on an individual loan or lease basis for other
loans and leases. If a loan or lease is impaired,
a portion of the allowance is allocated so that
the loan or lease is reported, net, at the present
value of estimated cash flows using the loan’s
or lease’s existing rate or at the fair value
of collateral if repayment is expected solely
from the collateral.
Office
Building and Equipment: Land is carried
at cost. Building and related components are
depreciated using the straight-line method with
useful lives ranging from 7 to 40 years. Furniture,
fixtures and equipment are depreciated using
the straight-line method with useful lives ranging
from 3 to 10 years.
Other
Real Estate: Real estate acquired in
settlement of loans is initially reported at
estimated fair value at acquisition. After acquisition,
a valuation allowance reduces the reported amount
to the lower of the initial amount or fair value
less costs to sell. Expenses, gains and losses
on disposition and changes in the valuation
allowance are reported in net loss on other
real estate.
Goodwill
and Other Intangible Assets: Goodwill
results from prior business acquisitions and
represents the excess of the purchase price
over the fair value of acquired tangible assets
and liabilities and identifiable intangible
assets. Upon adopting new accounting guidance
in 2002, the Company ceased amortizing goodwill.
Goodwill is assessed at least annually for impairment
and any such impairment will be recognized in
the period identified.
The core deposit
intangible arising from the First State Bank
of Round Lake acquisition was measured at fair
value and is being amortized on the straight-line
method over seven years.
Long-term
Assets: These assets are reviewed for
impairment when events indicate their carrying
amount may not be recoverable from future discounted
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
$208,000, $264,000 and $241,000 in
|
|
2005, 2004 and 2003. The plan allows employees
to make voluntary contributions, although
such contributions are not matched by the
Company.
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 basis of assets and liabilities
computed using enacted tax rates. A valuation
allowance, if needed, reduces deferred tax
assets to the amount expected to be realized.
Fair
Value 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 judgement 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 on- and offbalance sheet
financial instruments does not include the
value of anticipated future business or the
values of assets and liabilities not considered
financial instruments.
Loan
Commitments and Related Financial Instruments:
Financial instruments include off-balance
sheet credit instruments, such as commitments
to make loans and commercial letters of credit,
issued to meet customer financing needs. The
face amount for these items represents the
exposure to loss, before considering customer
collateral or ability to repay. Such financial
instruments are recorded when they are funded.
Earnings
per Share: Basic earnings per share
is based on weighted average common shares
outstanding.
Comprehensive
Income: Comprehensive income consists
of net income and other comprehensive income.
Other comprehensive income includes unrealized
gains and losses on securities available for
sale, net of deferred tax, which are also
recognized as separate components of equity.
Reclassification:
Some items in the prior year financial statements
were reclassified to conform to current presentation.
|
