are even hoping for the “new normal,” although I am not sure anyone really knows what

that might be. There are some fundamental flaws in our economy and I do not believe we

have been willing to fully acknowledge them, much less address the solutions.

There is still a tremendous disparity between our local economy and that of the rest of the

world. We have enjoyed, in agriculture, another year of good production with reasonable costs and

very good prices. The trickle-down effect of this on the local economy remains positive as we still

see good construction, manufacturing and retail activity. We benefit from employment among

the highest in the country. You do not need to travel very far, either east or west, and economic

conditions deteriorate rapidly.

The “change,” voted for in 2008 has been disappointing to many. The 2010 election indicated that

the electorate is fed up with spending by the federal government. Earmarks, stimulus and the

burdens placed on businesses and taxpayers due to legislation such as health care and financial

reform are a strain on the economy. Federal spending is now well over 20% of GDP, which is higher

than the late 1970s that left the economic legacy of “malaise” and “stagflation.” Tax relief should be

welcome; however it is for only two years. This does little to solve the uncertainty brought about

by political posturing. In order for the economy to grow, and businesses to hire, we must have

some long-term certainty. Elected officials must realize that long-term does not mean until the

next election cycle!

The financial reform legislation is much like the health care bill. It is massive – 2,300 pages. There

are estimated to be 240 rule-making efforts and 70 studies. The legislation affects 11 regulatory

bodies. In Washington, a rule of thumb is that there will be ten pages of regulation for one page of

law! Like the health care legislation, there will be countless unintended consequences to this bill.

Unintended consequences are seldom positive. Large financial institutions controlled the debate as

this legislation was being formulated. My guess is that the large financial institutions Congress

tried to reign in will be the benefactors. Like the health care bill, I would challenge those who

voted yes to look their constituents in the eye and say they read the bill and understood it!

Many times over the 15 years I have written this report, I have addressed the challenges that we are

faced within production agriculture. We have been able to help our clients navigate those challenges

and continue to grow and prosper. This new set of challenges will be much different, yet I am

confident we are well positioned for the future to continue to grow and prosper along with our clients.

Navigating theChallenges of Change

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Deposits drive the bankDeposits drive the bank. We continued the trend of strong

growth in deposits. Total deposits increased over 6% in 2010. In

the last four years, total deposits are up over 30%.

Farm profi ts remain very good and are the primary reason for

this growth. We continue to be fortunate and attract new clients,

further adding to this growth. I also think some of the growth is

attributable to two other factors. Many have the view that there

are no good alternatives for investments in that the potential

returns do not justify the risks. For now, bank deposits are a

safe harbor until other investments appear attractive.

It is true that bank deposits are not as attractive as we all wish

they would be. However, it is very easy to structure deposit

accounts so that relatively large sums can be covered with FDIC

insurance. In addition, non-interest bearing checking accounts

have separate, unlimited FDIC insurance. When compared

to institutional money market accounts, and even Treasury

investments and government agencies, bank deposits are a very

good alternative when investing for fi xed income.

Our loan quality remains goodAgricultural loans represent the largest segment of our loan

portfolio. As mentioned above, several years of good profi tability

have allowed farmers to reduce borrowings. Businesses and

consumers remain wary, even with low rates, and there are many

competitors for high quality borrowers. All of these factors have

impacted loan volume, resulting in little to no growth.

We remain eager to loan. We added in the past year a very good

program for residential mortgage loans. Your mortgage will

be handled here at the bank, by our staff, from application to

closing, and we will handle all of the servicing for the life of the

loan. We have had great success with our mortgage lending, and

expect that to continue.

Our “Seeds for Success” program continues to offer extremely

competitive fi nancing for agricultural inputs. This allows our

producers the opportunity to take substantial cash discounts

available at the end of the year, and fi nance these purchases at

very attractive rates.

Our loan quality remains good, and we strive to provide

productive credit to our clients who need to borrow to obtain

their objectives for the farm, business and family.

A high qualityinvestment portfolioThe bank has a high quality investment portfolio totaling over

$32 million. And when it comes to returns, like our deposit

clients, we feel your pain. Rates for shorter-term, high-quality

investments we are willing to purchase are pitiful. The one

positive factor is that the yield curve in the two to ten-year

sector is historically steep. This does give the bank the ability to

invest in the fi ve to six-year portion of the curve, and earn more

from these investments than we are paying on deposits.

The Federal Reserve is committed to its policy of excessive

liquidity and low interest rates. The market is not so sure that

this is the right move, and we have seen rates, with maturity

in three to ten years particularly, move up somewhat the last

couple of months of the year. Longer-term rates have moved up

somewhat but these are investments that are not appropriate

for the bank, given their long duration.

Capital and liquidity remain strongCapital and liquidity are critical areas for banks. Regulator

pressure has increased dramatically to have ample liquidity and

capital. We have very strong liquidity. It is typical for the bank

to have liquid assets of $12 million to $15 million. In fact, we

have too much, which is a negative factor in profi tability. Banks

make money by lending, not by investing in bonds and we would

certainly be willing to lessen our liquidity in exchange for high-

quality loans.

Our capital remains sound, in excess of $6 million and our risk-

based capital, in particular, is well beyond regulatory guidelines

at 18.73%.

4

Data Processing/Operations,Angie Finn

2010 brought a new and exciting feature to our Online Banking

site-electronic statements. eStatements are a convenient, safe

and secure way to receive your checking and savings account

statements. eStatements are electronic copies of your account

statements that you can view, save and print from the Online

Banking site. For our clients’ convenience, eStatements are

available for up to 18 months. Our enrollments for this new

product are meeting our expectations, with more clients signing

up every month. We have received very positive comments from

our clients who have signed-up for this new feature. Check it out

the next time you sign into Online Banking.

If you haven’t browsed around in our website lately, you might

want to take a few minutes to have a look. Within the last couple

of years we have added several new and convenient features. You

can now print a real estate or consumer loan application, view

our latest Certifi cate of Deposit rates, and read about our latest

special offers. We have also added several new community-related

links to the resources section. I encourage you to take a look at

www.fi rstofminden.com and let us know what you think, or if you

prefer, you can also fi nd us on Facebook.

We enjoy bringing you new and updated technologies and

features. However, we will only do so when it is a safe and

secure product, as the confi dentiality and security of your

personal and fi nancial data is and always will be our highest

priority. To that end we keep our technology up-to-date and

protected by fi rewalls and intrusion detection systems that

are regularly tested and verifi ed. We will always take the

responsibility of protecting your data and privacy very seriously.

Trust and Non-Deposit,Carol Loschen

“Before we can think about the future, we must refl ect on what

happened in the market during 2010, and see if we can pick out

any trends both new and/or old for 2011. Learning from the past

is why we are taught history in school, right?” This quote, taken

from the Financial Markets page on CNN, is about as good advice

as I’ve seen for a while. Taking stock of where we’ve been can

certainly help an investor plan a strategy for the future. If history

has taught us anything, we can be certain that trying to “time the

market” can be devastating. Finding an investment strategy that

works for your personal style, and sticking with the long-range

goal will almost always work in an investor’s favor.

2010 was certainly not without its ups and downs. A technical

snafu during the afternoon of May 6th sent U.S. markets

careening, and left most investors feeling skittish to say the

least. Unemployment problems continued to be a major focus,

with no signs of easing in the near future. The Federal Reserve

kept interest rates at historically low levels to try and increase

consumer spending, while foreclosures were halted in 23 states

because of improper paper work.

The second half of the year was responsible for nearly all of the

2010 stock gains; and what a year-end it was! The S&P 500 rose

17 of 22 trading days in December, making it the best December

since 1991. Stocks turned in another solid year; the DOW gained

nearly 11%, and all year-end indicators set the tone for a

positive beginning to 2011.

Our Trust Department continues to provide quality service to

clients. Kelley Ayres and Carol Loschen head this department,

and are eager to work with you in helping you achieve your

fi nancial goals. We provide services for Trust administration,

farm management, agency account investing, bill pay and self-

directed IRA products.

Shareholder ReturnsProfi tability improved in 2010. We did manage to improve net

interest margin somewhat, although we are trailing peer banks.

Non-interest income increased due in large part to our mortgage

lending. In addition, non-interest expense was well controlled as

we continue to look for effi ciencies. FDIC premiums have been

a huge expense the past two years. There may be some relief

with the fi nancial reform bill, however the costs of the added

regulatory burden will more than off-set these gains.

We have completed our tenth year as an S-corp. This election,

for tax purposes, has served us well. We have eliminated double

taxation, which has allowed our capital to grow, and shareholder

basis has increased.

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Return on assets was .85% and return on equity was 8.32%.

Dividends were maintained at $76 per share, marking the 116th

consecutive year the bank has paid a dividend!

In ConclusionBanking in the future will continue to change and evolve. The

myriad of new regulations will be noticed by our clients, in the

additional disclosures and requirements to obtain a deposit

account or loan. Unfortunately, the increasing costs will

eventually be passed on.

The success of our business depends entirely on our focus on

relationships rather than transactions. We may not be able to

offer every available fi nancial service or product that the larger

fi nancial institutions can. There are however, advantages to

our clients that only a bank such as ours can offer. What we can

offer you is a handshake, a face-to-face conversation, a caring

staff, knowledgeable advice and local decision-making. We

are able to provide the type of service that makes our clients

“yellow dog” loyal.

Large fi nancial institutions, the Farm Credit System, captive

fi nance companies and vendors at times are eager to compete

in rural communities. Often times their decision-making process

is driven by the profi tability service. They will offer a service or

enter or exit a market based on the bottom line. They will never

know their customers as well as we know our clients, and as

institutions grow and consolidate, their geographic “footprint,”

decision-making moves further and further away from the local

communities. Our market is here, and we provide services and

products that the community needs to grow and prosper.

We appreciate the faith and confi dence you have placed in the

bank. All of our staff is well trained and eager to serve you in

a friendly and professional manner. We understand the current

economic conditions, and we are well positioned to help you

achieve your fi nancial goals.

On behalf of our directors, offi cers and staff, I wish you all the

very best in the future.

Changes to Our Board of DirectorsMr. R.W. (Dick) Agee retired from

active membership of the Board of

Directors this year. He was elected

Director Emeritus. Mr. Agee has

served on the board since 1977.

Mr. Agee said upon his retirement,

“Over the past decades there have

been many changes within the

banking and fi nancial industry that

I consider a privilege to have been

a part of. I have appreciated and enjoyed my time working with

the members of the Board and offi cers of the bank.”

Mr. Agee has generously supported the community for many

years by providing grants for community projects through the

Rogers Foundation.

Rex Marquart was elected to the board. Mr. Marquart has been

associated with the Agee and Rogers families for many years.

He is director of the Rogers Foundation and the R.H. Rogers

Investment Company.

Kelley Ayres was named President and Chairman of the Board of

First Bank and Trust Company.

R.W. (Dick) Agee

6

STATEMENT OF CONDITIONASSETS 2010 2009

Cash & Due From Banks $1,538,288 $1,236,120

U.S. Government Securities 19,885,539 18,900,738

Other Securities 12,012,024 9,295,723

Unrealized Gain/Loss on AFS 129,215 423,435

Federal Funds Sold - -

Federal Reserve Stock 15 0,000 150,000

Loans 29,288,865 31,711,233

Less: Loan Loss Reserve (409,274) (535,623)

Net Loans 28,879,591 31,175,610

Land, Building, Furniture & Fixtures 129,872 174,884

Other Real Estate Owned 112,075 263,837

Interest Earned, Not Collected 608,938 647,300

Other Assets 368,613 395,163

Total Assets $63,814,155 $62,662,810

LIABILITIES 2010 2009

Demand Deposits $12,453,922 $12,536,054

Time Deposits 36,747,959 33,821,625

Total Deposits $49,201,881 $46,357,679

Repurchase Agreements $6,785,895 $6,422,389

Borrowed Funds 1,406,239 3,413,465

Interest Payable 45,437 63,562

Other Liabilities 366,983 332,128

Total Liabilties $57,806,435 $56,589,223

Capital Stock $400,000 $400,000

Surplus 4,600,000 4,600,000

Undividied Profi ts 878,505 650,152

Unrealized Gain/Loss on AFS 129,215 423,435

Total Capital Accounts $6,007,720 $6,073,587

Total Liabilities & Capital $63,814,155 $62,662,810

RECONCILEMENT OF CAPITAL ACCOUNTS2010 2009

Balance at Beginning of Calendar Year $6,073,587 $5,885,442

Net Income Transferred to Undivided Profi ts at Year End 532,353 382,121

Change in Unrealized Gain/Loss of Assets for Sale (294,220) 110,024

Cash Dividend Paid to Shareholders (304,000) (304,000)

Balance at End ofCalendar Year $6,007,720 $6,073,587 *Dollars on graphs shown in thousands.

LOANS*

ASSETS*

DEPOSITS*

CAPITAL*

7f i r s tofminden .com

STATEMENT OF INCOMEINCOME 2010 2009

Income & Fees on Loans $1,883,240 $1,888,709

Interest From Securities 859,829 924,280

Income From Deposit Accounts 142,568 148,045

Other Income 88,977 80,603

Total Income $2,974,614 $3,041,637

EXPENSES 2010 2009

Interest Expense $605,656 $784,317

Salaries and Benefi ts 992,658 953,720

Bank Premise Expense 141,911 186,264

Overhead Expense 575,020 631,410

Total Expenses $2,315,245 $2,555,711

Net Operating Income $659,369 $485,926

Gain or Loss on Securities $29,766 $64,134

Provision for Loan Losses (138,240) (150,000)

Federal & State Income Taxes (18,542) (17,939)

Net Income $532,353 $382,121

Earnings Per Share $133.09 $95.53

RECONCILEMENT OF RESERVEFOR LOAN LOSSES

2010 2009

Balance at Beginning of Calendar Year $535,622 $393,159

Recoveries 25 -

Transfer to Reserve 138,240 150,000

Losses Charged to Reserve (264,614) (7,537)

Transfer from Reserve - -

Balance at End ofCalendar Year $409,273 $535,622

TRUST DEPARTMENTASSETS 2010 2009

Securities in Department

Cash Equivalents $1,283,910 $1,216,447

Government and Municipal Securities 23,203,685 19,927,319

Common Stock and Mutual Funds 2,039,571 1,400,416

Total Assets $26,527,166 $22,544,182

LIABILITIES 2010 2009

Department Accounts

Guardianships $- $-

Personal Trusts 1 1,000

Personal Agency Accounts 2,022,759 1,789,806

Qualifi ed Retirement Plans 2,339,276 2,415,659

Corporate Agency Accounts 22,165,130 18,347,717

Total Liabilites $26,527,166 $22,554,182

*Dollars on graphs shown in thousands.

INCOME*

ROA (RETURN ON ASSETS)

ROE (RETURN ON EQUITY)

First Bank and Trust Company Leadership:

ANNUAL MEETING: APRIL 14, 2011

OFFICERS:

Kelley Ayres,Chairman and President

Angie Finn,Sr. Vice President and Cashier

Carol Loschen,Sr. Vice President & Trust Officer

Bernie Stratman,Senior Vice President

Steve GriffithVice President

Tobbi Hansen,Vice President & New Accounts Officer

Deb Olson,Vice President & Head Teller

Rebecca Riese,Asst. Vice President

DIRECTORS:

Kelley Ayres,Chairman and President,First Bank and Trust Company

Robert A. Garrett,Real Estate, Farming

Carol Loschen,Sr. Vice PresidentFirst Bank and Trust Company

Rex Marquart,InvestmentsThe Rogers Foundation

Marvin B. Meyer,D.D.S.

Bernie Stratman,Senior Vice President,First Bank and Trust Company

Morgan Wells,Farming and Investments

STAFF:

Rita Crooks,Loan Clerk

Charlene Schriner,Loan Clerk

Sue Moon,Operations

Kay Epp,Proof Operator

Jennifer Bergstrom,Computer Operator

Debbie Reiss,New Accounts

Cathy Anderson,Teller

Holly Eckhoff,Teller

Laurie Clement,Teller

315 E 4th Street Minden, NE 68959 P: 308-832-2030 TF: 800-448-4823 f i r s t o f m i n d e n . c o m

W h a t y o u ’ d e x p e c t f r o m a f r i e n d .

Membe r