First Bankers Trustshares, Inc. Annual Report 2011

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FY2011 Annual Report · First Bankers Trustshares, Inc.

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Contents

Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Letter to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

select Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 - 6

Management’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Management’s Discussion and Analysis
of Financial Condition and Results of operations . . . . . . . . . . . . . . .

8 - 13

Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Consolidated Financial statements
Balance sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
statements of Changes in stockholders’ equity . . . . . . . . . . . . . . . . . . . 17
statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 - 19

notes to Consolidated Financial statements . . . . . . . . . . . . . . . . . . 20 - 49

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

CoRpoRA te InFoRMA tIon

Corporate DesCription

First Bankers trustshares, Inc . (FBtI) is a bank holding company for First
Bankers trust Company, n .A ., First Bankers trust services, Inc ., FBIL
statutory trust I, FBIL statutory trust II, and FBIL statutory trust III . the
Company was incorporated on August 25, 1988 and is headquartered
in Quincy, Illinois .

First Bankers trustshares’ mission, through its subsidiaries, is to provide
comprehensive financial products and services to its retail, institutional,
and corporate customers .

First Bankers trust Company, n .A . is a community-oriented financial
institution, which traces its beginnings to 1946, operates 10 banking
facilities in Adams, Hancock, McDonough, sangamon, and schuyler
counties in West Central Illinois .

First Bankers trust services, Inc . is a national provider of fiduciary services
to individual retirement accounts, personal trusts, and employee benefit
trusts . the trust Company is headquartered in Quincy, IL and operates
facilities in Chicago, IL, phoenix, AZ, philadelphia, pA, and springfield, IL .

FBIL statutory trust I, FBIL statutory trust II, and FBIL statutory trust
III were capitalized in september 2000 and 2003 and August 2004,
respectively, for the purpose of issuing Company obligated Mandatorily
Redeemable preferred securities .

For additional financial information contact:
Brian A . Ippensen, treasurer
First Bankers trustshares, Inc .
(217) 228-8000

stoCkholDer information
Common shares authorized:

6,000,000

Common shares outstanding
as of December 31, 2011:

stockholders of record:
*As of December 31, 2011

2,053,026

245*

Inquiries regarding transfer requirements, lost certificates, changes of
address and account status should be directed to the corporation’s
transfer agent:

Illinois stock transfer, Inc .
209 West Jackson Blvd ., suite 903
Chicago, IL 60606

Corporate aDDress
First Bankers trustshares, inc.
1201 Broadway
p .o . Box 3566
Quincy, IL 62305

inDepenDent auDitors
McGladrey & Pullen, LLP
201 n . Harrison, suite 300
Davenport, IA 52801

General Counsel
hunton & Williams, LLP
1445 Ross Ave ., suite 3700
Dallas, tX 75202

first Bankers trustshares, inC.
BoarD of DireCtors

David E. Connor
Chairman Emeritus, First Bankers Trustshares, Inc.

Carl Adams, Jr.
President, Illinois Ayers Oil Company

William D. Daniels
Member, Harborstone Group, LLC.

Mark E. Freiburg
Owner, Freiburg Insurance Agency & Freiburg Development
President, Freiburg, Inc.

Donald K. Gnuse
Chairman of the Board, First Bankers Trustshares, Inc.
Chairman of the Board, First Bankers Trust Company, N.A.
Chairman of the Board, First Bankers Trust Services, Inc.

Arthur E. Greenbank
President/CEO, First Bankers Trust Company, N.A.
President/CEO, First Bankers Trustshares, Inc.

Phyllis J. Hofmeister
Secretary, Robert Hofmeister Farm

Steven E. Siebers
Secretary of the Board, First Bankers Trustshares, Inc.
Secretary of the Board, First Bankers Trust Company, N.A.
Secretary of the Board, First Bankers Trust Services, Inc.
Attorney at Law, Scholz, Loos, Palmer, Siebers & Duesterhaus

Dennis R. Williams
Chairman of the Board, Quincy Newspapers, Inc.

eXeCutiVe offiCers

Arthur E. Greenbank President and CEO
Brian A. Ippensen Treasurer
Steven E. Siebers Secretary

first Bankers trustshares, inC. stoCk priCes
(For the three months period ended)

Market Value

12/31/11 09/30/11 06/30/11 03/31/11

12/31/10

High

Low

$ 21 .50

$ 20 .45

$ 21 .05

$ 22 .10

$ 22 .01

$ 18 .00

$ 20 .00

$ 20 .80

$ 18 .43

Period end close

$ 21.04

$ 18.00

$ 20.34

$ 20.80

$ 20.10

The following companies make a market in FBTI common stock:

howe Barnes hoefer & arnett, inc. Wells Fargo advisors
225 s . Riverside plaza, 7th Floor
Chicago, IL 60603
(800) 800-4693

510 Maine, 9th Floor
Quincy, IL 62301
(800) 223-1037

stifel nicolas & co. inc.
227 W . Monroe, suite 1850
Chicago, IL 60606
(800) 745-7110

Monroe securities, inc.
100 n . Riverside plaza, suite 1620
Chicago, IL 60606
(312) 327-2530

Corporate Information | AnnuAl RepoRt 2011

LetteR to sHAReHoLDeRs

Dear shareholders,

By many, if not most measurements, the year 2011 was a very successful year .

We finished our new Corporate Headquarters at 12th & Broadway in Quincy .

this solidified our very strong banking presence in the Quincy community . By the

time you receive this report, our newest facility in Macomb will be open giving us

two locations in our Macomb, Illinois market . this will allow us to continue our

momentum in this very important university community . our most eastern branch

in springfield, Illinois has been a tremendous investment for us . We look for further

growth and opportunities in this dynamic marketplace .

our trust Company continues its growth in national trust business throughout the

United states . We currently do business with customers in 35 states across the nation .

In 2011, the trust Company eclipsed $3 billion in assets under management for

employee benefit trusts, personal trusts and Individual Retirement Accounts .

our earnings were good, if not a record . our measurement was based against our

record 2010 year where we had an extraordinary $1 million gain on securities sales .

even with that gain, 2011 was our second best year from an earnings standpoint and

allowed us to boost our dividend by over 30% .

Donald K. Gnuse
Chairman of the Board

We remain continuously optimistic about the future of your Company . We hope to

continue to reward you with increased earnings, dividends and the growth of your

investment in the future .

Arthur e. Greenbank
President/CEO

We look forward to talking with you at our annual meeting on tuesday, May 15, 2012

at our new Corporate Headquarters building, located at 12th and Broadway streets in

Quincy, Illinois . the meeting will begin at 9:00 a .m .

Donald K . Gnuse
Chairman of the Board

Arthur e . Greenbank
President/CEO

AnnuAl RepoRt 2011 | letter to Shareholders

Donald K. Gnuse

Chairman of the Board

Arthur e. Greenbank

President/CEO

seLeCt FInAnCIAL DA tA

(Amount in thousands of dollars, except per share data statistics)

Year ended December 31,

2011

2010

2009

2008

2007

2006

performanCe

net income

6,057

6,440

5,885

4,729

4,243

3,763

Common stock cash dividends paid

944

943

942

860

778

Common stock cash dividend payout ratio 1

17.67 %

16 .28 %

17 .90 %

19 .93 %

20 .28 %

20 .69 %

Return on average assets 1

0.75 %

0 .88 %

0 .89 %

1 .01 %

0 .97 %

0 .91 %

Return on average common stockholders’ equity 2

11.26 %

13 .54 %

13 .79 %

13 .77 %

13 .90 %

13 .68 %

per Common share

earnings, basic and diluted

Dividends (paid) on common stock

Book value 3

stock price

High

Low

2.60

0.46

2 .83

0 .46

2 .57

0 .46

2 .31

0 .46

2 .07

0 .42

1 .84

0 .38

24.08

21 .98

19 .62

17 .51

15 .66

14 .02

22.10

22 .01

18 .25

21 .75

20 .00

23 .25

18.00

16 .10

12 .00

15 .60

18 .00

18 .05

21.04

20 .10

16 .10

18 .00

19 .70

19 .00

price/earnings per share (at period end)

Market price/Book value (at period end)

8.1

0.87

7 .1

0 .91

6 .3

0 .82

7 .8

1 .03

9 .5

1 .26

10 .3

1 .36

Weighted average number
of shares outstanding

at DeCemBer 31,

Assets

Investment securities

Loans held for sale

Loans

Deposits

short-term borrowings and Federal
Home Loan Bank advances

Junior subordinated debentures

preferred stock

stockholders’ equity 4

total equity to total assets 4

tier 1 capital ratio (risk based)

total capital ratio (risk based)

Leverage ratio

2,052,703

2,050,864

2,048,574

$ 721,854

$ 690,644

$ 623,896

$ 498,028

$ 438,878

$ 423,674

281,635

278,729

282,135

146,908

114,616

95,773

454

183

187

835

599

375,390

337,558

292,344

288,412

279,915

275,974

584,499

570,436

511,769

400,844

359,345

355,955

48,769

15,465

10,000

43,104

15,465

10,200

38,717

15,465

10,100

40,545

15,465

27,088

15,465

19,537

15,465

$ 59,446

$ 55,286

$ 50,287

$ 35,866

$ 32,079

$ 28,717

8.24 %

8 .00 %

8 .06 %

7 .20 %

7 .31 %

6 .78 %

14.68 %

14 .70 %

15 .44 %

12 .44 %

11 .78 %

10 .39 %

15.54 %

15 .43 %

16 .60 %

14 .36 %

14 .05 %

12 .93 %

9.99 %

9 .83 %

9 .88 %

8 .96 %

8 .89 %

8 .21 %

1 Excludes preferred stock dividends/accretion.
2 Return on average common stockholders’ equity is calculated by dividing net income, excluding preferred stock dividends/accretion, by average common stockholders’

equity. Common stockholders’ equity is defined as equity less preferred stock and accumulated other comprehensive income or loss.

3 Book value per share is calculated by dividing stockholders’ equity, excluding preferred stock and accumulated other comprehensive income or loss, by outstanding

common shares.

4 Stockholders’ equity includes preferred stock and excludes accumulated other comprehensive income or loss.

Select Financial Data | AnnuAl RepoRt 2011

AnnuAl RepoRt 2011 | Select Financial Data

MAnAGeMent’s RepoR t of Internal Controls over Financial Reporting

Arthur e. Greenbank
President/CEO

Brian A. Ippensen
Treasurer

to the stockholders:

Management of First Bankers trustshares, Inc . has prepared and is responsible for the
integrity and consistency of the financial statements and other related information
contained in this Annual Report . In the opinion of Management, the financial
statements, which necessarily include amounts based on management estimates and
judgments, have been prepared in conformity with accounting principles generally
accepted in the United states of America and appropriate to the circumstances .

In meeting its responsibilities, First Bankers trustshares, Inc . maintains a system of
internal controls and procedures designed to provide reasonable assurance that
assets are safeguarded, that transactions are executed in accordance with established
policies and practices, and that transactions are properly recorded so as to permit
preparation of financial statements that fairly present financial position and results
of operations in conformity with accounting principles generally accepted in the
United states of America . Internal controls and procedures are augmented by written
policies covering standards of personal and business conduct and an organizational
structure providing for division of accountability and authority .

the effectiveness of, and compliance with, established control systems are monitored
through a continuous program of internal audit, account review, and external audit .
In recognition of the cost-benefit relationships and inherent control limitations, some
features of the control systems are designated to detect rather than prevent errors,
irregularities and departures from approved policies and practices . Management
believes the system of controls has prevented or detected on a timely basis, any
occurrences that could be material to the financial statements and that timely
corrective action have been initiated when appropriate .

First Bankers trustshares, Inc . engaged the accounting firm of McGladrey & pullen,
LLp as Independent Auditors to render an opinion on the consolidated financial
statements . to the best of our knowledge, the Independent Auditors were provided
with access to all information and records necessary to render their opinion .

the Board of Directors exercises its responsibility for the financial statements and
related information through the Audit Committee, which is composed entirely of
outside directors . the Audit Committee meets regularly with Management, the
internal auditing manager and staff, and the Independent Auditors to assess the
scope of the annual audit plan and to discuss audit, internal control and financial
reporting issues . Among the many items discussed are major changes in accounting
policies and reporting practices . the Independent Auditors also meet with the Audit
Committee, without Management present, to afford them the opportunity to discuss
adequacy of compliance with established policies and procedures and the quality of
financial reporting .

Arthur e . Greenbank
President/CEO

Brian A . Ippensen
Treasurer

Management’s Report | AnnuAl RepoRt 2011

MAnAGeMent’s DIsCUssIon AnD AnALYsIs
of Financial Condition and Results of operations

introDuCtion
the following discussion of the financial condition and results
of operations of First Bankers trustshares, Inc . provides an
analysis of the consolidated financial statements included in
this annual report and focuses upon those factors which had
a significant influence on the overall 2011 performance .

the discussion should be read in conjunction with the
Company’s consolidated financial statements and notes thereto
appearing elsewhere in this Annual Report .

the Company was incorporated on August 25, 1988, and
acquired First Midwest Bank/M .C .n .A . (the Bank) on June 30,
1989 . the Bank acquisition was accounted for using purchase
accounting . prior to the acquisition of the Bank, the Company
did not engage in any significant business activities .

finanCial manaGement
the business of the Company is that of a community-oriented
financial institution offering a variety of financial services to
meet the needs of the communities it serves .

the Company attracts deposits from the general public
and uses such deposits, together with borrowings and other
funds, to originate one-to-four family residential mortgage
loans, consumer loans, small business loans and agricultural
loans in its primary market area . the Company also invests in
mortgage-backed securities, investment securities consisting
primarily of U .s . government or agency obligations, financial
institution certificates of deposit, and other liquid assets .
In addition, the Company conducts trust operations
nationwide through its sales representatives .

the Company’s goal is to achieve consistently high levels
of earning assets and loan/deposit ratios while maintaining
effective expense control and high customer service levels .
the term “high level” means the ability to profitably increase
earning assets . As deposits have become fully deregulated,
sustained earnings enhancement has focused on “earning
asset” generation . the Company will focus on lending money
profitably, controlling credit quality, net interest margin,
operating expenses and on generating fee income from trust
and banking operations .

ConsoliDateD assets (Amounts in thousands of dollars)

2011 Change

2010 Change

2009

2008

2007

2006

5 Year
Growth Rate

assets

Cash and due from banks:
non-interest bearing

$ 12,104

29.27 %

$ 9,363

2 .68 %

$ 9,119

$ 9,923 $ 13,668 $ 10,738

12 .72 %

Interest bearing

9,073

(64.67)

25,681 202 .24

8,497

18,544

1,658

1,443

528 .76

securities

281,635

1.04

278,729

(1 .21)

282,135

146,908

114,616

95,773

194 .07

Federal funds sold

3,238

49.42

2,167 639 .59

Loans held for sale

454 100.00

(100 .00)

293

183

6,483

5,035

14,485

187

835

599

net loans

other assets

totAL

370,203

11.33

332,538

15 .58

287,700

284,375

276,605

272,835

45,147

7.07

42,166

17 .23

35,969

31,608

26,461

27,801

$ 721,854

4.52 %

$ 690,644

10 .70 %

$ 623,896

$ 498,028

$ 438,878

$ 423,674

70 .38 %

liaBilities & stoCkholDers’ equity

Deposits

$ 584,499

2.47%

$ 570,436

11 .46 %

$ 511,769

$ 400,844

$ 359,345

$ 355,955

64 .21 %

short-term borrowings

48,769

29.69

37,604

24 .45

30,217

22,045

15,088

14,037

247 .43

Federal Home Loan
Bank advances
Junior subordinated
Debentures

(100.00)

5,500

(35 .29)

8,500

18,500

12,000

5,500

(100 .00)

other liabilities

8,954

77.06

5,057

(4 .02)

5,269

4,900

4,574

4,535

15,465

stockholders’ equity

64,167

13.41

56,582

7 .42

52,676

36,274

32,406

28,182

127 .69

totAL

$ 721,854

4.52 %

$ 690,644

10 .70 %

$ 623,896

$ 498,028

$ 438,878

$ 423,674

70 .38 %

AnnuAl RepoRt 2011 | Management’s Discussion and Analysis

(77 .65)

(24 .21)

35 .69

62 .39

97 .44

MAnAGeMent’s DIsCUssIon AnD AnALYsIs

of Financial Condition and Results of operations

At December 31, 2011, the Company had assets of
$721,854,000 compared to $690,644,000 at December 31,
2010 . the growth in assets is primarily made up of an 11 .33%
growth in net loans . the growth was primarily funded by a
2 .47% growth in deposits and a 29 .69% growth in short
term borrowings .

the growth in the net loan portfolio was primarily made up of
growth in commercial, operating and commercial real estate
loans of $31,649,000 and agriculture loans of $4,550,000 .
Approximately $58,051,000 of fixed rate long-term residential
real estate loans were sold in the secondary market during
2011 while $91,274,000 were sold in 2010 . Agricultural real
estate loans totaling $6,020,000 were sold in the secondary
market during 2011, while $3,284,000 were sold in 2010 .
Management continues to place emphasis on the quality
versus the quantity of the credits placed in the portfolio .

occupancy and equipment expenses, amortization and general
and administrative expenses .

prevailing economic conditions as well as federal regulations
concerning monetary and fiscal policies as they pertain to
financial institutions significantly affect the Company . Deposit
balances are influenced by a number of factors including
interest rates paid on competing personal investments and the
level of personal income and savings within the institution’s
market . In addition, growth of deposit balances is influenced
by the perceptions of customers regarding the stability of the
financial services industry . Lending activities are influenced
by the demand for housing, competition from other lending
institutions, as well as lower interest rate levels, which may
stimulate loan refinancing . the primary sources of funds for
lending activities include deposits, loan payments, borrowings
and funds provided from operations .

In addition to lending, the Company has focused on
maintaining and enhancing high levels of fee income for its
existing services and new services . Generation of fee income
will be a goal of the Company and should be a source of
continued revenues in the future .

results of operations summary

the Company’s earnings are primarily dependent on net
interest income, the difference between interest income
and interest expense . Interest income is a function of the
balances of loans, securities and other interest earning assets
outstanding during the period and the yield earned on such
assets . Interest expense is a function of the balances of
deposits and borrowings outstanding during the same
period and the rates paid on such deposits and borrowings .
the Company’s earnings are also affected by provisions for
loan losses, service charges, trust income, other non-interest
income and expense and income taxes . non-interest expense
consists primarily of employee compensation and benefits,

For the year ended December 31, 2011, the Company reported
consolidated net income of $6,057,000, a $383,000 (5 .95%)
decrease from 2010 . net interest income after provision
for loan losses for the periods being compared increased
$1,709,000 or 10 .74% . other operating income decreased
$521,000 (4 .67%) and other expenses increased $1,990,000
(11 .12%) from 2010 .

analysis of net inCome

the Company’s assets are primarily comprised of interest
earning assets including commercial, agricultural, consumer
and real estate loans, as well as federal funds sold, interest
bearing deposits in banks and securities . Average earning assets
equaled $662,207,000 for the year ended December 31, 2011 .
A combination of interest bearing and non-interest bearing
deposits, long term debt, federal funds purchased, securities
sold under agreement to repurchase, other borrowings and
capital funds are employed to finance these assets .

Management’s Discussion and Analysis | AnnuAl RepoRt 2011

ConsoliDateD inCome summary (Amounts in thousands of dollars)

2011 Change

2010 Change

2009

2008

2007

2006

5 Year
Growth Rate

Interest income

Interest expense

$ 27,155

4.72 % $ 25,930

(0 .85) % $ 26,153 $ 25,711

$ 26,912

$ 24,618

10 .31 %

(7,888)

(11.69)

(8,932)

(7 .56)

(9,663)

(11,009)

(14,027)

(11,944)

(33 .96)

net interest income

$ 19,267

13.35 % $ 16,998

3 .08 % $ 16,490 $ 14,702

$ 12,885

$ 12,674

52 .02 %

provision for loan losses

(1,640)

51.85

(1,080)

(1,330)

(1,080)

51 .85

net interest income after
provision for loan losses

other income

other expenses

$ 17,627

10.74 %

$ 15,918

3 .30 %

$ 15,410

$ 13,372

$ 11,805

$ 11,594

52 .04 %

10,643

(4.67)

11,164

22 .78

9,093

7,835

7,415

6,977

(19,889)

11.12

(17,899)

11 .06

(16,116)

(14,419)

(13,377)

(13,503)

52 .54

47 .29

Income before taxes

8,381

(8.73) % $

9,183

9 .49 % $

8,387 $

6,788

5,843

5,068

65 .37 %

Income tax expense

(2,324)

(15.28)

(2,743)

9 .63

(2,502)

(2,059)

(1,600)

(1,305)

78 .08

net InCoMe

6,057

(5.95) % $

6,440

9 .43 % $

5,885 $

4,729

4,243

3,763

60 .96 %

Years ended December 31,

2011

2010

2009

(Amounts in thousands of dollars)
Interest Income

Loan Fees

Interest expense

$ 26,620

$ 25,375

$ 25,607

535

(7,888)

555

(8,932)

546

(9,663)

net InteRest InCoMe

$ 19,267

$ 16,998

$ 16,490

Average earning Assets

$ 662,207

$ 611,482

$ 553,127

net Interest Margin

2.91 %

2 .78 %

2 .98 %

the amounts recorded in the provision for loan losses are
determined from management’s quarterly evaluation of the
quality of the loan portfolio . In this review, such factors as the
volume and character of the loan portfolio, general economic
conditions and past loan loss experience are considered .
Management believes that the allowance for loan losses is
adequate to provide for possible losses in the portfolio at
December 31, 2011 .

the yield on average earning assets for the year ended 2011
was 4 .10% while the average cost of funds for the same
period was 1 .36% on average interest bearing liabilities of
$580,764,000 . the yield on average earning assets for the
year ended 2010 was 4 .24%, while the average cost of funds
for the same period was 1 .67% on average interest bearing
liabilities of $535,405,000 . the increase in the net interest
income of $2,269,000 can be attributed to the 8 .30% increase
in average earning assets and the 0 .31% decrease in average
cost of funds, which was partially offset by the 0 .14% decrease
in yield on earning assets .

other inCome

other income may be divided into two broad categories –
recurring and non-recurring . trust fees and service charges
on deposit accounts are the major sources of recurring other
income . Investment securities gains and other income vary
annually . other income for the period ended December 31,
2011 was $10,643,000, a decrease of $521,000 (4 .67%)
from 2010 . An increase in trust services income of $355,000
offset by a decrease in security gains of $1,095,000 primarily
accounted for the overall decrease .

proVision for loan losses

the allowance for loan losses as a percentage of net loans
outstanding is 1 .38% at December 31, 2011, compared to
1 .49% at December 31, 2010 . net loan charge-offs totaled
$1,473,000 for the year ended December 31, 2011 compared
to $704,000 in 2010 .

other expenses for the period ended December 31, 2011
totaled $19,889,000, an increase of $1,990,000 (11 .12%)
from 2010 year end totals . salaries and employee benefits
expense aggregated 56 .65% and 55 .02% of total other
expense for the years ended December 31, 2011 and
2010, respectively .

other eXpense

AnnuAl RepoRt 2011 | Management’s Discussion and Analysis

non-aCCrual anD p ast Due loans, leases anD other real estate owneD
(Amounts in thousands of dollars)

At December 31,

2011

2010

2009

2008

2007

2006

non-accrual loans and leases

other real estate owned (oRe)

total non-accural loans and (oRe)

$ 5,218

$ 5,856

$ 3,449

$ 3,023

$ 2,152

236

210

1,757

230

1,370

1,327

$ 5,428

$ 7,613

$ 3,679

$ 4,393

$ 2,242

$ 1,563

Loans and leases past due 90 days or more and still accruing interest

186

591

199

717

301

578

total

$ 5,614

$ 8,204

$ 3,878

$ 5,110

$ 2,543

$ 2,141

inCome t aXes

the Company files its Federal income tax return on a
consolidated basis with the Bank . see note 14 to the
consolidated financial statements for detail of income taxes .

liquiDity

the concept of liquidity comprises the ability of an enterprise
to maintain sufficient cash flow to meet its needs and
obligations on a timely basis . Bank liquidity must thus be
considered in terms of the nature and mix of the institution’s
sources and uses of funds .

Bank liquidity is provided from both assets and liabilities .
the asset side provides liquidity through regular maturities
of investment securities and loans . Investment securities with
maturities of one year or less, deposits with banks and federal
funds sold are a primary source of asset liquidity . on December
31, 2011, these categories totaled $25,343,000 or 3 .51% of
assets, compared to $38,987,000 or 5 .65% the previous year .

As of December 31, 2011, securities held to maturity included
$29,000 of gross unrealized gains and no gross unrealized
losses on securities which management intends to hold until
maturity . such amounts are not expected to have a material
effect on future earnings beyond the usual amortization of
premium and accretion of discount .

Closely related to the management of liquidity is the
management of rate sensitivity (management of variable rate
assets and liabilities), which focuses on maintaining a stable net
interest margin, an important factor in earnings growth and
stability . emphasis is placed on maintaining an evenly balanced

rate sensitivity position to avoid wide swings in margins and
minimize risk due to changes in interest rates .

the Company’s Asset/Liability Committee is charged with the
responsibility of prudently managing the volumes and mixes of
assets and liabilities of the subsidiary Bank .

Management believes that it has structured its pricing
mechanisms such that the net interest margin should maintain
acceptable levels in 2012, regardless of the changes in interest
rates that may occur . the following table shows the repricing
period for interest-earning assets and interest-bearing liabilities
and the related repricing gap (Amounts in thousands of dollars):

repriCinG perioD as of December 31, 2011

through one Year

After one Year
through Five Years

After Five Years

Interest-earning assets

$ 173,181

$ 256,016

$ 236,595

Interest-bearing liabilities

440,650

121,686

15,465

Repricing gap
(repricing assets minus
repricing liabilities)

$ (267,469)

$ 134,330

$ 221,130

rePricinG Period as of december 31, 2010

through one Year

After one Year
through Five Years

After Five Years

Interest-earning assets

$ 167,720

222,207 $ 254,208

Interest-bearing liabilities

435,690

107,722

15,466

Repricing gap
(repricing assets minus
repricing liabilities)

$ (267,970)

114,485

$ 238,742

Management’s Discussion and Analysis | AnnuAl RepoRt 2011

effeCts of inflation

asset liaBility manaGement

since changes in interest rates may have a significant impact
on operations the Company has implemented, and currently
maintains, an asset liability management committee at the
Bank to monitor and react to the changes in interest rates and
other economic conditions . Research concerning interest rate
risk is supplied by the Company from information received
from a third party source . the committee acts upon this
information by adjusting pricing, fee income parameters,
and/or marketing emphasis .

Common stoCk information anD DiViDenDs

the Company’s common stock is held by 245 shareholders
as of December 31, 2011, and is traded in a limited over-the-
counter market .

on December 31, 2011 the market price of the Company’s
common stock was $21 .04 . Market price is based on stock
transactions in the market . Dividends on common stock of
$1,016,000 were declared by the Board of Directors of the
Company for the year ended December 31, 2011 .

Until recent years, the economic environment in which the
Company operates has been one of significant increases in
the prices of most goods and services and a corresponding
decline in the purchasing power of the dollar .

Banks are affected differently than other commercial
enterprises by the effects of inflation . some reasons for these
disparate effects are: a) premises and equipment for banks
represent a relatively small proportion of total assets; b) a
bank’s asset and liability structure is substantially monetary in
nature, which can be converted into a fixed number of dollars
regardless of changes in prices, such as loans and deposits;
and c) the majority of a bank’s income is generated through
net interest income and not from goods or services rendered .

Although inflation may impact both interest rates and volume
of loans and deposits, the major factor that affects net interest
income is how well a bank is positioned to cope with changing
interest rates .

Capital

the ability to generate and maintain capital at adequate levels
is critical to the Company’s long term success . A common
measure of capitalization for financial institutions is primary
capital as a percent of total assets .

Regulations also require the Company to maintain certain
minimum capital levels in relation to consolidated Company
assets . Regulations require a ratio of capital to risk-weighted
assets of 8 .00 percent .

the Company’s capital, as defined by the regulations, was
15 .54 percent of risk-weighted assets at December 31, 2011 .
In addition, a leverage ratio of at least 4 .00 percent is to be
maintained . At December 31, 2011, the Company’s leverage
ratio was 9 .99 percent .

16.38%

14.05%

14.36%

$19.00

$19.70

$18.00

$16.10

AnnuAl RepoRt 2011 | Management’s Discussion and Analysis

finanCial report

Upon written request of any shareholder of record on
December 31, 2011, the Company will provide, without
charge, a copy of its 2011 Annual Report including financial
statements and schedules .

the Company filed a Form 15 with the securities and exchange
Commission to discontinue the filing of quarterly (10-Q) and

annual (10-K) reports based on the Company’s number
of stockholders .

notiCe of annual meetinG of stoCkholDers

the annual meeting of stockholders will be May 15, 2012
at 9:00 A .M . at the corporate headquarters, 1201 Broadway,
Quincy, Illinois .

Management’s Discussion and Analysis | AnnuAl RepoRt 2011

InDepenDent AUDItoR’s RepoR t

AnnuAl RepoRt 2011 | Independent Auditor’s Report

ConsoLIDAteD FInAnCIAL st AteMents

ConsoliDateD BalanCe sheets (Amounts in thousands of dollars, except share and per share data)

December 31,

assets
Cash and due from banks
non-interest bearing
Interest bearing

securities held to maturity
securities available for sale
Federal funds sold
Loans held for sale
Loans
Less allowance for loan losses
net loans
premises, furniture and equipment, net
Accrued interest receivable
Life insurance contracts
Intangibles
prepaid FDIC insurance assessment
other assets

totAL Assets

liaBilities anD stoCkholDers’ equity
liabilities
Deposits
non-interest bearing demand
Interest bearing demand

savings
time
total Deposits
securities sold under agreements to repurchase
Federal Home Loan Bank advances
Junior subordinated debentures
Accrued interest payable
other liabilities
total liabilities
Commitments and Contingencies (note 11)

stockholders’ equity
series A preferred stock, no par value; shares authorized issued and outstanding:
2011 – none; 2010 – 10,000

series B preferred stock; no par value; shares authorized issued and outstanding:
2011 – none; 2010 – 500

series C preferred stock; no par value; shares authorized issued and outstanding:
2011 – 10,000; 2010 – none

Common stock, $1 par value; shares authorized 6,000,000;
shares issued 2,579,230 and outstanding: 2011 – 2,053,026; 2010 – 2,051,476

Additional paid in capital
Retained earnings
Accumulated other comprehensive income
treasury stock, at cost: 2011 – 526,204 shares; 2010 – 527,754 shares
total stockholders’ equity

totAL LIABILItIes AnD stoCKHoLDeRs’ eQUItY

See notes to consolidated financial statements

2011

2010

$
$

12,104
9,073
21,177
532
281,103
3,238
454
375,390
(5,187)
370,203
19,299
3,271
11,467
3,318
1,267
6,525

$
$

9,363
25,681
35,044
1,481
277,248
2,167
-
337,558
(5,020)
332,538
16,303
3,289
9,118
3,385
1,798
8,273

721,854

690,644

70,932
203,435
36,595
273,537
584,499
48,769
-
15,465
1,110
7,844
657,687

10,000

2,580

2,269
51,964
4,721
(7,367)
64,167

721,854

70,127
184,727
33,705
281,877
570,436
37,604
5,500
15,465
1,321
3,736
634,062

9,645

555

2,580

2,258
47,637
1,296
(7,389)
56,582

690,644

Consolidated Financial Statements | AnnuAl RepoRt 2011

ConsoliDateD statements of inCome (Amounts in thousands of dollars, except per share data)

Years ended December 31,

interest inCome

Loans, including fee income:
taxable
non-taxable
securities:
taxable
non-taxable
other
total interest income

interest eXpense
Deposits:

Interest bearing demand and savings

time
total interest on deposits
securities sold under agreements to repurchase
Federal Home Loan Bank advances
Junior subordinated debentures
total interest expense
net interest income
Provision for loan losses
net interest income after provision for loan losses

other inCome
trust services
service charges on deposit accounts
Gain on sale of loans
Investment securities gains (losses), net:
total other-than-temporary impairment gains (losses)
portion of loss recognized in other comprehensive income before taxes
net impairment losses recognized in earnings
Realized securities gains, net

Investment securities gains (losses), net

other
total other income

other eXpenses
salaries and employee benefits
occupancy expense, net
equipment expense
Computer processing
professional services
other
total other expenses
Income before income taxes
Income taxes
net incoMe
earnings per share of common stock, basic and diluted

See notes to consolidated financial statements

AnnuAl RepoRt 2011 | Consolidated Financial Statements

2011

2010

$
$
$
$

$
$

18,169
523

6,328
2,037
98
27,155

1,420
5,141
6,561
153
198
976
7,888
19,267
1,640
17,627

5,192
1,276
1,003

75
(105)
(30)
17
(13)
3,185
10,643

11,267
1,497
1,051
1,468
511
4,095
19,889
8,381
2,324
6,057
2.60

$
$
$
$

$
$

16,758
301

6,858
1,916
97
25,930

1,564
5,880
7,444
115
396
977
8,932
16,998
1,080
15,918

4,837
1,261
1,046

-
(81)
(81)
1,163
1,082
2,938
11,164

9,848
1,168
894
1,271
565
4,153
17,899
9,183
2,743
6,440
2 .83

ConsoliDateD statements of ChanGes in stoCkholDers’ equity
(Amounts in thousands of dollars, except share and per share data) Years Ended December 31, 2011 and 2010

series A
preferred
stock

series B
preferred
stock

series C
preferred
stock

Common
stock

Additional
paid in
Capital

Retained
earnings

Accumulated
other
Comprehensive
Income (Loss)

treasury
stock

Comprehensive
Income

total

Balance, December 31, 2009 $ 9,526 $ 574 $

- $ 2,580 $ 2,251 $ 42,785

$ 2,389 $ (7,429)

$ 52,676

Balance, December 31, 2010 $ 9,645 $ 555

- $ 2,580 $ 2,258 $ 47,637

$ 1,296 $ (7,389)

$ 56,582

Restricted stock
compensation, 2,902 shares
of treasury stock

Comprehensive income:

net income

other comprehensive
(loss), net of tax

Comprehensive income

preferred stock dividends
declared

Discount accretion on
preferred stock, net

Common stock
dividends declared
(amount per share $ .46)

Issuance of 10,000 shares
of series C preferred stock

Restricted stock
compensation, 1,550 shares
of treasury stock

Comprehensive income:

net income

other comprehensive
income, net of tax

Comprehensive income

preferred stock
dividends declared

Discount accretion on
preferred stock, net

Redemption of 10,000
shares of series A
preferred stock

Redemption of 500 shares
of series B preferred stock

Common stock
dividends declared
(amount per share $ .495)

119

(19)

6,440

(1,093)

(545)

(100)

(943)

(1,093)

$ 5,347

(545)

(943)

10,000

6,057

(12)

(9,724)

(543)

(414)

(67)

(276)

(1,016)

3,425

9,482

3,425

(414)

(10,000)

(500)

(1,016)

Balance, December 31, 2011 $

- $

- $ 10,000 $ 2,580 $ 2,269 $ 51,964

$ 4,721 $ (7,367)

$ 64,167

See notes to consolidated financial statements

Consolidated Financial Statements | AnnuAl RepoRt 2011

ConsoliDateD statements of Cash flows (Amounts in thousands of dollars)

2011

2010

6,057

6,440

1,640

1,465

2,787

(64,071)

64,620

(1,003)

1,120

1,833

531

668

1,080

1,181

222

2,667

(1,082)

(94,558)

95,787

(1,046)

186

(627)

708

196

15,760

11,201

(72,587)

(121,537)

72,402

(39,389)

(1,071)

(4,461)

(2,000)

(349)

27,903

93,888

(48,276)

(1,874)

(5,104)

(339)

(47,455)

(55,339)

14,063

58,667

(456)

(944)

11,165

(5,500)

10,000

(10,500)

17,828

(13,867)

(545)

(943)

7,387

(3,000)

61,566

17,428

Years ended December 31,

Cash flows from operatinG aCtiVities

net income

Adjustments to reconcile net income to net cash provided by operating activities:

provision for loan losses

Depreciation

Amortization of intangibles

Amortization/accretion of premiums/discounts on securities, net

Investment securities (gains) losses, net:

Loans originated for sale

proceeds from loans sold

Gain on sale of loans

Restricted stock compensation

Deferred income taxes

(Increase) decrease in accrued interest receivable and other assets

Decrease in prepaid FDIC insurance assessment

Increase in accrued interest payable and other liabilities

net cash provided by operating activities

Cash flows from inVestinG aCtiVities
Activity in securities portfolio:

purchases

sales of securities available for sale

Calls, maturities and paydowns

(Increase) in loans, net

(Increase) in federal funds sold

purchases of premises, furniture and equipment

purchase of life insurance contracts

(Increase) in cash surrender value life insurance contracts

net cash (used in) investing activities

Cash flows from finanCinG aCtiVities
net increase in deposits

Cash dividends paid to preferred shareholders

Cash dividends paid to common shareholders

Increase in securities sold under agreement to repurchase

Repayments of Federal Home Loan Bank advances

Issuance of Class C preferred stock

Redemption of Class A and B preferred stock

net cash provided by financing activities

net increase (decrease) in cash and due from banks

(continued)

AnnuAl RepoRt 2011 | Consolidated Financial Statements

Years ended December 31,

Cash anD Due from Banks:

Beginning

ending

supplemental disclosure of cash flow information, cash payments for:

Interest

Income taxes

supplemental schedule of non-cash investing and financing activities:

net change in accumulated other comprehensive income

transfer of loans to other real estate owned

effects of common and preferred dividends payable

See notes to consolidated financial statements

2011

2010

35,044

21,177

8,099

1,342

3,425

17,616

35,044

8,924

3,082

(1,093)

2,358

Consolidated Financial Statements | AnnuAl RepoRt 2011

notes to ConsoLIDAteD FInAnCIAL st AteMents

1. nature of Business and summary of significant

accounting policies

nature of Business

First Bankers trustshares, Inc . (the “Company”) is a bank
holding company which owns 100% of the outstanding
common stock of, First Bankers trust Company, n .A . (Bank),
First Bankers trust services, Inc . (trust services), FBIL statutory
trust I (trust I), FBIL statutory trust II (trust II), and FBIL statutory
trust III (trust III) . the Bank is engaged in banking and bank
related services and serves a market area consisting primarily
of Adams, McDonough, schuyler, Hancock, sangamon,
and adjacent Illinois counties, and Marion, Lewis and shelby
counties in Missouri . trust services provides asset and
custodial management for clients throughout the country . All
administration is conducted in Quincy, IL with sales offices in
Chicago and springfield, IL, philadelphia, pA and phoenix, AZ .
trusts I, II, and III were capitalized for the purpose of issuing
company obligated mandatory redeemable preferred securities .

aCCountinG estimates

the preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during
the reporting period . Actual results could differ from those
estimates . the allowance for loan losses is inherently subjective
as it requires material estimates that are susceptible to significant
change . the fair value disclosure of financial instruments is an
estimate that can be computed within a range .

Basis of ConsoliDation

the accompanying consolidated financial statements
include the accounts of First Bankers trustshares, Inc . and its
wholly-owned subsidiaries, except trusts I, II, and III, which
do not meet the criteria for consolidation . All significant
intercompany accounts and transactions have been eliminated
in consolidation .

presentation of Cash flows

For purposes of reporting cash flows, cash and due from banks
includes cash on hand and amounts due from banks, including
cash items in process of clearing . Cash flows from federal
funds sold, loans to customers, deposits, and securities sold
under agreements to repurchase are reported net .

trust ser ViCes fiDuCiary aCtiVities anD assets

trust services provides fiduciary related services, including
asset management and custodial services to individual and
corporate clients . Assets held by trust services are not assets

of the Company, except for cash deposits held by the Bank,
and accordingly are not included in the consolidated financial
statements . During the course of discharging its respective
responsibilities for each client, trust services is subject to a
number of Federal and state regulatory bodies and associated
rules governing each type of account . trust services is
regulated by the Federal Reserve Bank of st . Louis and the
Illinois Department of Financial and professional Regulation .

seCurities

securities held to maturity are those for which the Company
has the ability and intent to hold to maturity . securities
meeting such criteria at the date of purchase and as of the
balance sheet date are carried at amortized cost, adjusted
for amortization of premiums and accretion of discounts,
computed by the interest method over their contracted lives .

securities available for sale are accounted for at fair value and
the unrealized holding gains or losses, net of their deferred
income tax effect, are presented as increases or decreases
in accumulated other comprehensive income, as a separate
component of equity .

Realized gains and losses on sales of securities are based upon
the adjusted book value of the specific securities sold and are
included in earnings .

there were no trading securities at December 31, 2011 or 2010 .

All securities are evaluated to determine whether declines in
fair value below their amortized cost are other-than-temporary .
In estimating other-than-temporary impairment losses on
debt securities, management considers a number of factors
including, but not limited to, (1) the length of time and extent
to which the fair value has been less than amortized cost, (2)
the financial condition and near-term prospects of the issuer,
(3) the current market conditions and, (4) the intent of the
Company to not sell the security prior to recovery and whether
it is not more-likely-than-not that it will be required to sell the
security prior to recovery . If the Company does not intend to
sell the security, and it is unlikely the entity will be required to
sell the security before recovery of its amortized cost basis, the
Company will recognize the credit component of an other-
than-temporary impairment of a debt security in earnings
and the remaining portion in other comprehensive income .
For held to maturity debt securities, the amount of an other-
than-temporary impairment recorded in other comprehensive
income for the noncredit portion would be amortized
prospectively over the remaining life of the security on the basis
of the timing of future estimated cash flows of the security .

loans

Loans held for sale: Residential real estate and agricultural
loans, which are originated and intended for resale in the

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

secondary market in the foreseeable future, are classified as
held for sale . these loans are carried at the lower of cost or
estimated market value in the aggregate . As assets specifically
acquired for resale, the origination of, disposition of, and gain/
loss on these loans are classified as operating activities in the
statement of cash flows .

Loans held for investment: Loans that management has the
intent and ability to hold for the foreseeable future, or until
pay-off or maturity occurs, are classified as held for investment .
these loans are stated at the amount of unpaid principal
adjusted for charge-offs, the allowance for estimated losses on
loans, and any deferred fees and/or costs on originated loans .
Interest is credited to earnings as earned based on the principal
amount outstanding . Deferred direct loan origination fees and/
or costs are amortized as an adjustment of the related loan’s
yield . As assets held for and used in the production of services,
the origination and collection of these loans is classified as an
investing activity in the statement of cash flows .

In the current year, the Company adopted Accounting standards
Update (AsU) 2010-20, Disclosures about the Credit Quality
of Financing Receivables and the Allowance for Credit Losses,
which requires significant new disclosures about the allowance
for credit losses (also known as “allowance for loan losses”)
and the credit quality of financing receivables . the requirements
are intended to enhance transparency regarding credit losses
and the credit quality of loan and lease receivables . Under this
statement, allowance for credit losses and fair value are to be
disclosed by portfolio segment, while credit quality information,
impaired financing receivables and nonaccrual status are to be
presented by class of financing receivable . A portfolio segment
is defined by the AsU as the level at which an entity develops
and documents a systematic methodology to determine its
allowance for credit losses . A class of financing receivable is
defined by the AsU as a further disaggregation of a portfolio
segment based on risk characteristics and the entity’s method
for monitoring and assessing credit risk . the disclosures are to
be presented at the level of disaggregation that management
uses when assessing and monitoring the portfolio’s risk and
performance . the Company has included the new disclosures
throughout these financial statements (see note 1 and note 4) .

the Company’s portfolio segments are as follows:
• Commercial operating
• Commercial real estate
• Agricultural operating
• Agricultural real estate
• Construction and land development
• Real estate secured by 1-4 and multi-family
• Consumer

Given the risk characteristics and the Company’s method for
monitoring and assessing credit risk, further disaggregation
of the loan portfolio is not warranted, and therefore, the
Company’s classes equal their segments .

Generally, for all classes of loans, loans are considered past
due when contractual payments are delinquent for 31 days
or greater .

For all classes of loans, loans will generally be placed on
nonaccrual status when the loan has become 90 days past
due (unless the loan is well secured and in the process of
collection); or if any of the following conditions exist:
• It becomes evident that the borrower will not make

payments, or will not or cannot meet the terms for renewal
of a matured loan,

• When full repayment of principal and interest is not expected,
• When the loan is graded “substandard” and the future

accrual of interest is not protected by sound collateral values,

• When the loan is graded “doubtful”,
• When the borrower files bankruptcy and an approved plan

of reorganization or liquidation is not anticipated in the near
future, or

• When foreclosure action is initiated .

When a loan is placed on nonaccrual status, payments received
will be applied to the principal balance . However, interest
may be taken on a cash basis in the event the loan is fully
secured and the risk of loss is minimal . previously recorded
but uncollected interest on a loan placed in nonaccrual status
is accounted for as follows: if the previously accrued but
uncollected interest and the principal amount of the loan is
protected by sound collateral value based upon a current,
independent qualified appraisal, such interest may remain
on the Company’s books . If such interest is not protected, it
is considered a loss with the amount thereof recorded in the
current year being reversed against current earnings, and the
amount recorded in the prior year being charged against the
allowance for possible loan losses .

For all classes of loans, nonaccrual loans may be restored to
accrual status provided the following criteria are met:
• the loan is current, and all principal and interest amounts

contractually due have been made,

• the loan is well secured and in the process of collection, and
• prospects for future principal and interest payments are not

in doubt .

As of December 31, 2011 and 2010, the Bank had loan
concentrations in agribusiness of 13 .50% and 12 .22%,
respectively, of outstanding loans . the Bank had no additional
industry loan concentrations, which, in management’s
judgment, were considered to be significant . the Bank had no
foreign loans outstanding as of December 31, 2011 and 2010 .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

1. nature of Business and summary of significant

accounting policies (continued)

of foreclosure and cover the loan amount plus costs incurred to
convert it to cash .

allowanCe for loan losses

troubled debt restructures: troubled debt restructuring exists
when the Company, for economic or legal reasons related
to the borrower’s financial difficulties, grants a concession
(either imposed by court order, law, or agreement between
the borrower and the Company) to the borrower that it
would not otherwise consider . these concessions could
include forgiveness of principal, extension of maturity dates,
and reduction of stated interest rates or accrued interest .
the Company is attempting to maximize its recovery of the
balances of the loans through these various concessionary
restructurings . see note 4 for disclosure of the Company’s
troubled debt restructurings .

Allowance for loan losses: For all portfolio segments, the
allowance for loan losses is maintained at the level considered
adequate by management to provide for losses that are
probable . the allowance is increased by provisions charged
to expense and reduced by net charge-offs . In determining
the adequacy of the allowance balance, the Company makes
continuous evaluations of the loan portfolio and related
off-balance sheet commitments, considers current economic
conditions, historical loan loss experience, reviews of specific
problem loans and other factors .

A discussion of the risk characteristics and the allowance for
loan losses by each portfolio segment follows:

For commercial operating loans, the Company focuses on
small and mid-sized businesses with primary operations in
transportation, warehousing and manufacturing, as well as
serving as building contractors, business services companies,
health care providers, financial organizations and retailers .
the Company provides a wide range of commercial loans,
including lines of credit for working capital and operational
purposes, and term loans for the acquisition of real estate,
facilities, equipment and other purposes . Approval is generally
based on the following factors:
• sufficient cash flow to support debt repayment;
• Ability and stability of current management of the borrower;
• positive earnings and financial trends;
• earnings projections based on reasonable assumptions;
• Financial strength of the industry and business; and
• Value and marketability of collateral .

Collateral for commercial loans generally includes accounts
receivable, inventory, equipment and real estate . the lending
policy specifies approved collateral types and corresponding
maximum advance percentages . the value of collateral pledged
on loans typically exceeds the loan amount by a margin
sufficient to absorb potential erosion of its value in the event

the lending policy specifies maximum term limits for
commercial operating loans . For term loans, the maximum
term is 7 years . the lending policy references compliance with
the interagency appraisal and evaluation guidelines effective
December, 2010 . Where the purpose of the loan is to finance
depreciable equipment, the term loan generally does not
exceed the estimated useful life of the asset . For lines of
credit, the typical maximum term is 365 days . However, longer
maturities may be approved if the loan is secured by readily
marketable collateral .

In addition, the Company often takes personal guarantees
to help assure repayment . Loans may be made on an
unsecured basis if warranted by the overall financial condition
of the borrower .

Commercial real estate loans, construction and land
development loans and real estate second by multi-family loans
are subject to underwriting standards and processes similar to
commercial operating loans and to real estate loans including
the factors regarding approval of the loan noted previously .

Collateral for these loans generally includes the underlying
real estate and improvements, and may include additional
assets of the borrower . the lending policy specifies maximum
loan-to-value limits based on the category of commercial real
estate (commercial real estate loans on improved property,
raw land, land development, and commercial construction) .
the lending policy also references compliance with the
interagency appraisal and evaluation guidelines effective
December, 2010 . In addition, the Company often takes
personal guarantees to help assure repayment .

Agricultural operating and real estate loans are subject to
underwriting standards and processes similar to commercial
loans including the approval factors noted previously .
the Company provides a wide range of agriculture loans,
including lines of credit for working capital and operational
purposes, and term loans for the acquisition of real estate,
facilities, equipment and other purposes .

Collateral for agricultural loans generally includes accounts
receivable, inventory (typically grain or livestock), equipment
and real estate . the lending policy specifies approved collateral
types and corresponding maximum advance percentages .
the value of collateral pledged on loans typically exceeds the
loan amount by a margin sufficient to absorb potential erosion
of its value in the event of foreclosure and cover the loan
amount plus costs incurred to convert it to cash .

the lending policy specifies maximum term limits for
agricultural loans . For term loans, the maximum term is 7 years .
the lending policy references compliance with the interagency

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

appraisal and evaluation guidelines effective December, 2010 .
Where the purpose of the loan is to finance depreciable
equipment, the term loan generally does not exceed the
estimated useful life of the asset . For lines of credit, the typical
maximum term is 365 days . However, longer maturities may be
approved if the loan is secured by readily marketable collateral .

In addition, the Company often takes personal guarantees
to help assure repayment . Loans may be made on an
unsecured basis if warranted by the overall financial condition
of the borrower .

In some instances for all loans, it may be appropriate to
originate or purchase loans that are exceptions to the
guidelines and limits established within the lending policy
described above and below . In general, exceptions to the
lending policy do not significantly deviate from the guidelines
and limits established within the lending policy and, if there
are exceptions, they are clearly noted as such and specifically
identified in loan approval documents .

For loans categorized as “commercial,” which would include
the segments: commercial operating, commercial real estate,
agricultural real estate, agricultural operating, construction
and land development and real estate secured by multi-family,
the allowance for estimated losses on loans consists of specific
and general components .

the specific component relates to loans that are classified as
impaired, as defined below . For those loans that are classified
as impaired, an allowance is established when the collateral
value (or discounted cash flows or observable market price) of
the impaired loan is lower than the carrying value of that loan .

these loans are considered impaired when, based on current
information and events, it is probable that the Company will
be unable to collect the scheduled payments of principal
or interest when due according to the contractual terms of
the loan agreement . Factors considered by management in
determining impairment include payment status, collateral
value, and the probability of collecting scheduled principal and
interest payments when due . Loans that experience insignificant
payment delays and payment shortfalls generally are not
classified as impaired . Management determines the significance
of payment delays and payment shortfalls on a case-by-
case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length
of the delay, the reasons for the delay, the borrower’s prior
payment record and the amount of the shortfall in relation to
the principal and interest owed . Impairment is measured on
a case-by-case basis by either the present value of the expected
future cash flows discounted at the loan’s effective interest
rate, the loan’s obtainable market price, or the fair value of the
collateral if the loan is collateral dependent .

the general components consist of quantitative and qualitative
factors and covers non-impaired loans . the quantitative factors
are based on historical charge-offs experience and expected
loss given default derived from the Company’s internal risk
rating process . see below for a detailed description of the
Company’s internal risk rating scale . the qualitative factors are
determined based on an assessment of internal and/or external
influences on credit quality that are not fully reflected in the
historical loss or risk rating data .

For these commercial loans, the Company utilizes the following
internal risk rating scale:

tyPe 1 (substantially risk Free)

General statement: this rating should be assigned to loans
with virtually no credit risk, such as loans fully secured by
certificates of deposit and other deposit accounts . It may be
assigned to other loans to businesses or individuals with little
or no risk .

Business Loans: A loan to a business may be rate 1 if it
exhibits enough of these characteristics to make it substantially
risk free:
• Bank has a high regard for the character, competence, and

diligence of management .

• earnings are strong and well-assured .
• there is ample liquidity .
• Loans have paid as agreed .
• Abundant collateral which is liquid and has well-defined

market value .

• Capital position well above industry averages .
• Loan structure is appropriate and documentation complete .
• no adverse trends .

Loans to individuals: Loans to individuals may be assigned
a 1 rating if the following conditions are met:
• the primary source of repayment is strong and is considered

likely to remain strong throughout the life of the loan,

• the loan is secured by collateral with a loan to value (LtV)
of less than 50% provided that the collateral must have
well-defined market-value, must have satisfactory liquidity,
and should retain most of its value if the primary source of
repayment falters .

• the individual has significant liquidity and is considered likely

to remain liquid over the life of the loan .

tyPe 2 (Low risk)

General statement: this rating should be assigned to loans that
have little credit risk . Borrowers in this category have strong
earnings and capital and a secondary source of repayment that
is sufficient to fully repay the loan . the business is considered
to be highly resistant to adverse changes in economic or
industry conditions .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

1. nature of Business and summary of significant

• Collateral is considered sufficient to repay the loan in full

accounting policies (continued)

within a reasonable marketing time .

Business Loans: Following are some characteristics of loans that
should be rated 2 . A 2 loan may not exhibit all of the following
characteristics, but its strengths – primarily the sufficiency/
reliability of the sources of repayment – result in a loan with
little credit risk . to the extent that a loan is not characterized
by one or more of the factors listed below, the deficiency is not
considered to adversely affect the likelihood of repayment in
any material way .
• Bank has a high regard for the character, competence, and

diligence of management .

• Consistent record of earnings; the earnings stream is

considered resistant to changes in economic conditions .

• Liquidity at or above industry norms .
• Loans have paid as agreed .
• Collateral margin is well within policy guidelines with
satisfactory liquidity and well-defined market value .

• Capital position above industry averages .
• Loan structure appropriate and documentation complete .
• no adverse trends .

Loans to individuals: Loans to individuals may be rated 2 if the
individual’s earnings stream is considered strong and reliable
and the individual maintains a conservative financial posture .
the income may be from any source, including business
income, passive income, or professional income . Individuals are
considered to maintain a conservative financial posture if they
consistently leave themselves a wide margin of safety in terms
of their ability to repay debt . this margin typically manifests
itself in the form of significant liquidity, strong debt service
coverage (DsC) ratios, and/or quick repayment of loans .

tyPe 3 (normal risk)

• Capital position within a reasonable range above or below

industry average .

• no material deficiencies in loan structure or documentation .
• trends typically flat or positive . no material adverse trends .

Loans to individuals: Loans may be unsecured and still rated 3
if the individual’s earnings stream is both strong and reliable . If
earnings are not as strong, loans should be rated 3 if the bank’s
collateral is considered sufficient to repay the loan .

tyPe 4 (above average risk)

General statement: Borrowers in this category are not as
strong financially as the typical business in the same industry .
there may be discernible weakness in management, earnings,
capital, or the bank’s secondary sources of repayment . the
business is considered to be susceptible to adverse changes in
economic or industry conditions .

Business Loans: Loans to businesses should be rated 4 if
financial strength is somewhat below industry averages, but
the loans are expected to repay as agreed if the company’s
current financial condition stays the same or strengthens .
Following are some examples of weaknesses which may cause
a loan to have above average levels of risk . A 4 loan will not
have all of these weaknesses, but will have one or more:
• there is some question as to the strength of management .
• the company is profitable in most years, but earnings are

typically below industry averages .

• Liquidity may be limited as evidenced by occasional

delinquencies .

• there may be a less than desirable margin in collateral; the

collateral may be difficult to market; or the value of collateral
may vary significantly depending on economic conditions .

General statement: Borrowers in this category have satisfactory
earnings and net worth . In most cases, there is collateral or
guarantor support which provides a satisfactory secondary
source of repayment . the business is considered to be capable
of operation profitably throughout the normal business cycle .

• Capital position is below industry average .
• May have deficiencies in loan structure, incomplete legal

documentation, or missing financial information .

• May have an adverse trend in sales or earnings; may be

capital account withdrawals in excess of earnings .

Business Loans: Loans to businesses should be rated 3 if
financial strength is typical for the industry and there is no
significant adverse trends . Following are some characteristics
of 3 loans . A loan may not exhibit all of the following
characteristics, but its strengths – primarily the sufficiency/
reliability of the sources of repayment – result in a loan with
normal levels of risk .
• Management is considered to be capable and diligent .
• the earnings stream is satisfactory under present conditions

and is considered likely to continue .

• satisfactory liquidity .
• Loans have paid as agreed .

Loans to Individuals: Loans to individual should be rated 4 if the
bank appears to have a satisfactory source of repayment for
the loan, but there is concern about the individual’s earnings
stream, leverage, or tolerance for risk .

tyPe 5 (Watch Loan)

General statement: Borrowers in this category have readily
apparent weaknesses in their financial condition . there may
be weak earnings, thin capital, or an adverse trend that is
expected to continue . the borrower currently has the capacity
to repay, but is of marginal strength and is considered to have
little ability to overcome economic events that would adversely

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

affect the business . Loans with material documentation
or structural deficiencies may also be rated Watch at the
discretion of bank or loan review personnel .

Business Loans: Following are examples of weaknesses which
may warrant a Watch rating . Loans rated Watch will typically
have several of the following weaknesses:
• there is often a question about the ability of management to

operate the business successfully over time .

• the earnings stream is weak, with possible periods of loss .
• Liquidity may be a problem as evidenced by delinquencies

or amortization periods longer than is typical for the type of
collateral securing the loan .

• there may be reasonable doubt as to whether the loan

would be repaid in full from the sale of collateral . possible
issues include: third party claims to the collateral; difficulty in
obtaining possession; condition; marketing time; and value
under current market conditions .

• Capital position less than half of industry average .
• Common to have deficiencies in loan structure, incomplete

legal documentation, or missing financial information . trends
are flat or negative . It is common for there to be a decline in
sales, earnings, and/or capital .

Loans to Individuals: see “General statement” for Watch loans .

tyPe 6 (substandard)

General statement: these loans have one or more pronounced
weaknesses which jeopardize their timely liquidation . neither
the earnings of the business nor its realistic net worth
adequately protect the bank from possible loss . there is a
distinct possibility that the bank will sustain some loss if the
deficiencies are not corrected .

Business Loans: Following are examples of weaknesses which
may warrant a substandard rating . Loans rated substandard
will typically have several of the following weaknesses:
• Management often considered to have made incorrect

strategic decisions, or to be weak or inattentive .

• earnings stream is insufficient to repay loans on a timely

basis . Business normally has periods of loss, sometimes large .

• Liquidity usually strained by operating losses .
• Loans usually renegotiated or past-due .
• It may be unlikely that the loan would be repaid in full from

the sale of collateral . possible issues include: third party claims
to the collateral; difficulty in obtaining possession; condition;
marketing time; and value under current market conditions .
• typical reliance upon guarantors or other secondary sources

of repayment that was not originally anticipated .

• Documentation deficiencies – including lack of important

financial information – are common .

• In most cases that are negative trends, such as declines in

sales, earnings, and/or capital .

Loans to Individuals: Loans to individual borrowers should
be rated substandard if there is a pronounced weakness in
income, liquidity, or collateral that is likely to affect the ability
of the bank to collect the debt in full . Debt levels may be
significantly above accepted guidelines relative to income .

tyPe 7 (doubtful)

General statement: Loans with well-defined weaknesses that
make collection or liquidation of the debt in full improbable
based on current information .

Business Loans: typical characteristics of a doubtful loan
include the following:
• Large operating losses .
• Collateral insufficient to repay loan .
• typical to have little or no capital . Continued viability of

business is doubtful .

• Unreliable or no alternative sources of repayment .
• Loss anticipated; exact loss figure cannot be determined

at present .

Loans to individuals: Borrower’s ability or willingness to repay
makes collection of the debt in full unlikely . Loans may be
unsecured or have an obvious collateral deficiency .

tyPe 8 (Loss)

General statement: Loans with pervasive weaknesses so
great that principal is considered uncollectible under current
circumstances . this classification does not mean that the loan
has absolutely no recovery value, but simply that it is no longer
practical to defer writing it off . Recovery is dependent on
favorable future events .

normal characteristics:
• Business has failed or is near failure .
• no reliable source of repayment .

For these loans categorized as commercial or credit
relationships with aggregate exposure greater than $500,000,
a loan review will be required within 15 months of the most
recent credit review . the reviews shall be completed in enough
detail to, at a minimum, validate the risk rating . Additionally,
the reviews shall determine whether any documentation
exceptions exist, appropriate written analysis is included in
the loan file, and whether credit policies have been properly
adhered to .

An ongoing independent review is conducted of a sampling of
residential real estate as well to assess underwriting quality and
adherence to policy .

Many of the residential real estate loans underwritten by
the Company conform to the underwriting requirements of
MpF, Fannie Mae, or other secondary market aggregators to
allow the bank to resell loans in the secondary market .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

1. nature of Business and summary of significant

other real estate owneD

accounting policies (continued)

servicing rights are retained on many, but not all, of the
residential real estate loans sold in the secondary market .
the lending policy references compliance with the interagency
appraisal and evaluation guidelines effective December, 2010 .

the Company provides many types of consumer and other
loans including motor vehicle, home improvement, home
equity, signature loans and small personal credit lines . the
lending policy addresses specific credit guidelines by consumer
loan type .

For residential real estate loans, and consumer loans, these
large groups of smaller balance homogenous loans are
collectively evaluated for impairment . the Company applies
a quantitative factor based on historical charge-off experience
in total for each of these segments . Accordingly, the Company
generally does not separately identify individual residential real
estate loans, and/or consumer loans for impairment disclosures,
unless such loans are the subject of a restructuring agreement
due to financial difficulties of the borrower or it has been
identified for another specific reason .

troubled debt restructures are considered impaired loans and
are subject to the same allowance methodology as described
above for impaired loans by portfolio segment .

transfers of finanCial assets

transfers of financial assets are accounted for as sales, only
when control over the assets has been surrendered . Control
over transferred assets is deemed to be surrendered when
(1) the assets have been isolated from the Company, (2) the
transferee obtains the right to pledge or exchange the assets
it received, and no condition both constrains the transferee
from taking advantage of its right to pledge or exchange and
provides more than a modest benefit to the transferor, and
(3) the Company does not maintain effective control over the
transferred assets through an agreement to repurchase them
before their maturity or the ability to unilaterally cause the
holder to return specific assets .

CreDit relateD finanCial instruments

In the ordinary course of business, the Bank has entered into
commitments to extend credit, including commitments under
lines of credit and standby letters of credit . such financial
instruments are recorded when they are funded .

premises, furniture anD equipment

premises, furniture and equipment are stated at cost less
accumulated depreciation . Depreciation is determined using
the straight-line method over the estimated useful lives of
the assets .

other real estate owned (oReo), which is included with other
assets, represents properties acquired through foreclosure,
in-substance foreclosure or other proceedings . property is
recorded at fair value less cost to sell when acquired . property
is evaluated regularly to ensure that the recorded amount is
supported by the current fair value . subsequent write-downs
to fair value are charged to earnings .

GooDwill

Goodwill represents the excess of cost over fair value of net
assets acquired in connection with business combinations .
Goodwill is evaluated for impairment annually or whenever
events or changes in circumstances indicate that it is more
likely than not that an impairment loss has occurred . In the
current year, the Company adopted AsU 2011-08, Intangibles
– Goodwill and Other: Testing Goodwill for Impairment.
the Company has completed its annual goodwill impairment
test and has determined that goodwill was not impaired at
December 31, 2011 and 2010 .

prepaiD fDiC insuranCe assessment

In november 2009, the Federal Deposit Insurance Corporation
(FDIC) adopted a final rule amending the assessment
regulations to require insured depository institutions to prepay
their quarterly risk-based assessment for all of 2010, 2011,
and 2012 . the payment, which was made in December 2009,
was recorded as a prepaid asset and is being amortized over
the assessment period .

repurChase aGreements

securities sold under agreements to repurchase, which are
classified as secured borrowings, generally mature either
daily or within one year from the transaction date . securities
sold under agreements to repurchase are reflected at the
amount of cash received in connection with the transaction .
the underlying securities are held by the Company’s
safekeeping agent . the Company may be required to
provide additional collateral based on the fair value of the
underlying securities .

earninGs per share of Common stoCk

Basic earnings per share of common stock is computed by
dividing net income, after deducting preferred stock dividends
and accretion, by the weighted average number of shares
outstanding during each reporting period . Diluted earnings
per share of common stock assume the conversion, exercise
or issuance of all potential common stock equivalents unless
the effect is to reduce the loss or increase the income per
common share from continuing operations . the Company had
no common stock equivalents as of and for the years ending
December 31, 2011 and 2010 .

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

inCome t aXes

Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carry
forwards and deferred tax liabilities are recognized for
taxable temporary differences . temporary differences are
the differences between the reported amounts of assets
and liabilities and their tax bases . Deferred tax assets are
reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized . Deferred tax
assets and liabilities are adjusted for the effects of changes in
the tax laws and rates on the date of enactment .

When the tax returns are filed, it is highly certain that some
positions taken would be sustained upon examination by the
taxing authorities, while others could be subject to uncertainty
about the merits of the position taken . the Company may
recognize the tax benefit from an uncertain tax-position only if
it is more-likely-than-not that the tax position will be sustained
on examination by taxing authorities, based on the technical
merits of the position . the tax benefits recognized in the
financial statements from such a position are measured based
on the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement . Management
evaluated the Company’s tax positions and concluded that the
Company had taken no uncertain tax positions that require
adjustment to the financial statements .

the Company recognizes interest and penalties on income
taxes as a component of income tax expense .

With few exceptions, the Company is no longer subject to
U .s . federal or state and local income tax examinations by tax
authorities for years before 2007 .

aCCountinG for DeriV atiVes
anD heDGinG aCtiVities

Interest rate swaps are derivatives that are recognized on
the balance sheet at their fair value . Changes in the fair value
of a derivative that is highly effective and that is designed
and qualifies as a cash flow hedge, are recorded in other
comprehensive income, until earnings are affected by the
variability of cash flows (e .g ., when periodic settlements on
a variable rate liability are recorded in earnings) .

the Company formally documents all relationships between
hedging instruments and hedged items as well as its risk-
management objective and strategy for undertaking various
hedged transactions . the Company also formally assesses both
at the hedge’s inception and, on an ongoing basis, whether
the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of
hedged items . When it is determined that a derivative is not

highly effective as a hedge or that it has ceased to be a highly
effective hedge, the Company discontinues hedge accounting
prospectively, as discussed below .

the Company discontinues hedge accounting prospectively
when: (1) it is determined that the derivative is no longer
effective in offsetting changes in the cash flows of the hedged
item; (2) the derivative expires or is sold, terminated and
exercised; or (3) management determines that designation of
the derivative as a hedge instrument is no longer appropriate .
If hedge accounting is discontinued, the derivative is carried at
fair value on the balance sheet, with changes in its fair value
recognized in current-period earnings .

suBsequent eVents

the Company has evaluated all subsequent events through
March 20, 2012, the date that the financial statements were
available to be issued .

reClassifiCations

Certain amounts in the prior year financial statements have
been reclassified with no effect on net income or stockholders’
equity, to conform to current year presentations .

Current aCCountinG DeVelopments

In May 2011, the FAsB issued AsU 2011-04, Fair Value
Measurement (Topic 820) – Amendments to Achieve Common
Fair Value Measurements and Disclosure Requirements in U.S.
GAAP and IFRS. AsU 2011-04 amends topic 820, Fair Value
Measurements and Disclosures, to converge the fair value
measurement guidance in U .s . generally accepted accounting
principles and International Financial Reporting standards .
AsU 2011-04 clarifies the application of existing fair value
measurement requirements, changes certain principles in topic
920 and requires additional fair value disclosures . AsU 2011-04
is effective for the Company for the year ended December 31,
2012, and is not expected to have a material impact on the
Company’s consolidated financial statements .

In June 2011, the FAsB issued AsU 2011-05, Comprehensive
Income (Topic 220) – Presentation of Comprehensive Income.
AsU 2011-05 amends topic 220, Comprehensive Income,
to require that all non-owner changes in stockholders’ equity
be presented in either a single continuous statement of
comprehensive income or in two separate but consecutive
statements . the amendments do not change the items that
must be reported in other comprehensive income or when
an item of other comprehensive income must be reclassified
to net income . the option to present components of other
comprehensive income as part of the statement of changes in
stockholders’ equity was eliminated . AsU 2011-05 is effective
for the year ended December 31, 2012, and is not expected
to have a material impact on the Company’s consolidated
financial statements .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

2. Comprehensive income
Comprehensive income is defined as the change in equity during a period from transactions and other events from non-owner
sources . Comprehensive income is the total of net income and other comprehensive income, which, for the Company, is
comprised of unrealized gains and losses on securities available for sale and the interest rate swap .

other comprehensive income (loss) is comprised as follows (Amounts in thousands of dollars):

year ended December 31, 2011

Unrealized gains on securities available for sale:

Unrealized holding gains arising during the year

Less reclassification adjustment for (losses) included in net income

Interest rate swap

other comprehensive income

year ended december 31, 2010

Unrealized (losses) on securities available for sale:

Unrealized holding (losses) arising during the year

Less reclassification adjustment for gains included in net income

Interest rate swap

other comprehensive (loss)

Before tax

tax expense (Benefit)

net of tax

5,534

(13)

5,524

(2,649)

1,082

(196)

(1,763)

2,103

(5)

2,099

3,431

(8)

3,425

(1,007)

(1,642)

411

(74)

671

(122)

(670)

(1,093)

As of December 31, 2011, accumulated other comprehensive income on the consolidated balance sheet includes $4,826,000
as a result of unrealized gains on securities available for sale and ($105,000) as a result of the interest rate swap . As of December
31, 2010, accumulated other comprehensive income on the consolidated balance sheet includes $1,403,000 as a result of
unrealized gains on securities available for sale and ($107,000) as a result of the interest rate swap .

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

3. securities
the amortized cost and fair values of securities as of December 31, 2011 and 2010 are as follows . Included in gross unrealized
losses is an ottI loss of $1,088,000 and $1,193,000 as of December 31, 2011 and 2010 respectively, relating to two corporate
securities, which represent the non-credit related portion of the overall impairment . (Amounts in thousands of dollars):

2011

seCurities helD to maturity

U .s . Government agency bonds

state and political subdivisions

seCurities aVailaBle for sale

U .s . Government agency bonds

U .s . Government agency mortgage backed securities

state and political subdivisions

Corporate securities

Collateralized mortgage obligations

2010

seCurities helD to maturity

U .s . Government agency bonds

state and political subdivisions

seCurities aVailaBle for sale

U .s . Government agency bonds

U .s . Government agency mortgage backed securities

state and political subdivisions

Corporate securities

Collateralized mortgage obligations

Amortized Cost

Gross Unrealized
Gains

Gross Unrealized

(Losses)

Fair Value

259

273

532

83,568

63,837

57,728

1,477

66,709

1,378

4,270

3,263

689

271

290

561

(5)

(6)

(243)

(1,091)

(471)

84,941

68,101

60,748

386

66,927

273,319

9,600

(1,816)

281,103

Amortized Cost

Gross Unrealized
Gains

Gross Unrealized

(Losses)

Fair Value

264

1,217

1,481

78,909

79,233

55,003

1,696

60,144

1,009

3,656

447

262

(6)

276

1,222

1,498

(78)

(74)

(1,586)

(1,193)

(183)

79,840

82,815

53,864

506

60,223

274,985

5,377

(3,114)

277,248

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

3. securities (continued)
Fair value and unrealized losses, aggregated by investment category and length of time that individual securities have been in
a continuous unrealized loss position, as of December 31, 2011 and 2010 are summarized as follows (Amounts in thousands
of dollars):

2011

Less tHAn 12 MontHs

12 MontHs oR MoRe

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

Fair Value

totAL

Unrealized
Losses

seCurities aVailaBle for sale

U .s . Government agency bonds

995

U .s . Government agency mortgage backed securities

state and political subdivisions

Corporate securities

4,082

261

(5)

(6)

(3)

Collateralized mortgage obligations

32,845

(384)

1,374

125

2,057

(243)

( 1,088)

995

4,082

1,374

386

(5)

(6)

(243)

(1,091)

(471)

(87)

34,902

$ 38,183

(398)

$ 3,556

$ (1,418)

$ 41,739

$ (1,816)

Less tHAn 12 MontHs

12 MontHs oR MoRe

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

Fair Value

totAL

Unrealized
Losses

2010

seCurities helD to maturity

state and political subdivisions

167

(6)

seCurities aVailaBle for sale

U .s . Government agency bonds

$ 10,114

U .s . Government agency mortgage backed securities

2,914

state and political subdivisions

Corporate securities

Collateralized mortgage obligations

25,040

24,449

(78)

(74)

(989)

(183)

167

(6)

2,644

(597)

27,684

( 1,193)

24,449

$ 10,114

2914

(78)

(74)

(1,586)

(1,193)

(183)

$ 62,517

$ (1,324)

$ 2,694

$ (1,790)

$ 65,211

$ (3,114)

At December 31, 2011, the investment portfolio included 395 securities . of this number, 36 securities have current unrealized
losses and 9 of them have current unrealized losses which have existed for longer than one year . All of the debt securities with
unrealized losses are considered to be acceptable credit risks . Based upon an evaluation of the available evidence, including
recent changes in market rates, credit rating information and information obtained from regulatory filings, management believes
the declines in fair value for these debt securities are temporary except for the two securities discussed below . In addition, the
Company does not have the intent to sell these debt securities and it is unlikely that the Company will be required to sell these
debt securities prior to their anticipated recovery .

In fiscal year 2009, the Company recognized other-than-temporary impairment of $1,930,000 on two securities of which
$653,000 was associated with credit loss and was, therefore, recognized in income with the remaining non-credit related portion
of $1,277,000 being recognized in other comprehensive income . For the year ended December 31, 2011 and 2010 an additional
$30,000 and $81,000, respectively, of credit loss was recognized in earnings .

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

the amortized cost and fair value of securities as of December 31, 2011 by contractual maturity are shown below . expected
maturities may differ from contractual maturities because the mortgages underlying the collateralized mortgage obligations
and the debt underlying the corporate securities may be called or prepaid without penalties . therefore, these securities are not
included in the maturity categories in the following summaries (Amounts in thousands of dollars):

seCurities helD to maturity

Due in one year or less

Due after one year through five years

Due after five years through ten years

seCurities aVailaBle for sale

Due in one year or less

Due after one year through five years

Due after five years through ten years

Due after ten years

Corporate securities

Collateralized mortgage obligations

Amortized Cost

Fair Value

259

174

532

819

71,456

61,294

71,564

102

271

188

561

829

72,696

64,403

75,862

$ 205,133

$ 213,790

1,477

66,709

386

66,927

$ 273,319

$ 281,103

Information on sales of securities available for sale during the years ended December 31, 2011 and 2010 follows (Amounts in
thousands of dollars):

proceeds from sales

Gross gains

Gross losses

2011

2010

27,903

1,126

In addition, gains related to calls of investment securities were $17,000 and $37,000 for the years ended December 31, 2011 and
2010, respectively .

As of December 31, 2011 and 2010 securities with a carrying value of approximately $182,637,000 and $179,779,000
respectively, were pledged to collateralize deposits and securities sold under agreements to repurchase and for other purposes as
required or permitted by law .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

4. loans
the composition of net loans outstanding as of December 31, 2011 and 2010 are as follows (Amounts in thousands of dollars):

Commercial operating

Commercial real estate

Agricultural operating

Agricultural real estate

Construction and land development

Real estate secured by 1-4 and multi-family

Consumer

Less: Allowance for loan losses

net LoAns

2011

2010

48,280

40,299

130,521

23,295

28,351

25,259

82,000

37,684

106,853

25,876

21,220

23,566

80,316

39,428

375,390

337,558

(5,187)

(5,020)

370,203

332,538

the aging of the loan portfolio, by classes of loans, as of December 31, 2011 is summarized as follows (Amounts in thousands
of dollars):

Classes of Loans:

Commercial operating

Commercial real estate

Agricultural operating

Agricultural real estate

Construction and land development

Real estate secured by 1-4 and multi-family

Consumer

Current

30-59 Days
past Due

60-89 Days
past Due

Accruing
past Due 90
Days or More

nonaccrual
Loans

total

48,213

125,938

23,265

28,213

24,140

78,423

37,057

605

631

2,392

522

336

48,280

3,978

130,521

420

804

23,295

28,351

25,259

82,000

37,684

$ 365,249

4,316

421

186

5,218

$ 375,390

As a percentage of total loan portfolio

97 .30 %

1 .15 %

0 .11 %

0 .05 %

1 .39 %

100 .00 %

As of December 31, 2010, loans past due 90 days or more and still accruing interest totaled $591,000 . nonaccrual loans totaled
$5,856,000 as of December 31, 2010, including impaired loans of $5,506,000 . see further information on impaired loans as of
December 31, 2010 following later in this note .

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

nonperforming loans, by classes of loans, as of December 31, 2011 are summarized as follows (Amounts in thousands of dollars):

Classes of Loans:

Commercial operating

Commercial real estate

Agricultural operating

Agricultural real estate

Construction and land development

Real estate secured by 1-4 and multi-family

Consumer

Accruing past
Due 90 Days
or More

nonaccrual
Loans**

troubled Debt
Restructures-
Accruing

total
nonperforming
Loans

percentage of total
nonperforming
Loans

3,978

481

420

804

4,459

488

849

0 .12 %

75 .77

0 .15

0 .90

8 .29

14 .43

0 .34

186

5,218

481

5,885

100 .00 %

**nonaccrual loans as of December 31, 2011 include $3,573,000 of troubled debt restructures which are included in commercial
real estate .

Changes in the allowance for loan losses, by portfolio segment, during the year ended December 31, 2011, and in total, during
the year ended December 31, 2010 are summarized as follows (Amounts in thousands of dollars):

2011

Commercial
operating

Commercial
Real estate

Agricultural
operating

Agricultural
Real estate

Construction
& Land
Development

Real estate
secured by 1-4
& Multi-family

Consumer

total

Balance, beginning

$ 1,153

$ 2,105

$ 141

$ 117

293

740

471 $ 5,020

provision for
loan losses

Recoveries of loans
charged off

Loans charged off

307

463

1,460

(867)

2,568

(1)

140

169

388

129

810

(385)

356

1,104

(224)

1,640

168

577

6,828

(165)

(1,641)

Balance, ending

593

$ 2,568

$ 140

$ 169

425

880

412 $ 5,187

2010

Balance, beginning

provision for Loan Loss

Recoveries of loans charged off

Loans charged off

Balance, ending

total

$ 4,644

1,080

122

5,846

(826)

$ 5,020

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

4. loans (continued)
the allowance for loan losses, by impairment evaluation and by portfolio segment, as of December 31, 2011 are summarized as
follows (Amounts in thousands of dollars):

Commercial
operating

Commercial
Real estate

Agricultural
operating

Agricultural
Real estate

Construction
& Land
Development

Real estate
secured by 1-4
& Multi-family

Consumer

total

Allowance for
loans individually
evaluated for
impairment

Allowance for loans
collectively evaluated
for impairment

Loans individually
evaluated for
impairment

Loans collectively
evaluated for
impairment

Allowance as
a percentage of loans
individually evaluated
for impairment

Allowance as
a percentage of loans
collectively evaluated
for impairment

Allowance as
a percentage of
total loans

776

100

133

1,009

593

1,792

140

593

$ 2,568

140

169

325

425

747

412

4,178

880 $

412 $

5,187

$ 4,458

420

805

5,699

48,273

126,063

23,286

28,351

24,839

81,195

37,684

369,691

$ 48,280

$ 130,521

$ 23,295

$ 28,351

$ 25,259

$ 82,000 $ 37,684 $ 375,390

Commercial
operating

Commercial
Real estate

Agricultural
operating

Agricultural
Real estate

Construction
& Land
Development

Real estate
secured by 1-4
& Multi-family

Consumer

total

0.00 %

17.41 %

0.00 %

23.81 %

16.52 %

0.00 %

17.70 %

1.23 %

1.42 %

0.60 %

1.31 %

0.92 %

1.09 %

1.13 %

1.23 %

1.97 %

0.60 %

1.68 %

1.07 %

1.09 %

1.38 %

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

Loans, by classes of loans, considered to be impaired as of December 31, 2011, are summarized as follows (Amounts in thousands
of dollars):

Recorded Investment

Unpaid
principal Balance

Related Allowance

Average
Recorded Investment

CLAsses oF LoAns
impaired loans with no specific
allowance recorded:
Commercial operating

Commercial real estate

Agricultural operating

Real estate secured by 1-4 and multi-family

impaired loans with specific
allowance recorded:
Commercial operating

Commercial real estate

Construction and land development

Real estate secured by 1-4 and multi-family

total impaired loans:

Commercial operating

Commercial real estate

Agricultural operating

Construction and land development

Real estate secured by 1-4 and multi-family

884

291

884

311

1,191

1,215

3,574

420

514

3,828

527

526

776

100

133

871

317

1,207

3,815

475

523

4,508

4,881

1,009

4,813

4,458

420

805

4,712

527

837

776

100

133

4,686

475

840

5,699

6,096

1,009

6,020

As of December 31, 2010, impaired loans totaled $5,506,000, which included impaired loans with no specific allowance recorded
of $2,255,000 and impaired loans with specific allowance recorded of $3,251,000 . the allowance provided on the later totaled
$1,600,000 . During the year ended December 31, 2010, the average recorded investment in impaired loans totaled $4,192,000 .
Interest income and cash basis interest income recognized on impaired loans during the years ended December 31, 2011 and 2010
was not significant .

Impaired loans, for which no allowance has been provided, as of December 31, 2011 and 2010, have adequate collateral, based
on management’s current estimates .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

4. loans (continued)
For each class of loans, the following summarized the recorded investment by credit quality indicator as of December 31, 2011
(Amounts in thousands of dollars):

Commercial
operating

Commercial
Real estate

Agricultural
operating

Agricultural
Real estate

Construction
& Land
Development

Real estate
secured by
Multi-family

total

internally assigned risk rating:

pass (ratings 1 through 4)

$ 47,945 $ 123,360 $ 20,518 $

26,193 $

7,850 $

18,110 $ 243,976

special mention (rating 5)

substandard (rating 6)

Doubtful (rating 7)

259

1,473

3,234

2,454

2,777

2,158

671

420

372

808

485

7,525

4,301

3,361

$ 48,280 $ 130,521 $ 23,295 $

28,351 $

8,941 $

19,775 $ 259,163

delinquency status:*

performing

nonperforming

Construction &
Land Development

Real estate
secured by 1-4

Consumer

total

$ 16,318

62,180

$ 37,664

$ 116,162

$ 16,318

62,225

$ 37,684

$ 116,227

*performing loans are those which are accruing and less than 90 days past due . nonperforming loans are those on nonaccrual,
accruing loans that are greater than or equal to 90 days past due, and accruing tDR’s .

For commercial operating, commercial real estate, agricultural operating, agricultural real estate, real estate secured by multifamily
and a portion of the construction and land development loans, the Company’s credit quality indicator is internally assigned risk
ratings . each of these loans is assigned a risk rating upon origination . the risk rating is reviewed every 12 months, at a minimum,
and on an as needed basis depending on the specific circumstances of the loan . some classes of loans contain loans that are risk
rated and loans that are not as loans of a more homogeneous nature are not risk rated . see note 1 for further discussion on the
Company’s risk ratings .

For residential real estate loans and consumer loans, the Company’s credit quality indicator is performance determined by
delinquency status . Delinquency status is updated daily by the Company’s loan system .

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

As of December 31, 2011 and 2010, troubled debt restructurings (tDRs) total $4,054,000 and $1,901,272, respectively .

For each class of loans, the following summarizes the number and investment in troubled debt restructuring (tDRs), by type of
concession, that were restructured during the year ended December 31, 2011 (Amounts in thousands of dollars):

Concession-extension of maturity:

number of tDRs

pre-modification
Recorded Investment

post-modification
Recorded Investment

Commercial real estate

$ 2,254

there was no financial impact for charge-offs, principal forgiveness or foregone interest for the troubled debt restructurings .
the financial impact for specific reserves was not significant for the troubled debt restructurings .

For the year ended December 31, 2011, none of the Company’s tDRs have redefaulted subsequent to restructure, where a
default is defined as a delinquency of 90 days or more and/or placement on nonaccrual status .

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets . the unpaid principal
balances of these loans totaled $148,959,000 and $133,763,000 at December 31, 2011 and 2010, respectively .

In the ordinary course of business, the Bank has granted loans to directors, principal officers, their immediate families and
affiliated companies in which they are principal stockholders amounting to $6,755,000 and $8,021,000 as of December 31, 2011
and 2010 respectively .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

5. premises, furniture and equipment
the cost, accumulated depreciation and net book value of premises, furniture and equipment as of December 31, 2011 and 2010
is summarized as follows (Amounts in thousands of dollars):

Land

Building and improvements

Furniture and equipment

Less accumulated depreciation

6. intangibles
Goodwill and intangible assets are summarized as follows (Amounts in thousands of dollars):

As of December 31,

intangible assets:

Goodwill

Core deposit intangible

other intangible assets

Less accumulated amortization on certain intangible assets

total intangible assets

estimateD future amortization eXpense:
For the year ended December 31:
2011

2012

2013

2014

2015

2011

2010

3,091

3,108

15,448

9,107

14,208

8,002

$ 27,646

$ 25,318

(8,347)

(9,015)

$ 19,299

$ 16,303

2011

2010

3,050

1,380

481

(1,593)

1,380

481

(1,526)

3,318

3,385

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

7. time Deposits
the aggregate amount of time deposits, each with a minimum denomination of $100,000, was approximately $104,025,000
and $101,874,000 at December 31, 2011 and 2010, respectively . this includes brokered deposits of $9,663,000 at
December 31, 2011 and 2010 .

At December 31, 2011, the scheduled maturities of time deposits are as follows (Amounts in thousands of dollars):

2012

2013

2014

2015

2016

$ 151,851

45,824

28,209

21,790

25,863

$ 273,537

8. federal home loan Bank advances
Advances from the Federal Home Loan Bank totaled $5,500,000 as of December 31, 2010 and bore a weighted average
interest rate of 4 .95% . First mortgage loans of approximately $7,333,000 were pledged as collateral on the advances .
these advances matured during the year ended December 31, 2011 and no further advances were obtained .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

9. Junior subordinated Debentures and Company
obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely
subordinated Debentures

Junior subordinated debentures are due to FBIL statutory
trusts I, II, and III, which are all 100% owned non-consolidated
subsidiaries of the Company . the debentures were issued
in 2000, 2003, and 2004, respectively, in conjunction with
each trust’s issuance of 5,000 shares of Company obligated
Mandatorily Redeemable preferred securities . the debentures
all bear the same interest rate and terms as the preferred
securities, detailed following . the debentures are included
on the consolidated balance sheets as liabilities; however, in
accordance with Federal Reserve Board regulations in effect at
December 31, 2011 and 2010, the Company is allowed, for
regulatory purposes, to include the entire $15,000,000 of the
capital securities issued by the trusts in tier I capital .

During 2004 FBIL statutory trust III issued 5,000 shares of
Company obligated Mandatorily Redeemable (CoMR) preferred
securities . Distributions are paid quarterly . Cumulative cash
distributions are calculated at a variable annual rate that is 265
basis points above the 3 month LIBoR rate (3 .23% and 2 .95%
as of December 31, 2011 and 2010, respectively) . the trust
may, at one or more times, defer interest payments on the
capital securities for up to 20 consecutive quarterly periods, but
not beyond september 15, 2034 . At the end of the deferral
period, all accumulated and unpaid distributions will be paid .
the capital securities will be redeemed on september 15, 2034
at par plus any accrued and unpaid distributions to the date of
the redemption; however, the trust has the option to redeem at
any time . the redemption may be in whole or in part, but in all
cases in a principal amount with integral multiples of $1,000 .

effective January 2009, the Company entered into an interest
rate swap agreement related to the Company obligated
Mandatorily Redeemable preferred securities issued in 2004
by FBIL statutory trust III . the swap agreement is utilized to
manage variable interest rate exposure and is designated as a
highly effective cash flow hedge . the swap agreement expires
in 2013 and essentially fixes the rate to be paid at 5 .02% .
As of December 31, 2011 and 2010, the notional amount of
the swap is $5,000,000 with a fair value of $(169,000) and
($172,000) respectively recorded in other liabilities, and as a
reduction to accumulated other comprehensive income in the
consolidated balance sheet .

During 2003 the Company issued 5,000 shares of Company
obligated Mandatorily Redeemable (CoMR) preferred
securities of FBIL statutory trust II Holding solely subordinated
Debentures . Distributions are paid quarterly . Cumulative cash
distributions are calculated at a variable annual rate that is
295 basis points above the 3 month LIBoR rate (3 .53% and

3 .25% as of December 31, 2011 and 2010, respectively) .
the Company may, at one or more times, defer interest
payments on the capital securities for up to 20 consecutive
quarterly periods, but not beyond september 17, 2033 . At
the end of the deferral period, all accumulated and unpaid
distributions will be paid . the capital securities will be
redeemed on september 17, 2033 at par plus any accrued and
unpaid distributions to the date of the redemption; however,
the Company has the option to redeem at any time .

During 2000 the Company issued 5,000 shares of Company
obligated Mandatorily Redeemable (CoMR) preferred
securities of FBIL statutory trust I Holding solely subordinated
Debentures . Distributions are paid semi-annually . Cumulative
cash distributions are calculated at a 10 .60% annual rate . the
Company may, at one or more times, defer interest payments
on the capital securities for up to 10 consecutive semi-annual
periods, but not beyond september 7, 2030 . At the end of the
deferral period, all accumulated and unpaid distributions will
be paid . the capital securities will be redeemed on september
7, 2030; however, the Company has the option to redeem at
any time . the redemption price begins at 105 .300% to par
and is reduced by 53 basis points each year until september 7,
2020 when the capital securities can be redeemed at par . Any
accrued and unpaid distributions to the date of the redemption
must also be paid .

Holders of the capital securities have no voting rights, are
unsecured and rank junior in priority of payment to all of the
trust’s indebtedness and senior to the trust’s capital stock .

10. preferred stock, series a, B, and C
In october 2008, Congress passed the emergency economic
stabilization Act of 2008 (eesA) . one of the provisions resulting
from the Act was the treasury Capital purchase program (Cpp)
which provides direct equity investment of perpetual preferred
stock by the U .s . treasury in qualified financial institutions . In
January 2009, the Company, pursuant to the Cpp implemented
under the eesA, issued and sold to the treasury 10,000 shares
of the Company’s Cumulative perpetual preferred stock, series
A, together with a warrant to purchase 500 shares of the
Company’s Cumulative perpetual preferred stock, series B,
for an aggregate purchase price of $10 million in cash . the
warrant has a ten-year term and was immediately exercised
upon its issuance at the exercise price of $0 .01 per share .

the series A preferred stock qualifies as tier 1 capital and pays
cumulative dividends at a rate of 5% per annum for the first
five years, and 9% per annum thereafter . the series B preferred
stock also qualifies as tier 1 capital and pays cumulative
dividends at a rate of 9% per annum . the series A and B
preferred stock could have been redeemed by the Company
at any time, subject to approval of the Federal Reserve . Any
redemption of the series A and B preferred stock was to be at

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

the per share liquidation amount of $1,000 per share, plus any
accrued and unpaid dividends .

prior to the third anniversary of the treasury’s purchase of the
series A preferred stock, unless the series A preferred stock
had been redeemed or the treasury had transferred all of
the series A preferred stock to one or more third parties, the
consent of the treasury was to be required for the Company to
increase the dividend paid on its common stock above its most
recent quarterly dividend of $0 .115 per share or repurchase
shares of its common stock . the series A and B preferred stock
are non-voting except for class voting rights on matters that
would adversely affect the rights of the holders of the series A
and B preferred stock .

For accounting purposes, the proceeds of the $10,000,000
were allocated between the preferred stock and the warrant
based on their relative fair values . the entire discount on the
preferred stock, created from the initial value assigned to the
warrant, will be accreted over a five year period in a manner
that produces a level preferred stock dividend yield . At the end
of the fifth year, the carrying amount of the preferred stock
would equal its liquidation value .

on september 8, 2011, the Company issued 10,000
shares of senior non-Cumulative perpetual preferred stock,
series C (“series C preferred stock”) to the U .s . Department
of the treasury (“treasury”) for an aggregate purchase price
of $10,000,000 . the sale of series C preferred stock is the
result of an investment from the small Business Lending Fund
(“sBLF”), a fund established under the small Business Jobs
Act of 2010 that encourages lending to small businesses
by providing capital to qualified community banks with
assets of less than $10 billion . As a requirement of the sBLF,
simultaneously, the Company redeemed the 10,500 shares
of Fixed Rate Cumulative perpetual preferred stock, series A
and B (“series A or B preferred stock”), at an aggregate price
of $10,500,000 plus accrued and unpaid dividends to the
date of redemption of $35,000 . the series A and B preferred
stock was issued as a result of the Company’s participation
in the treasury’s voluntary Capital purchase program (“CCp”)
discussed previously .

the series C preferred stock qualifies as tier 1 capital for the
Company . non-cumulative dividends are payable quarterly on
the series C preferred stock, and the dividend rate is based on
changes in the level of “Qualified small Business Lending” or
“QsBL” by the Company . Based upon the change in the bank’s
level of QsBL over the baseline level (as defined by sBLF, the
baseline average of QsBL for the last two quarters of 2009
and the first two quarters of 2010), the dividend rate for the
initial dividend period, which was from the date of issuance
through september 30, 2011, was set at 2%, and the dividend
rate for the fourth quarter of 2011 was set at 1% . For the 2nd
through 10th calendar quarters, the annual dividend rate may

be adjusted to between 1% and 5%, to reflect the amount
of change in the banks’ level of QsBL . For the 11th calendar
quarter through 4 .5 years after issuance, the dividend rate will
be fixed between 1% and 5%, based upon the increase in
QsBL from the baseline level to the level as of the end of the
ninth dividend period (i .e ., as of september 30, 2013), or will
be fixed at 7% if there is no increase or there is a decrease in
QsBL during such period . In addition, beginning on April 1,
2014 and ending on April 1, 2016, if there is no increase or
there is a decrease in QsBL from the baseline level to the level
as of the end of the ninth dividend period (i .e . as of september
30, 2013), because of the Company’s participation in the Cpp,
the Company will be subject to an additional lending incentive
fee of 2% per year . After 4 .5 years from the issuance, the
dividend rate will increase to 9% .

the series C preferred stock may be redeemed at any time
at the option of the Company, subject to the approval of the
Company’s primary federal banking regulator . All redemptions
must be in amounts equal to at least 25% of the number of
originally issued shares at $1,000 per share, or 100% of the
then-outstanding shares (if less than 25% of the originally
issued shares) .

In accordance with the sBLF, the Company may pay dividends
on all stock assuming tier 1 capital levels remain at least 90%
of the level existing upon the date of issuance, september
8, 2011 . this threshold is subject to reduction depending on
increases in the Company’s QsBL .

the series C preferred stock is nonvoting, other than for
consent rights granted to treasury with respect to (i) an
authorization or issuance of shares ranking senior to the series
C preferred stock, (ii) any amendment to the rights of the
series C preferred stock, (iii) any merger, exchange, dissolution,
or similar transaction that would affect the rights of the series
C preferred stock and (iv) any sale of all, or any material
portion of, the Company’s assets if in conjunction with such
sale, the series C preferred stock will not be redeemed in full .

If the Company misses five dividend payments, whether or not
consecutive, the holder of the series C preferred stock will have
the right , but not the obligation, to appoint a representative as
an observer on the Company’s Board of Directors .

11. Commitments and Contingencies
finanCial instruments with off-BalanCe sheet risk

the Bank, in the normal course of business, is a party to
financial instruments with off-balance sheet risk to meet the
financing needs of its customers . these financial instruments
include unused lines of credit and standby letters of credit .
those instruments involve, to varying degrees, elements of
credit and market risk in excess of the amount recognized in
the consolidated balance sheets .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

11. Commitments and Contingencies (continued)
the Bank’s exposure to credit loss in the event of
nonperformance by the other party to the financial
instrument for unused lines of credit and standby letters of
credit is represented by the contractual amounts of those
instruments . the Bank uses the same credit policies in making
commitments and conditional obligations as it does for
on-balance sheet instruments .

A summary of the Bank’s commitments at December 31, 2011
and 2010 is as follows (Amounts in thousands of dollars):

2011

2010

Commitments to extend credit
and unused lines of credit

67,384

$ 59,406

standby letters of credit

1,836

2,091

Unused lines of credit are agreements to lend to a customer
as long as there is no violation of any condition established in
the contract . the agreements generally have fixed expiration
dates or other termination clauses and may require payment
of a fee . since many of the agreements are expected to expire
without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements . the
Bank evaluates each customer’s credit worthiness on a case-
by-case basis . the amount of collateral obtained if deemed
necessary by the Bank upon extension of credit is based upon
management’s credit evaluation of the counter-party . Collateral
varies but may include accounts receivable, inventory, property,
equipment, and income-producing commercial properties .

standby letters of credit are conditional commitments issued
by the Bank to guarantee the performance of a customer to
a third party . those guarantees are primarily issued to support
public and private borrowing arrangements and, generally,
have terms of one year, or less . the credit risk involved in
issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers . the Bank holds
collateral, as detailed above, supporting those commitments if
deemed necessary . In the event the customer does not perform
in accordance with the terms of the agreement with the third
party, the Bank would be required to fund the commitment .
the maximum potential amount of future payments the Bank
could be required to make is represented by the contractual
amount shown in the previous summary . If the commitment is
funded, the Bank would be entitled to seek recovery from the
customer . At December 31, 2011 and 2010, no amounts have
been recorded as liabilities for the Bank’s potential obligations
under these guarantees .

the Company has executed contracts for the sale of mortgage
loans in the secondary market in the amount of $4,545,000
and $847,000 at December 31, 2011 and 2010, respectively .

these amounts include loans held for sale of 454,000 and
none as of December 31, 2011 and 2010, respectively, and
loan commitments, included in the summary in this note,
of $4,091,000 and $847,000 as of December 31, 2011 and
2010, respectively .

A portion of residential mortgage loans sold to investors in the
secondary market are sold with recourse . specifically, certain
loan sales agreements provide that if the borrower becomes 60
days or more delinquent during the first six months following
the first payment due, and subsequently becomes 90 days or
more delinquent during the first 12 months of the loan, the
Bank must repurchase the loan from the subject investor . the
Bank did not repurchase any loans from secondary market
investors under the terms of these loan sales agreements
during the years ended December 31, 2011 and 2010 . In the
opinion of management, the risk of recourse to the Bank is not
significant and, accordingly, no liability has been established .

ConCentration of CreDit risk

Aside from cash on hand and in-vault, the Company’s cash is
maintained at various correspondent banks . the total amount
of cash on deposit and federal funds sold exceeded federal
insurance limits at four institutions by a total of approximately
$12,378,000 as of December 31, 2011 . In the opinion of
management, no material risk of loss exists due to the financial
condition of the institutions .

ContinGenCies

In the normal course of business, the Company is involved
in various legal proceedings . In the opinion of management,
any liability resulting from such proceedings would not
have a material adverse effect on these consolidated
financial statements .

12. Benefits
the Company has a 401(k) plan, which is a tax qualified
savings plan, to encourage its employees to save for
retirement purposes or other contingencies . All employees,
working over 1,000 hours per year, of the Company and
its subsidiaries are eligible to participate in the plan after
completion of one year of service and attaining the age of
21 . the employee may elect to contribute a percentage of
their compensation before taxes in a traditional 401(k) and/
or a percentage of their compensation after taxes using
the subsidiary’s Roth 401(k) option . Based upon profits,
as determined by the subsidiaries, a contribution may be
made by the subsidiaries . employees are 100% vested in the
subsidiaries’ contribution to the plan after five years of service .
employee contributions and vested subsidiaries contributions
may be withdrawn only on termination of employment,
retirement, death or hardship withdrawal .

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

Under the employee Incentive Compensation plan, the Bank
and trust services are authorized at their discretion, pursuant
to the provisions of the plan, to establish on an annual basis,
a bonus fund, which will be distributed to certain employees,
based on their performance . the employee Incentive
Compensation plan does not become effective unless the Bank
and trust services exceeds established income levels .

Contributions to the 401(k) plan for the years ended December
31, 2011 and 2010 totaled $576,000 and $383,000,
respectively . Contributions made to the incentive compensation
plan for the years ended December 31, 2011 and 2010 were
$37,000 and $185,000, respectively .

13. Dividends and regulatory Capital
the Company’s stockholders are entitled to receive such
dividends as are declared by the Board of Directors . the
ability of the Company to pay dividends in the future is
dependent upon its receipt of dividends from its subsidiaries .
the subsidiaries’ ability to pay dividends is regulated by
financial regulatory statutes . the timing and amount of
dividends will depend on earnings, capital requirements and
financial condition of the Company and its subsidiaries as well
as general economic conditions and other relevant factors
affecting the Company and the subsidiary .

Under the provisions of the national Bank Act the Bank
may not, without prior approval of the Comptroller of the
Currency, declare dividends in excess of the total of the
current and past two year’s earnings less any dividends already
paid from those earnings . In addition, see note 10, for other
potential dividend restriction .

the Company and its subsidiaries are subject to various
regulatory capital requirements administered by the

federal banking agencies . Failure to meet minimum
capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that,
if undertaken, could have a direct material effect on the
Company’s financial statements . Under capital adequacy
guidelines and the regulatory framework for prompt
corrective action, the Company and Bank must meet specific
capital guidelines that involve quantitative measures of the
Bank’s assets, liabilities, and certain off-balance sheet items
as calculated under regulatory accounting practices . the
Company’s and Bank’s capital amounts and classification
are also subject to qualitative judgments by the regulators
and components, risk weightings, and other factors . prompt
corrective action provisions are not applicable to bank
holding companies .

Quantitative measures established by regulation to ensure
capital adequacy require the Company and Bank to maintain
minimum amounts and ratios (set forth in the following table)
of total and tier I capital (as defined in the regulations) to risk-
weighted assets (as defined) and of tier I capital (as defined)
to average assets (as defined) . Management believes, as of
December 31, 2011, that the Company and Bank meet all
capital adequacy requirements to which they are subject .

the most recent notification from the office of the Comptroller
of the Currency categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action . to be
categorized as adequately or well capitalized the Bank must
maintain minimum total risk-based, tier I risk-based, and tier I
leverage ratios as set forth in the table . there are no conditions
or events since that notification that management believes
have changed the Bank’s category .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

13. Dividends and regulatory Capital (continued)
the Company’s and Bank’s actual capital amounts and ratios are also presented in the table . (Amounts in thousands of dollars):

Actual

For Capital Adequacy purposes

to be Well Capitalized Under
prompt Corrective Action provisions

as of December 31, 2011

Amount

Ratio

Amount

Ratio

Amount

Ratio

total capital (to Risk Weighted Assets)
Company

$ 75,473

15.54 %

$ 38,854

≥ 8.00 %

n/a

Bank

$ 62,708

13.00 %

$ 38,580

≥ 8.00 %

$ 48,225

≥ 10.00 %

tier i capital (to Risk Weighted Assets)
Company

$ 71,295

14.68 %

$ 19,427

≥ 4.00 %

n/a

Bank

$ 57,521

11.93 %

$ 19,290

≥ 4.00 %

$ 28,935

≥

6.00 %

tier i capital (to Average Assets)
Company

Bank

$ 71,295

$ 57,521

9.99 %

$ 28,535

≥ 4.00 %

n/a

8.14 %

$ 28,270

≥ 4.00 %

$ 35,337

≥

5.00 %

as of december 31, 2010

Amount

Ratio

Amount

Ratio

Amount

total capital (to Risk Weighted Assets)
Company

$ 70,165

15 .43 % ≥ $ 36,380

≥ 8 .00 %

n/A

Ratio

n/A

Bank

$ 58,779

13 .02 % ≥ $ 36,121

≥ 8 .00 %

≥ $ 45,152

≥ 10 .00 %

tier i capital (to Risk Weighted Assets)
Company

$ 66,827

14 .70 % ≥ $ 18,190

≥ 4 .00 %

n/A

Bank

$ 53,759

11 .91 % ≥ $ 18,061

≥ 4 .00 %

≥ $ 27,091

≥

6 .00 %

tier i capital (to Average Assets)
Company

Bank

$ 66,827

$ 53,759

9 .83 % ≥ $ 27,191

≥ 4 .00 %

n/A

7 .98 % ≥ $ 26,961

≥ 4 .00 %

≥ $ 33,701

≥

5 .00 %

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

14. income tax matters
the components of income tax expense are as follows for the years ended December 31, 2011 and 2010 (Amounts in thousands
of dollars):

Years ended December 31,

Current

Deferred

2011

2010

1,204

2,557

1,120

2,324

186

2,743

A reconciliation between income tax expense in the statements of income and the amount computed by applying the statutory
federal income tax rate to income before income taxes is as follows (Amounts in thousands of dollars):

Federal income tax at statutory rate

$ 2,850

34.0 %

$ 3,122

34 .0 %

2011 amount

% of pretax income

2010 Amount

% of pretax Income

Changes from statutory rate resulting from:

state tax, net of federal benefit

tax exempt interest income, net

Increase in cash surrender value

over (under) accrual of provision and other, net

247

(823)

(109)

159

2.9

(9.8)

(1.3)

1.9

333

(701)

(104)

3 .6

(7 .6)

(1 .1)

1 .0

Income tax expense

$ 2,324

27.7 %

$ 2,743

29 .9 %

net deferred tax assets consist of the following components as of December 31, 2011 and 2010 (Amounts in thousands of dollars):

deferred tax assets:

Allowance for loan losses

other-than-temporary impairment

Accrued expenses

Interest rate swap

deferred tax liabilities:

premises, furniture and equipment

stock dividends

prepaid expenses

Unrealized gains on securities available for sale, net

Intangibles

other

net DeFeRReD tAX Assets (LIABILItIes)

2011

2010

1,993

1,854

290

272

2,619

(2,024)

(146)

(83)

(2,958)

(502)

(108)

279

223

2,421

(790)

(140)

(78)

(860)

(371)

(165)

(5,821)

(3,202)

(2,404)

net deferred tax assets (liabilities) are included in other assets (liabilities) on the accompanying consolidated balance sheets .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

14. income tax matters (continued)
the net change in deferred income taxes is reflected in the financial statements as follows (Amounts in thousands of dollars):

Years ended December 31,

provision for income taxes

statement of changes in stockholders’ equity, accumulated other comprehensive income (loss),
unrealized gains (losses) on securities available for sale, net

Interest rate swap

2011

2010

$ 1,120

186

2,098

(596)

(74)

$ 3,219

(484)

15. fair Value measurements
the Fair Value Measurements and Disclosures topic of the FAsB Accounting standards Codification defines fair value, establishes
a framework for measuring fair value using a hierarchy system, and requires disclosure of fair value measurements . the hierarchy
is intended to maximize the use of observable inputs and minimize the use of unobservable inputs and includes three levels based
upon the valuation techniques used . the three levels are as follows:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of

the measurement date .

Level 2: significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted

prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data .

Level 3: significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market

participants would use in pricing an asset or liability .

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general
classification of such instruments pursuant to the valuation hierarchy, is set forth below .

investment securities available for sale: Where quoted prices are available in an active market, securities are classified within
level 1 of the valuation hierarchy . Level 1 securities would include highly liquid government bonds and exchange traded equities .
If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with
similar characteristics, or discounted cash flow . Level 2 securities would include U .s . agency securities, mortgage−backed agency
securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities . In certain cases
where there is limited activity or less transparency around inputs to the valuation, securities are classified within level 3 of the
valuation hierarchy .

impaired loans: the Company does not record loans at fair value on a recurring basis . However, from time to time, a loan
is considered impaired and an allowance for loan losses is established . Loan impairment may be measured based upon the
present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral,
if the loan is collateral dependent . Collateral may be real estate and/or business assets including equipment, inventory and/or
accounts receivable . Fair value is determined based upon appraisals by qualified licensed appraisers hired by the Company, and
are, generally, considered level 2 measurements . In some cases, adjustments are made to the appraised values due to various
factors including age of the appraisal, age of comparables included in the appraisal, and known changes in the market and in
the collateral . When significant adjustments are based on unobservable inputs, the resulting fair value measurement has been
categorized as a level 3 measurement .

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

other real estate owned: other real estate owned is carried at the lower of the principal amount of the loan outstanding at the
time of acquisition, plus any acquisition costs, or the estimated fair value of the property, less disposal costs . the fair value of the
property is determined based upon appraisals . As with impaired loans, if significant adjustments are made to the appraised value,
based upon unobservable inputs, the resulting fair value measurement is categorized as a level 3 measurement .

interest rate swap: the fair value is estimated by a third party using inputs that are observable or that can be corroborated by
observable market data, and therefore, are classified within level 2 of the valuation hierarchy .

there have been no changes in valuation techniques used for any assets or liabilities measured at fair value during the year ended
December 31, 2011 .

assets anD liaBilities reCorDeD at fair V alue on a reCurrinG Basis

the following table summarizes assets and liabilities measured at fair value on a recurring basis as of December 31, 2011 and
2010, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

fair Value measurements
as of December 31, 2011 using:

Investment securities available for sale:
U .s . Government agency bonds

U .s . Government agency mortgage
backed securities

state and political subdivisions

Corporate securities

Collateralized mortgage obligations

Interest rate swap

Fair Value Measurements
as of december 31, 2010 using:

Investment securities available for sale:
U .s . Government agency bonds

U .s . Government agency mortgage
backed obligations

state and political subdivisions

Corporate securities

Collateralized mortgage obligations

Interest rate swap

Fair Value

Quoted prices in Active
Markets for Identical Assets

significant other
observable Inputs

significant
Unobservable Inputs

(Level 1)

(Level 2)

(Level 3)

84,941

68,101

60,748

386

66,927

281,103

(169)

84,941

68,101

60,748

386

66,927

281,103

(169)

Fair Value

Quoted prices in Active
Markets for Identical Assets

significant other
observable Inputs

significant
Unobservable Inputs

(Level 1)

(Level 2)

(Level 3)

79,840

82,815

53,864

506

60,223

277,248

(172)

79,840

82,815

53,864

506

60,223

277,248

(172)

there were no transfers of assets or liabilities between levels 1, 2, and 3 of the fair value hierarchy during the year ended
December 31, 2011 .

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

15. fair Value measurements (continued)

assets anD liaBilities reCorDeD at fair V alue on a nonreCurrinG Basis

the Company may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis such
as when there is evidence of impairment . Assets measured at fair value on a nonrecurring basis are included in the table below:

fair Value measurements
as of December 31, 2011 using:

Fair Value

Quoted prices in Active
Markets for Identical Assets
(Level 1)

Impaired loans

other real estate owned

$ 3,676

$ 220

$ -

Fair Value Measurements
as of december 31, 2010 using:

Fair Value

Quoted prices in Active
Markets for Identical Assets
(Level 1)

Impaired loans

other real estate owned

$ 1,731

$ 1,845

$ -

significant other
observable Inputs

significant
Unobservable Inputs

(Level 2)

$ -

(Level 3)

$ 3,676

$ 220

significant other
observable Inputs

significant
Unobservable Inputs

(Level 2)

$ -

(Level 3)

$ 1,731

$ 1,845

the Financial Instruments topic of the FAsB Accounting standards Codification, requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value .
Certain financial instruments and all non-financial instruments are excluded from these disclosure requirements . Accordingly,
the aggregate fair value amounts presented do not represent the underlying value of the Company .

the following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Cash and due from banks and federal funds sold: the carrying amounts reported in the balance sheets for cash and due from
banks and federal funds sold equal their fair values .

securities: Fair values for securities are based on quoted market prices, where available . If quoted market prices are not available,
fair values are based on quoted market prices of comparable instruments .

loans and loans held for sale: For variable loans fair values are equal to carrying values . the fair values for all other types of
loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms
to borrowers with similar credit quality . the fair value of loans held for sale is based on quoted market prices of similar loans sold
in the secondary market .

accrued interest receivable and payable: the fair value of accrued interest receivable and payable is equal to its carrying value .

Deposits: the fair values for demand and savings deposits equal their carrying amounts, which represent the amount payable on
demand . Fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently
being offered on time deposits to a schedule of aggregated expected monthly maturities on time deposits .

AnnuAl RepoRt 2011 | notes to Consolidated Financial Statements

securities sold under agreements to repurchase: the fair value of securities sold under agreements to repurchase is
considered to equal carrying value due to the borrowings short-term nature .

federal home loan Bank advances: the fair value of Federal Home Loan Bank advances are estimated using discounted cash
flow analyses, using interest rates currently being offered for similar borrowings .

Junior subordinated debentures: It is not practicable to estimate the fair value of junior subordinated debentures as
instruments with similar terms are not available in the market place .

Commitments to extend credit: the fair value of these commitments is not material .

the carrying values and estimated fair values of the Company’s financial instruments as of December 31, 2011 and 2010 are as
follows (Amounts in thousands of dollars):

2011 Carrying Value

2011 fair Value

2010 Carrying Value

2010 Fair Value

Financial assets:

Cash and due from banks

securities held to maturity

securities available for sale

Federal funds sold

Loans, net

Accrued interest receivable

Financial liabilities:

21,177

$ 35,044

532

281,103

3,238

370,203

3,271

561

281,103

3,238

372,480

3,271

1,481

277,248

2,167

332,538

3,289

1,498

277,248

2,167

334,274

3,289

non-interest-bearing demand deposits

70,932

$ 70,127

Interest-bearing demand deposits

savings deposits

time deposits

securities sold under agreements to repurchase

Federal Home Loan Bank advances

Accrued interest payable

203,435

36,595

273,537

48,769

1,110

203,435

36,595

277,318

48,769

1,110

184,727

33,705

281,877

37,604

5,500

1,321

184,727

33,705

284,233

37,604

5,686

1,321

notes to Consolidated Financial Statements | AnnuAl RepoRt 2011

BoARD oF DIReCtoRs

First Bankers trustshares, inc.

First Bankers trust company, n. a.

First Bankers trust services, inc.

Donald K. Gnuse
Chairman of the Board

Arthur E. Greenbank
President/CEO

Donald K. Gnuse
Chairman of the Board

Arthur E. Greenbank
President/CEO

Donald K. Gnuse
Chairman of the Board

Brian A. Ippensen
President

Steven E. Siebers
Secretary
Scholz, Loos, Palmer, Siebers, & Duesterhaus,
Attorney at Law

Carl W. Adams, Jr.
Illinois Ayers Oil Company, President

William D. Daniels
Harborstone Group, LLC, Member

Scott A. Cisel
Ameren Illinois Company, President/CEO

Phyllis J. Hofmeister
Robert Hofmeister Farm, Secretary

Mark E. Freiburg
Freiburg Insurance Agency &
Freiburg Development, Owner
Freiburg, Inc., President

Phyllis J. Hofmeister
Robert Hofmeister Farm, Secretary

William D. Daniels
Harborstone Group, LLC, Member

Mark E. Freiburg
Freiburg Insurance Agency &
Freiburg Development, Owner
Freiburg, Inc., President

Dennis R. Williams
Quincy Newspapers, Inc., Chairman

Phyllis J. Hofmeister
Robert Hofmeister Farm, Secretary

John E. Laverdiere
Laverdiere Construction, Inc., President
LCI Concrete Inc., Vice President/Manager

Merle L.Tieken
T-C Building Corporation, President
M&M Developments Corporation,
Secretary/Treasurer

Dennis R. Williams
Quincy Newspapers, Inc., Chairman

AnnuAl RepoRt 2011 | Board of Directors

oFFICeRs

First Bankers trust company, n. a.

First Bankers trust services, inc.

presiDent
Brian A. Ippensen

ViCe presiDents
Merri e. Ash
Steven p. eckert
Michele R. Foster
Julie e. Kenning
Danielle C. Montesano

trust offiCers
Kjersti l. Cory
patricia D. Goestenkors
John H. Jaynes
Marilyn H. Marchetti
W. Diane McHatton
Ashley Melton
Blake R. Mock
linda J. Shultz
Kimberly A. Serbin
Deborah J. Staff
Martha e. Wert

assistant ViCe presiDent
John p. Shelton

assistant trust offiCers
John t. Cifaldi
Marilyn J. Crim
Sherri A. Zuspann

information
teChnoloGy offiCers
nicole R. Allen-Cain
Ronald W. Fairley
terry J. Hanks
John K. predmore
linda D. Reinold

retail offiCers
Susan lynn Allen
Stephanie M. Dickens
Judy A. Fairchild
Susan l. Farlow
Jennifer l. Gordley
Ryne R. lubben
Andrew W. Marner
Jeremy W. Melvin
Afton R. Mast
James e. Moore
Ryan J. newbrough
Kimberly M. neal
Dennis l. Royalty
Kelly R. Seifert

auDit offiCer
Christine A. Baker

human resourCes offiCer
laura J. Maas

marketinG offiCer
Maria D. eckert

loan operations offiCers
Amy J. Goehl
Karen J. Koehn

operations offiCer
Michelle M. Shortridge

presiDent
Arthur e. Greenbank

reGional presiDents
Gregory A. Curl East Region
Jason l. Duncan North Region
David J. Rakers West Region

senior ViCe presiDents
Dennis R. Iversen
Gretchen A. McGee

ViCe presiDents
timothy W. Corrigan
Mark A. DiMarzio
Daron D. Duke
Susan A. Dunseth
Debra K. Foster
thomas J. Frese
Charles D. Grace
Ryan G. Goestenkors
Kevin M. Koetters
Kathleen D. Mcnay
James R. obert
Marvin e. Rabe
Douglas R. Reed
nancy S. Richards
Hugh K. Roderick
Jeanette l. Schinderling
Scott l. thoele
linda K. tossick
Brent R. Voth
James D. Whitaker
David A. Young

assistant ViCe presiDents
John t. Armstrong
Sherry A. Bryson
pamela l. eftink
James M. Farmer
Jennifer M. Gilker
lucas C. Johnson
Jayson e. Martin
leslie A. Westen
patricia J. Westerman
Randal S. Westerman
Joan M. Whitlow

officers | AnnuAl RepoRt 2011

notes