changes in the
valuation allowance are reported in net loss on other real estate.
Servicing
Rights: Servicing rights are expensed in proportion to,
and over the period of, estimated net servicing revenues. Impairment
is evaluated based on the fair value of the rights, using groupings
of the underlying loans as to interest rates. Any impairment of a
grouping is reported as a valuation allowance.
Goodwill:
Goodwill is the excess of purchase price over identified net assets
in business acquisitions. Goodwill is expensed on the straight-line
method over 25 years. Goodwill is assessed for impairment based on
estimated undiscounted cash flows, and written down if necessary.
Long-term
Assets: These assets are reviewed for impairment when events
indicate their carrying amount may not be recoverable from future
undiscounted cash flows. If impaired, the assets are recorded at discounted
amounts.
Repurchase
Agreements: Substantially all repurchase agreement
liabilities represent amounts advanced by various customers. Securities
are pledged to cover these liabilities, which are not covered by federal
deposit insurance.
Employee
Benefits: A profit sharing plan covers substantially
all employees. Contributions are expensed annually and are made at
the discretion of the Board of Directors. Contributions totaled $266,000,
$264,000 and $259,000 in 2000, 1999 and 1998. The plan allows employees
to make voluntary contributions, although such contributions are not
matched by the Company.
Stock
Compensation: Expense for employee compensation
under stock option plans is reported if options are granted below
market price at grant date. Pro forma disclosures of net income and
earnings per share are provided as if the fair value method of SIAS
No. 123 were used for stock-based compensation awarded after January
1, 1995 using an option pricing model to estimate fair value.
Income
taxes: Income tax expense is the sum of the current
year income tax due or refundable and the change in deferred tax assets
and liabilities. Deferred tax assets and liabilities are the expected
future tax consequences of temporary differences between the carrying
amounts and tax bases of assets and liabilities, computed using enacted
tax rates. A
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valuation allowance,
if needed, reduces deferred tax assets to the amount expected to be
realized.
Fair
Values of Financial Instruments: Fair values of
financial instruments are estimated using relevant market information
and other assumptions, as more fully disclosed separately. Fair value
estimates involve uncertainties and matters of significant judgment
regarding interest rates, credit risk, prepayments, and other factors,
especially in the absence of broad markets for particular items. Changes
in assumptions or in market conditions could significantly affect
the estimates. The fair value estimates of existing on- and off-balance
sheet financial instruments does not include the value of anticipated
future business or the values of assets and liabilities not considered
financial instruments.
Earnings
Per Share: Basic earnings per share is based on
weighted-average common shares out- standing. Diluted earnings per
share further assumes issue of any dilutive potential common shares.
Comprehensive
Income: Comprehensive income consists of net income and
other comprehensive income (loss). Other comprehensive income (loss)
includes unrealized gains and losses on securities available for sale,
net of tax, which are also recognized as separate components of equity.
New
Accounting Pronouncements: Beginning January 1,
2001, a new accounting standard will require all derivatives to be
recorded at fair value. Unless designated as hedges, changes in these
fair values will be recorded in the income statement. Fair value changes
involving hedges will generally be recorded by offsetting gains and
losses on the hedge and on the hedged item, even if the fair value
of the hedged item is not otherwise recorded. Adoption of this standard
on January 1, 2001 did not have a material effect.
Operating
Segments: Internal financial information is primarily
reported and aggregated in three lines of business, banking, trust
and mortgage banking.
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