2013 ANNUAL REPORT
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C O M M U N I T Y
B U I L D I N G
T H R O U G H
C O M M U N I T Y
B A N K I N G
3106 NORTH ROCKTON AVENUE • ROCKFORD, ILLINOIS 61103 • www.foresightfg.com • 815.847.7500
www.foresightfg.com
Freeport, IL
We are a market driven,
people oriented
community banking organization
dedicated to enhancing
shareholder value by
providing our customers with
diversified financial services
that help them achieve
economic success
and financial security.
• • •
We will pursue these goals
while balancing shareholder
and customer interests
with the ongoing welfare
of our employees
and local communities.
The member banks
of our group maintain
a high degree
of independence
and sensitivity to the concerns
of the local communities
and markets that we
choose to serve.
• • •
We will seek to
expand sensibly into
new markets when we believe
that our business model and
community banking philosophy
can be successfully extended.
• • •
In summary:
“Community Building through Community Banking”
Dear Stockholders,
We are pleased to report that your company experienced an all time record net income of $6.84 million for 2013 despite the
obstacles presented by a local economy that is still struggling to recover. Coupled with modest improvement in the overall U.S.
economy in the past year, we are proud of the efforts put forth by our community bank group teams, which worked with notable
perseverance to serve our customers and communities, and to manage the company’s resources well. For the first time since 2008,
Foresight’s credit costs declined from the prior year, dropping by about $8 million from 2012, while our teams continued working
through adversity with customers who are still recovering from the economic downturn. Basic earnings per common share more
than tripled to $1.87 reflecting the 98% gain in net income, along with the beneficial impact of retiring the TARP preferred
stock in late 2012. Foresight’s return on average assets of .78% and return on stockholders’ equity of 8.2% exceeded internal
expectations and Midwest community bank peers.
Moderate progress was made in 2013 in reducing the relative burden of non-performing assets, which declined to a year- end total
of $16 million. Reserves for loan losses were maintained at $14.8 million, over 2.4% of total loans, providing significant capacity to
accelerate resolution of non-performing loans in 2014. Restoring asset quality to normal historical levels is still the most important
goal for future performance improvement for the company going forward.
For the year, net interest income declined by 5.6%, as average loan volumes were lower during the year due to increased competition
and economic conditions. Non-interest operating expenses increased by 4.8%, more than 50% of which is reflective of increased
personnel costs to strengthen staffing within the organization as we plan for future growth and a strong internal future succession
focus. Non-interest income declined 2.8% as mortgage banking revenues dropped in the second half of the year in response to
higher market interest rates. Thus, the $8 million in reduced credit costs cited above were the driving force for the significant gain
in net income. Risk-based Capital levels increased to more than 50% above regulatory requirements, and as a result, the Foresight
Board of Directors decided to increase quarterly dividends to shareholders by 25% in the fourth quarter, and a common stock
repurchase program was begun in the fall. The common stock market trading price increased during 2013 by about $7 per share
to $18.75 per share at year end, which is still below book value of nearly $23 per share.
Another significant set of events set in motion in 2013 culminated in the promotion from within the Foresight group of key
executives as part of our ongoing management succession plans for the bank group. Most notably, in December Mary Hartman
was promoted to President of State Bank, Freeport, becoming the first female community bank executive to achieve that level of
responsibility with a Foresight Bank. Doug Cross remains as Chairman of the Board for State Bank as the succession plan continues
to progress in 2014. After thoughtful consideration and discerning during 2013, in January of 2014, Brent Myers was appointed by
the Board of Directors as President and Chief Executive Officer of Foresight, the position held by Stephen Gaddis since 1993. We
and the Board believe the company is well served by the continuity of promoting from within the organization proven community
bankers that are highly successful, experienced, and energetic as successors to those who have been instrumental in leading the
company the past two decades. Stephen Gaddis, who has lead and grown this organization for 21 years from a three bank charter
group of $141 million to a five bank charter group of $873 million, has accepted a position as Vice President during 2014 to assist
with an orderly transition of the President and CEO responsibilities to Brent Myers and his team of experienced and talented
community bankers.
With the improvement in profitability, strong capital and reserve levels, and a relatively lower level of burdensome credit quality
challenges, we are looking forward to building on the success of the past year during 2014 and beyond. With your continued
support, we can continue to pursue in confidence our mission of Community Building through Community Banking.
Respectfully,
Brent Myers, President and CEO
Stephen Gaddis, Vice President
2013 ANNUAL REPORT
5
FORESIGHT
Net Earnings Dollars (1,000,000s)
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
2 0 1 2
2 0 1 3
Credit Costs vs. Net Operating Income* (In 000’s)
7.0 -
6.0 -
5.0 -
4.0 -
3.0 -
2.0 -
1.0 -
0 -
20,000 -
15,000 -
10,000 -
5,000 -
0 -
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
2 0 1 2
2 0 1 3
*Tax equivalent net operating income before taxes and credit costs.
6
2013 ANNUAL REPORT
FORESIGHT
Trends in Assets, Deposits and Loans (In 000’s)
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
2 0 1 2
2 0 1 3
Common Stock Per Share Book & Market Value - December 31
900,000 -
850,000 -
800,000 -
750,000 -
700,000 -
650,000 -
600,000 -
550,000 -
500,000 -
450,000 -
400,000 -
350,000 -
300,000 -
250,000 -
$25.00 -
$20.00 -
$15.00 -
$10.00 -
$5.00 -
0 -
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
2 0 1 2
2 0 1 3
2013 ANNUAL REPORT
7
FORESIGHT Wipfli LLP
Wipfli LLP
4949 Harrison Avenue
4949 Harrison Avenue
Rockford, Illinois 61108
Rockford, Illinois 61108
815.399.7700
815.399.7700
Fax 815.399.7644
Fax 815.399.7644
www.wipfli.com
www.wipfli.com
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors
To the Board of Directors
Foresight Financial Group, Inc.
Foresight Financial Group, Inc.
We have audited the accompanying consolidated financial statements of Foresight Financial Group, Inc. and
We have audited the accompanying consolidated financial statements of Foresight Financial Group, Inc. and
Subsidiaries, which comprise the consolidated balances sheets as of December 31, 2013 and 2012, and the related
Subsidiaries, which comprise the consolidated balances sheets as of December 31, 2013 and 2012, and the related
consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each
consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each
of the years in the three-year period ended December 31, 2013, and the related notes to the financial statements.
of the years in the three-year period ended December 31, 2013, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
accounting principles generally accepted in the United States of America; this includes the design, implementation,
accounting principles generally accepted in the United States of America; this includes the design, implementation,
and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are
and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error.
free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of America.
conducted our audits in accordance with auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement.
consolidated financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial
the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion.
expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of the financial
significant accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements.
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
opinion.
8
2013 ANNUAL REPORT
FORESIGHT
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Foresight Financial Group, Inc. and Subsidiaries as of December 31, 2013 and 2012, and the
results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2013, in accordance with accounting principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole.
The consolidating information included in Schedules 1 and 2 is presented for purposes of additional analyses and is
not a required part of the consolidated financial statements. Such information is the responsibility of management
and was derived from and relates directly to the underlying accounting and other records used to prepare the
financial statements. The information has been subjected to the auditing procedures applied in the audit of the
financial statements and certain additional procedures, including comparing and reconciling such information directly
to the underlying accounting and other records used to prepare the financial statements or to the financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted in the United
States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial
statements as a whole.
Rockford, Illinois
February 28, 2014
2013 ANNUAL REPORT
9
FORESIGHT
A S S E T S
A S S E T S
Cash and due from banks
Interest-bearing deposits in banks
Cash and due from banks
Federal funds sold
Interest-bearing deposits in banks
Total cash and cash equivalents
Federal funds sold
Total cash and cash equivalents
Interest-bearing deposits in banks - term deposits
Securities:
Interest-bearing deposits in banks - term deposits
Securities held-to-maturity (HTM)
Securities:
Securities available-for-sale (AFS)
Securities held-to-maturity (HTM)
Non-marketable equity securities, at cost
Securities available-for-sale (AFS)
Loans held for sale
Non-marketable equity securities, at cost
Loans, net of allowance for loan losses of $14,777 and $14,948,
Loans held for sale
respectively
Loans, net of allowance for loan losses of $14,777 and $14,948,
Foreclosed assets, net
respectively
Premises and equipment, net
Foreclosed assets, net
Other assets
Premises and equipment, net
Other assets
Total assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Liabilities:
Noninterest-bearing
Deposits:
Interest-bearing
Noninterest-bearing
Total deposits
Interest-bearing
Federal funds purchased
Total deposits
Securities sold under agreements to repurchase
Federal funds purchased
Federal Home Loan Bank (FHLB) advances and other borrowings
Securities sold under agreements to repurchase
Subordinated debentures
Federal Home Loan Bank (FHLB) advances and other borrowings
Accrued interest payable and other liabilities
Subordinated debentures
Total liabilities
Accrued interest payable and other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock (no par value; authorized 500,000 shares;
Stockholders’ equity:
15,750 shares issued)
Preferred stock (no par value; authorized 500,000 shares;
Common stock ($.25 par value; authorized 5,000,000 shares;
15,750 shares issued)
3,879,357 and 3,867,169 shares issued, respectively)
Common stock ($.25 par value; authorized 5,000,000 shares;
Additional paid-in capital
3,879,357 and 3,867,169 shares issued, respectively)
Retained earnings
Additional paid-in capital
Treasury stock, at cost (209,657 and 207,657 shares, respectively)
Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost (209,657 and 207,657 shares, respectively)
Total stockholders’ equity
Accumulated other comprehensive income
Total stockholders’ equity
Total liabilities and stockholders’ equity
Total liabilities and stockholders’ equity
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
December 31,
2013
2013
$16,787
911
$16,787
0
911
17,698
0
17,698
4,963
4,963
1,584
216,065
1,584
2,220
216,065
1,521
2,220
1,521
595,718
3,265
595,718
9,746
3,265
19,278
9,746
19,278
$872,058
$872,058
$93,806
635,251
$93,806
729,057
635,251
6,310
729,057
23,365
6,310
15,350
23,365
10,000
15,350
3,749
10,000
787,831
3,749
787,831
0
0
969
7,979
969
79,036
7,979
(4,098)
79,036
340
(4,098)
84,226
340
84,226
$872,057
$872,057
2012
2012
$19,733
2,634
$19,733
2,137
2,634
24,504
2,137
24,504
4,713
4,713
1,728
213,845
1,728
2,184
213,845
5,598
2,184
5,598
596,938
6,770
596,938
10,230
6,770
17,282
10,230
17,282
$883,792
$883,792
$92,336
644,382
$92,336
736,718
644,382
5,114
736,718
25,046
5,114
19,850
25,046
10,000
19,850
3,517
10,000
800,245
3,517
800,245
0
0
966
7,763
966
72,821
7,763
(4,060)
72,821
6,057
(4,060)
83,547
6,057
83,547
$883,792
$883,792
10
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
2013 ANNUAL REPORT
FORESIGHT CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF INCOME
(000s omitted except share data)
(000s omitted except share data)
For the years ended December 31,
For the years ended December 31,
A S S E T S
Interest and dividend income:
Interest and dividend income:
Loans, including fees
Loans, including fees
Debt securities:
Debt securities:
Cash and due from banks
Taxable
Taxable
Interest-bearing deposits in banks
Tax-exempt
Tax-exempt
Federal funds sold
Interest-bearing deposits in banks and other
Interest-bearing deposits in banks and other
Total cash and cash equivalents
Federal funds sold
Federal funds sold
Total interest and dividend income
Total interest and dividend income
Interest-bearing deposits in banks - term deposits
Securities:
Interest expense:
Interest expense:
Securities held-to-maturity (HTM)
Deposits
Deposits
Securities available-for-sale (AFS)
Federal funds purchased
Federal funds purchased
Non-marketable equity securities, at cost
Securities sold under agreements to repurchase
Securities sold under agreements to repurchase
Loans held for sale
FHLB and other borrowings
FHLB and other borrowings
Loans, net of allowance for loan losses of $14,777 and $14,948,
Subordinated debentures
Subordinated debentures
respectively
Total interest expense
Total interest expense
Foreclosed assets, net
Premises and equipment, net
Net interest and dividend income
Net interest and dividend income
Other assets
Provision for loan losses
Provision for loan losses
Total assets
Net interest and dividend income,
Net interest and dividend income,
after provision for loan losses
after provision for loan losses
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest income:
Noninterest income:
Deposits:
Customer service fees
Customer service fees
Noninterest-bearing
Gain on sales and calls of AFS securities, net
Gain on sales and calls of AFS securities, net
Interest-bearing
Gain on sales of loans, net
Gain on sales of loans, net
Total deposits
Loan servicing fees, net
Loan servicing fees, net
Federal funds purchased
Other
Other
Securities sold under agreements to repurchase
Total noninterest income
Total noninterest income
Federal Home Loan Bank (FHLB) advances and other borrowings
Subordinated debentures
Noninterest expenses:
Noninterest expenses:
Accrued interest payable and other liabilities
Salaries and employee benefits
Salaries and employee benefits
Total liabilities
Occupancy expense of premises, net
Occupancy expense of premises, net
Outside services
Outside services
Stockholders’ equity:
Data processing
Data processing
Preferred stock (no par value; authorized 500,000 shares;
Foreclosed assets, net
Foreclosed assets, net
Other
15,750 shares issued)
Other
Total noninterest expenses
Common stock ($.25 par value; authorized 5,000,000 shares;
Total noninterest expenses
3,879,357 and 3,867,169 shares issued, respectively)
Income before income taxes
Additional paid-in capital
Income before income taxes
Retained earnings
Income tax expense
Treasury stock, at cost (209,657 and 207,657 shares, respectively)
Income tax expense
Accumulated other comprehensive income
Net income
Total stockholders’ equity
Net income
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
2013
2013
$29,245
$29,245
2,945
2,945
3,736
3,736
83
83
13
13
36,022
36,022
5,751
5,751
9
9
81
81
203
203
600
600
6,644
6,644
29,378
29,378
4,777
4,777
24,601
24,601
1,166
1,166
156
156
1,535
1,535
751
751
2,379
2,379
5,987
5,987
12,508
12,508
2,391
2,391
212
212
414
414
622
622
5,243
5,243
21,390
21,390
9,198
9,198
2,360
2,360
$6,838
$6,838
$1.87
$1.87
$1.84
$1.84
2012
2012
2013
$31,487
$31,487
$16,787
3,472
3,472
911
3,900
3,900
0
57
57
17,698
11
11
38,927
38,927
4,963
1,584
7,231
7,231
216,065
3
3
2,220
128
128
1,521
245
245
189
189
595,718
7,796
7,796
3,265
9,746
31,131
31,131
19,278
13,444
13,444
$872,058
2011
2011
2012
$33,530
$33,530
$19,733
3,915
3,915
2,634
3,900
3,900
2,137
16
16
24,504
11
11
41,372
41,372
4,713
1,728
9,313
9,313
213,845
7
7
2,184
167
167
5,598
341
341
0
0
596,938
9,828
9,828
6,770
10,230
17,282
31,544
31,544
7,195
7,195
$883,792
17,687
17,687
24,349
24,349
1,275
1,275
$93,806
191
191
635,251
1,500
1,500
729,057
832
832
6,310
2,360
2,360
23,365
6,158
6,158
15,350
10,000
11,963
3,749
11,963
2,152
787,831
2,152
235
235
297
297
954
954
4,818
0
4,818
20,419
20,419
969
3,426
7,979
3,426
79,036
(20)
(4,098)
(20)
340
$3,446
84,226
$3,446
$872,057
$0.60
$0.60
$0.60
$0.60
1,369
1,369
$92,336
334
334
644,382
968
968
736,718
616
616
5,114
2,367
2,367
25,046
5,654
5,654
19,850
10,000
3,517
11,663
11,663
800,245
1,999
1,999
152
152
281
281
2,768
2,768
4,566
4,566
21,429
21,429
0
8,574
8,574
2,006
2,006
966
7,763
72,821
(4,060)
6,057
83,547
$6,568
$6,568
$883,792
$1.53
$1.53
$1.52
$1.52
11
Total liabilities and stockholders’ equity
Earnings per common share:
Earnings per common share:
Basic
Basic
Diluted
Diluted
2013 ANNUAL REPORT
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
FORESIGHT CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(000s omitted except share data)
December 31,
A S S E T S
For the years ended December 31,
2013
2012
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Total cash and cash equivalents
Net income
Interest-bearing deposits in banks - term deposits
Other comprehensive income:
Securities:
Unrealized holding (loss) gains on securities available for sale
Securities held-to-maturity (HTM)
Reclassification adjustments for net securities
Securities available-for-sale (AFS)
gains recognized in income
Non-marketable equity securities, at cost
Loans held for sale
Deferred income tax effect
Loans, net of allowance for loan losses of $14,777 and $14,948,
respectively
Foreclosed assets, net
Premises and equipment, net
Other assets
Total other comprehensive income (loss)
Total comprehensive income
2013
$6,838
(9,574)
(156)
(9,730)
4,011
(5,719)
$1,119
$16,787
911
2012
0
17,698
$3,446
4,963
1,228
1,584
216,065
2,220
1,521
(191)
1,037
(418)
619
$4,065
595,718
3,265
9,746
19,278
Total assets
$872,058
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) advances and other borrowings
Subordinated debentures
Accrued interest payable and other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock (no par value; authorized 500,000 shares;
15,750 shares issued)
Common stock ($.25 par value; authorized 5,000,000 shares;
3,879,357 and 3,867,169 shares issued, respectively)
Additional paid-in capital
Retained earnings
Treasury stock, at cost (209,657 and 207,657 shares, respectively)
Accumulated other comprehensive income
Total stockholders’ equity
$93,806
635,251
729,057
6,310
23,365
15,350
10,000
3,749
787,831
0
969
7,979
79,036
(4,098)
340
84,226
2011
$19,733
2,634
2,137
24,504
$6,568
4,713
7,603
1,728
213,845
(334)
2,184
7,269
5,598
(2,958)
596,938
4,311
6,770
10,230
$10,879
17,282
$883,792
$92,336
644,382
736,718
5,114
25,046
19,850
10,000
3,517
800,245
0
966
7,763
72,821
(4,060)
6,057
83,547
Total liabilities and stockholders’ equity
$872,057
$883,792
12
2013 ANNUAL REPORT
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
FORESIGHT CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(000s omitted except share data)
For the years ended December 31,
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
Additional
Paid-In
Capital
Retained
Earnings
Treasury
Stock
A S S E T S
Preferred Common
$966
Stock
Stock
$15,244
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Balance, January 1, 2011
Total cash and cash equivalents
Net income
Interest-bearing deposits in banks - term deposits
Other comprehensive income
Securities:
Securities held-to-maturity (HTM)
Cash dividends ($.16 per share)
Securities available-for-sale (AFS)
Non-marketable equity securities, at cost
Accretion of preferred stock warrants
Loans held for sale
Loans, net of allowance for loan losses of $14,777 and $14,948,
Cash dividends on preferred stock
respectively
Foreclosed assets, net
Stock-based compensation expense
Premises and equipment, net
Balance, December 31, 2011
Other assets
15,394
150
966
Net income
Total assets
$7,568
$66,179
6,568
(586)
(150)
(818)
98
7,666
71,193
3,446
Other comprehensive income
LIABILITIES AND STOCKHOLDERS' EQUITY
(15,750)
Redemption of preferred stock
Liabilities:
Cash dividends ($.16 per share)
Deposits:
Noninterest-bearing
Accretion of preferred stock warrants
Interest-bearing
Total deposits
Cash dividends on preferred stock
Federal funds purchased
Securities sold under agreements to repurchase
Stock-based compensation expense
Federal Home Loan Bank (FHLB) advances and other borrowings
Subordinated debentures
Balance, December 31, 2012
Accrued interest payable and other liabilities
Net income
Total liabilities
356
966
0
97
7,763
Other comprehensive income (loss)
Stockholders’ equity:
Preferred stock (no par value; authorized 500,000 shares;
Cash dividends ($.17 per share)
15,750 shares issued)
Common stock ($.25 par value; authorized 5,000,000 shares;
Purchase of treasury stock (2,000 shares)
3,879,357 and 3,867,169 shares issued, respectively)
Additional paid-in capital
Stock options exercised
Retained earnings
Stock-based compensation expense
Treasury stock, at cost (209,657 and 207,657 shares, respectively)
Accumulated other comprehensive income
Balance, December 31, 2013
Total stockholders’ equity
$969
$0
3
121
95
$7,979
$79,037
(586)
(356)
(877)
72,820
6,838
(621)
2013
Accumulated
Other
Comprehensive
Income
$16,787
911
0
17,698
($4,060)
$1,128
2012
$19,733
Total
2,634
2,137
24,504
$87,025
6,568
4,713
4,963
1,584
216,065
2,220
1,521
595,718
3,265
9,746
19,278
(4,060)
$872,058
$93,806
635,251
729,057
6,310
23,365
15,350
10,000
3,749
787,831
(4,060)
0
(38)
969
7,979
79,036
(4,098)
340
84,226
($4,098)
4,311
4,311
(586)
0
(818)
98
1,728
213,845
2,184
5,598
596,938
6,770
10,230
17,282
5,439
96,598
$883,792
3,446
619
619
(15,750)
(586)
0
(877)
97
$92,336
644,382
736,718
5,114
25,046
19,850
10,000
3,517
800,245
6,838
6,058
83,547
(5,719)
(5,719)
(621)
0
(38)
124
95
966
7,763
72,821
(4,060)
6,057
83,547
$339
$84,226
Total liabilities and stockholders’ equity
$872,057
$883,792
2013 ANNUAL REPORT
13
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
FORESIGHT CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s omitted except share data)
December 31,
For the years ended December 31,
2012
2013
A S S E T S
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Cash and due from banks
Adjustments to reconcile net earnings to net cash
Interest-bearing deposits in banks
provided by operating activities:
Provision for loan losses
Federal funds sold
Provision for foreclosed asset losses
Total cash and cash equivalents
Depreciation
Net amortization of securities
Interest-bearing deposits in banks - term deposits
Deferred income tax benefit
Securities:
Net gain on the sales and calls of AFS securities
Securities held-to-maturity (HTM)
Net (gain) loss on the sales of foreclosed assets
Securities available-for-sale (AFS)
Stock-based compensation expense
Non-marketable equity securities, at cost
Net change in:
Loans held for sale
Servicing rights
Loans, net of allowance for loan losses of $14,777 and $14,948,
Loans held for sale
respectively
Other assets
Foreclosed assets, net
Accrued expenses and other liabilities
Premises and equipment, net
Net cash provided by operating activities
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-bearing deposits in banks - term deposits
Proceeds from sales of AFS securities
Proceeds from maturities, calls, and paydowns of HTM securities
Proceeds from maturities, calls, and paydowns of AFS securities
Purchases of AFS securities
Purchases of non-marketable equity securities
Loan originations and principal collections, net
Proceeds from sales of foreclosed assets
Purchases of premises and equipment, net
Net cash used in investing activities
Liabilities:
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased
Securities sold under agreements to repurchase
CASH FLOWS FROM FINANCING ACTIVITIES:
Federal Home Loan Bank (FHLB) advances and other borrowings
Net change in deposits
Subordinated debentures
Net change is securities sold under agreements to repurchase
Accrued interest payable and other liabilities
Cash dividends paid
Total liabilities
Net change in federal funds purchased
Proceeds from issuance of subordinated debentures
Stockholders’ equity:
Redemption of preferred stock
Preferred stock (no par value; authorized 500,000 shares;
Stock options excercised
15,750 shares issued)
Purchase of treasury stock
Common stock ($.25 par value; authorized 5,000,000 shares;
Proceeds from lines of credit and FHLB advances and other borrowings
3,879,357 and 3,867,169 shares issued, respectively)
Payments on lines of credit and FHLB advances and other borrowings
Additional paid-in capital
Net cash (used in) provided by financing activities
Retained earnings
Treasury stock, at cost (209,657 and 207,657 shares, respectively)
Accumulated other comprehensive income
Total stockholders’ equity
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Total liabilities and stockholders’ equity
2013
$6,838
$3,446
$16,787
911
0
17,698
4,963
1,584
216,065
2,220
1,521
595,718
3,265
9,746
19,278
4,777
1,158
935
1,303
699
(156)
(2,853)
95
33
4,077
1,284
232
18,422
$872,058
(250)
15,917
190
40,642
(69,702)
(36)
(5,046)
6,688
(451)
(12,048)
(7,661)
(1,681)
(621)
1,196
0
0
124
(38)
32,600
(37,100)
(13,181)
(6,807)
24,504
$93,806
635,251
729,057
6,310
23,365
15,350
10,000
3,749
787,831
0
969
7,979
79,036
(4,098)
340
84,226
13,444
744
862
1,242
(1,642)
(191)
(207)
97
(128)
(3,400)
812
(1,226)
13,853
(3,863)
6,685
359
65,079
(64,034)
(7)
(14,765)
2,057
(977)
(9,466)
(1,350)
(2,652)
(1,463)
1,215
10,000
(15,750)
0
0
17,000
(11,550)
(4,550)
(163)
24,667
$17,697
$872,057
$24,504
2011
2012
$6,568
$19,733
2,634
7,195
2,137
2,410
24,504
799
974
4,713
(473)
(334)
1,728
12
213,845
98
2,184
5,598
8
(1,019)
596,938
305
6,770
400
10,230
16,943
17,282
$883,792
(850)
13,966
606
48,466
(75,388)
(124)
(27,693)
$92,336
1,608
644,382
(471)
736,718
(39,880)
5,114
25,046
19,850
42,629
10,000
1,371
3,517
(1,404)
800,245
1,815
0
0
0
0
0
10,500
966
(25,800)
7,763
29,111
72,821
(4,060)
6,174
6,057
18,493
83,547
$24,667
$883,792
14
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
2013 ANNUAL REPORT
FORESIGHT CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(000s omitted except share data)
For the years ended December 31,
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
A S S E T S
Cash and due from banks
Interest-bearing deposits in banks
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
Federal funds sold
INFORMATION:
Total cash and cash equivalents
Cash paid during the year for:
Interest
Interest-bearing deposits in banks - term deposits
Securities:
Income taxes
Securities held-to-maturity (HTM)
Securities available-for-sale (AFS)
Non-marketable equity securities, at cost
SUPPLEMENTAL SCHEDULE OF NONCASH AND
Loans held for sale
FINANCING ACTIVITIES:
Loans, net of allowance for loan losses of $14,777 and $14,948,
Foreclosed assets acquired in settlement of loans
respectively
Foreclosed assets, net
Premises and equipment, net
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) advances and other borrowings
Subordinated debentures
Accrued interest payable and other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock (no par value; authorized 500,000 shares;
15,750 shares issued)
Common stock ($.25 par value; authorized 5,000,000 shares;
3,879,357 and 3,867,169 shares issued, respectively)
Additional paid-in capital
Retained earnings
Treasury stock, at cost (209,657 and 207,657 shares, respectively)
Accumulated other comprehensive income
Total stockholders’ equity
2013
2012
2012
2013
$16,787
911
0
17,698
2011
$19,733
2,634
2,137
24,504
$6,826
4,963
$8,093
$10,040
4,713
$2,009
$3,367
$1,935
1,584
216,065
2,220
1,521
$1,489
595,718
3,265
9,746
19,278
$2,190
1,728
213,845
2,184
5,598
$2,619
596,938
6,770
10,230
17,282
$872,058
$883,792
$93,806
635,251
729,057
6,310
23,365
15,350
10,000
3,749
787,831
0
969
7,979
79,036
(4,098)
340
84,226
$92,336
644,382
736,718
5,114
25,046
19,850
10,000
3,517
800,245
0
966
7,763
72,821
(4,060)
6,057
83,547
Total liabilities and stockholders’ equity
$872,057
$883,792
2013 ANNUAL REPORT
15
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
FORESIGHT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of Foresight Financial Group, Inc. (Company) and its wholly owned
subsidiaries (Banks) conform to accounting principles generally accepted in the United States of America and
to general practices within the banking industry. The following is a description of the more significant
accounting policies:
(a) Nature of Operations
The Company provides a variety of banking services to individuals and businesses through its facilities in
the Rockford, Freeport, German Valley, Davis, Lena, Winnebago, Pecatonica, Seward, Kankakee, Loves
Park, and Machesney Park, Illinois areas. Its primary deposit products are demand deposits and
certificates of deposit and its primary lending products are agribusiness, commercial, real estate, and
installment loans.
(b) Basis of Consolidation
The consolidated financial statements include the accounts and results of operations of the Company and
its wholly owned subsidiaries, German-American State Bank (German), State Bank of Davis (Davis), State
Bank (Freeport), Northwest Bank of Rockford (Northwest), and Lena State Bank (Lena) (collectively the
“Banks”). All significant intercompany accounts and transactions have been eliminated in consolidation.
(c) Subsequent Events
The Company has evaluated subsequent events for recognition and disclosure through February 28, 2014,
which is the date the financial statements were available to be issued.
(d) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the
reported amounts 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, fair values of securities,
fair values of foreclosed assets, deferred tax assets and liabilities and fair values of financial instruments are
particularly subject to change in the near-term.
(e) Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and
balances due from banks, interest-bearing deposits in banks, and federal funds sold, all of which generally
mature within ninety days. Cash flows from interest-bearing deposits in banks, loans, deposits, federal
funds purchased, and securities sold under agreements to repurchase are reported net.
(f) Interest-bearing Deposits in Banks
Interest-bearing deposits in banks are comprised of liquid non-maturing deposits in banks but also include
some small balances in time deposits in banks with varying maturities. Interest-bearing deposits in banks
are carried at cost.
16
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(g) Securities
(g) Securities
Debt securities that management has the positive intent and ability to hold to maturity are classified as
Debt securities that management has the positive intent and ability to hold to maturity are classified as
held to maturity (HTM) and recorded at amortized cost. Securities not classified as HTM are classified as
held to maturity (HTM) and recorded at amortized cost. Securities not classified as HTM are classified as
available for sale (AFS) and recorded at fair value, with unrealized gains or losses excluded from earnings
available for sale (AFS) and recorded at fair value, with unrealized gains or losses excluded from earnings
and reported in other comprehensive income.
and reported in other comprehensive income.
Purchase premiums and discounts are recognized in interest income using the interest method over the
Purchase premiums and discounts are recognized in interest income using the interest method over the
terms of the securities. Declines in the fair value of HTM and AFS securities below their cost that are
terms of the securities. Declines in the fair value of HTM and AFS securities below their cost that are
deemed to be other than temporary are reflected in earnings as realized losses.
deemed to be other than temporary are reflected in earnings as realized losses.
In estimating other-than-temporary impairment losses, management considers (1) the length of time and
In estimating other-than-temporary impairment losses, management considers (1) the length of time and
the extent to which the fair value has been less than cost, (2) the financial condition and near-term
the extent to which the fair value has been less than cost, (2) the financial condition and near-term
prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer
prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer
for a period of time sufficient to allow for any anticipated recovery in fair value.
for a period of time sufficient to allow for any anticipated recovery in fair value.
Gains and losses on the sale of securities are recorded on the trade date and are determined using the
Gains and losses on the sale of securities are recorded on the trade date and are determined using the
specific-identification method.
specific-identification method.
(h) Non-Marketable Equity Securities
(h) Non-Marketable Equity Securities
.
.
The Banks, as members of the Federal Home Loan Bank (FHLB) system, are required to maintain a
The Banks, as members of the Federal Home Loan Bank (FHLB) system, are required to maintain a
minimum investment in capital stock of the FHLB in an amount equal to the greater of 1% of their
minimum investment in capital stock of the FHLB in an amount equal to the greater of 1% of their
mortgage-related assets or 5% of advances from the FHLB. The Banks may choose to invest in amounts
mortgage-related assets or 5% of advances from the FHLB. The Banks may choose to invest in amounts
greater than the minimum investment. Excess capital stock redemptions are subject to guidelines
greater than the minimum investment. Excess capital stock redemptions are subject to guidelines
established by the FHLB. FHLB stock is reported at cost since no ready market exists and it has no
established by the FHLB. FHLB stock is reported at cost since no ready market exists and it has no
quoted market value. FHLB stock is periodically evaluated for impairment based on the ultimate recovery
quoted market value. FHLB stock is periodically evaluated for impairment based on the ultimate recovery
of par value.
of par value.
(i) Loans Held for Sale
(i) Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or market
Loans originated and intended for sale in the secondary market are carried at the lower of cost or market
in the aggregate.
in the aggregate.
Mortgage loans held for sale are generally sold with mortgage servicing rights retained by the Company.
Mortgage loans held for sale are generally sold with mortgage servicing rights retained by the Company.
The carrying value of mortgage loans sold is reduced by the cost allocated to the associated mortgage
The carrying value of mortgage loans sold is reduced by the cost allocated to the associated mortgage
servicing rights. Gains or losses on sales of mortgage loans are recognized based on the difference
servicing rights. Gains or losses on sales of mortgage loans are recognized based on the difference
between the selling price and the carrying value of the related mortgage loans sold.
between the selling price and the carrying value of the related mortgage loans sold.
(j) Loans and Allowance for Loan Losses
(j) Loans and Allowance for Loan Losses
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or
pay-off are stated at the amount of unpaid principal balances less the allowance for loan losses. Interest
pay-off are stated at the amount of unpaid principal balances less the allowance for loan losses. Interest
income is accrued daily on the outstanding balances.
income is accrued daily on the outstanding balances.
A loan is considered to be delinquent when payments have not been made according to contractual terms,
A loan is considered to be delinquent when payments have not been made according to contractual terms,
typically evidenced by nonpayment of a monthly installment by the due date. The accrual of interest on
typically evidenced by nonpayment of a monthly installment by the due date. The accrual of interest on
loans is discontinued at the time the loan is 90-days delinquent unless the credit is well-secured and in the
loans is discontinued at the time the loan is 90-days delinquent unless the credit is well-secured and in the
process of collection. Credit card loans and other personal loans are typically charged off no later than
process of collection. Credit card loans and other personal loans are typically charged off no later than
180-days delinquent. Generally, loans are placed on non-accrual or charged-off at an earlier date if
180-days delinquent. Generally, loans are placed on non-accrual or charged-off at an earlier date if
collection of principal or interest is considered doubtful.
collection of principal or interest is considered doubtful.
2013 ANNUAL REPORT
17
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(j) Loans and Allowance for Loan Losses (continued)
(j) Loans and Allowance for Loan Losses (continued)
Generally, interest accrued but not collected for loans that are placed on nonaccrual status or charged off
Generally, interest accrued but not collected for loans that are placed on nonaccrual status or charged off
is reversed against interest income. The interest on these loans is accounted for on the cash basis or cost-
is reversed against interest income. The interest on these loans is accounted for on the cash basis or cost-
recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the
recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the
principal and interest amounts contractually due are brought current and future payments are reasonably
principal and interest amounts contractually due are brought current and future payments are reasonably
assured.
assured.
Loan origination fees usually approximate direct loan origination costs and are generally recognized as
Loan origination fees usually approximate direct loan origination costs and are generally recognized as
income upon receipt.
income upon receipt.
The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to
The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to
absorb credit losses relating to specifically identified loans, as well as probable credit losses inherent in the
absorb credit losses relating to specifically identified loans, as well as probable credit losses inherent in the
loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of
loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of
the loan portfolio including the nature of the portfolio, credit concentrations, trends in historical loss
the loan portfolio including the nature of the portfolio, credit concentrations, trends in historical loss
experience, specifically impaired loans, and economic conditions. Because of uncertainties inherent in the
experience, specifically impaired loans, and economic conditions. Because of uncertainties inherent in the
estimation process, management’s estimate of credit losses inherent in the loan portfolio and the related
estimation process, management’s estimate of credit losses inherent in the loan portfolio and the related
allowance may change materially in the near term. The allowance is increased by a provision for loan
allowance may change materially in the near term. The allowance is increased by a provision for loan
losses, which is charged to expense and reduced by charge-offs, net of recoveries.
losses, which is charged to expense and reduced by charge-offs, net of recoveries.
The allowance consists of specific and general components. The specific component relates to loans
The allowance consists of specific and general components. The specific component relates to loans
classified as impaired. For loans classified as impaired, an allowance is established when the discounted
classified as impaired. For loans classified as impaired, an allowance is established when the discounted
cash flows or collateral value of the impaired loan is lower than the carrying value of that loan. The
cash flows or collateral value of the impaired loan is lower than the carrying value of that loan. The
general component covers non-impaired loans and is based on historical-loss experience adjusted for
general component covers non-impaired loans and is based on historical-loss experience adjusted for
qualitative factors. The historical loss experience is determined by portfolio segment and is based on the
qualitative factors. The historical loss experience is determined by portfolio segment and is based on the
actual loss history experienced by the Company. This actual loss experience is supplemented with other
actual loss history experienced by the Company. This actual loss experience is supplemented with other
economic factors based on the risks present for each portfolio segment. These economic factors include
economic factors based on the risks present for each portfolio segment. These economic factors include
consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and
consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and
trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk
trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk
selection and underwriting standards; other changes in lending policies, procedures, and practices;
selection and underwriting standards; other changes in lending policies, procedures, and practices;
experience, ability, and depth of lending management and other relevant staff; national and local economic
experience, ability, and depth of lending management and other relevant staff; national and local economic
trends and conditions; industry conditions; and effects of changes in credit concentrations.
trends and conditions; industry conditions; and effects of changes in credit concentrations.
A loan is considered impaired when it is probable, based on current information and events, the Company
A loan is considered impaired when it is probable, based on current information and events, the Company
will be unable to collect all contractual principal and interest payments due in accordance with the terms of
will be unable to collect all contractual principal and interest payments due in accordance with the terms of
the loan agreement. Loans for which the terms have been modified to provide a concession, and for
the loan agreement. Loans for which the terms have been modified to provide a concession, and for
which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and
which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and
classified as impaired. Factors considered by management in determining impairment include payment
classified as impaired. Factors considered by management in determining impairment include payment
status, collateral value, and the probability of collecting scheduled principal and interest payments when
status, collateral value, and the probability of collecting scheduled principal and interest payments when
due. Impaired loans are measured on an individual basis based on the present value of expected future
due. Impaired loans are measured on an individual basis based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's
cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral less costs to sell if the loan is collateral
observable market price or the fair value of the collateral less costs to sell if the loan is collateral
dependent. The amount of impairment, if any, and subsequent changes are included in the allowance for
dependent. The amount of impairment, if any, and subsequent changes are included in the allowance for
loan losses. Troubled debt restructurings are measured at the present value of estimated future cash flows
loan losses. Troubled debt restructurings are measured at the present value of estimated future cash flows
using the loan’s effective rate at inception, unless collateral dependent, then reported using the fair value of
using the loan’s effective rate at inception, unless collateral dependent, then reported using the fair value of
collateral method, less estimated costs to sell.
collateral method, less estimated costs to sell.
For impaired loans, accrual of interest is discontinued when management believes, after considering
For impaired loans, accrual of interest is discontinued when management believes, after considering
collection efforts and other factors, the borrower’s financial condition is such that the collection of
collection efforts and other factors, the borrower’s financial condition is such that the collection of
interest is doubtful. Cash collections on impaired loans are credited to the loan receivable balance, and no
interest is doubtful. Cash collections on impaired loans are credited to the loan receivable balance, and no
interest income is recognized on those loans until the principal balance has been collected.
interest income is recognized on those loans until the principal balance has been collected.
18
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(k) Loan Commitments
The Banks enter into off-balance-sheet financial instruments consisting of commitments to extend credit
and letters of credit issued to meet customer-financing needs. Loan commitments are recorded when they
are funded. Standby or performance letters of credit are considered financial guarantees in accordance
with Generally Accepted Accounting Standards and are recorded at fair value, if material.
(l) Loan Servicing
Mortgage servicing rights are recognized as separate assets when rights are acquired through a sale of loans
and are reported in other assets. When the originating mortgage loans are sold into the secondary market,
the Company allocates the total cost of the mortgage loans between mortgage servicing rights and the
loans, based on their relative fair values. The cost of originated mortgage-servicing rights is amortized in
proportion to, and over the period of, estimated net servicing revenues. Impairment of mortgage-
servicing rights is assessed based on the fair value of those rights. The amount of impairment is the
amount by which the capitalized mortgage servicing rights exceed their fair value. Fair value is determined
using prices for similar assets with similar characteristics, when available, or based upon discounted cash
flows using market-based assumptions.
Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual
percentage of the outstanding principal and are recorded as income when earned. The amortization of
mortgage servicing rights is offset against loan servicing fee income.
(m) Mortgage-Banking Derivatives
Commitments to fund mortgage loans (interest-rate locks) to be sold into the secondary market and
mandatory delivery forward commitments for the future delivery of these mortgage loans are to be
accounted for as derivatives not qualifying for hedge accounting. The fair values of these mortgage
derivatives are to be estimated based on the net future cash flows related to the associated servicing of the
loans and on changes in mortgage interest rates from the date of the commitments. Changes in fair values
on these derivatives are to be included in net gains on sales of loans. The Company has deemed the effect
of these derivatives to be immaterial to the consolidated financial statements and, accordingly, has elected
not to record fair values associated with these derivatives.
(n) Foreclosed Assets
Assets acquired through or instead of loan foreclosure are initially recorded at fair value less estimated cost
of disposal when acquired. Subsequent to foreclosure, valuations are periodically performed by
management and the assets are carried at the lower of carrying amount or fair value less cost to sell.
Revenues and expenses from operations and changes in the valuation allowance are included in net
expenses from foreclosed assets.
2013 ANNUAL REPORT
19
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(o) Premises and Equipment
Premises and equipment are carried at cost less accumulated depreciation, based on the estimated useful
lives of the assets. Depreciation is generally computed on the straight-line method over estimated useful
lives ranging from 3 to 40 years.
(p) Bank-Owned Life Insurance
The Bank has purchased life insurance policies on certain key employees. Bank-owned life insurance is
recorded at its cash surrender value, or the amount that can be realized.
(q) Significant Group Concentrations of Credit Risk
Most of the Company’s activities are with customers located in the area and communities noted above.
Note 3 details the types of securities in which the Company invests. Note 4 details the types of lending in
which the Company engages. The Company does not have any significant concentrations with any one
industry or customer.
(r) Income Taxes
Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method.
Under this method, the net deferred tax asset or liability is determined based on the tax effects of the
temporary differences between the book and tax bases of the various balance sheet assets and liabilities
and gives current recognition to changes in tax rates and laws. The Company files consolidated Federal
and State income tax returns.
The Company may also recognize a liability for unrecognized tax benefits from uncertain tax positions.
Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken
in a tax return and the benefit recognized and measured in the financial statements. Interest and penalties
related to unrecognized tax benefits are classified as income taxes, if applicable. No liabilities for
unrecognized tax benefits from uncertain tax positions have been recorded.
(s) Comprehensive Income
Accounting principles generally require the Company to include in net income recognized revenue,
expenses, gains and losses. Certain changes in assets and liabilities, such as unrealized gains and losses on
available-for-sale securities, are reported as a separate component of the equity section of the balance
sheet, net of taxes. Such items, along with net income, are components of comprehensive income.
20
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(t) Earnings Per Share
Basic earnings per share (EPS) represent income available to common stockholders divided by the
weighted-average number of common shares outstanding during the period. Diluted EPS reflects
additional common shares that would have been outstanding if dilutive potential common shares had been
issued, as well as any adjustment to income that would result from the assumed issuance. Potential
common shares that may be issued by the Company relate solely to outstanding stock options and are
determined using the treasury stock method.
(u) Loss Contingencies
Loss contingencies, including claims and legal actions arising from time to time in the ordinary course of
business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss
can be reasonably estimated. Management does not believe there now are such matters that could have a
material effect on the consolidated financial statements.
(v) Transfers of Financial Assets
Transfers of financial assets are accounted for as sales 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 transferred assets, and (3) the
Company does not maintain effective control over the transferred assets through an agreement to
repurchase them before their maturity.
(w) Trust Assets
Assets of the trust department of State Bank, other than trust cash on deposit at the Bank, are not
included in these financial statements because they are not assets of the Company.
(x) Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase liabilities represent amounts advanced by various
customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit
insurance.
(y) Stock Compensation Plans
The Company records the cost of stock-based employee compensation using the fair-value method.
Compensation expense for share-based awards is recorded over the vesting period at the fair value of the
award at the time of grant. The Company has historically assumed no projected forfeitures on its stock
based compensation, since forfeitures have not been significant.
(z) Reclassifications
Certain amounts in the 2011 and 2012 consolidated financial statements have been reclassified to conform
to the 2013 presentation.
2013 ANNUAL REPORT
21
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(aa) Newly Issued Not Yet Effective Accounting Standards
In January 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans
upon Foreclosure. The primary purpose of this new guidance is to clarify, for residential mortgage loans,
when an in substance repossession or foreclosure occurs, and a creditor is considered to have received
physical possession of residential real estate property collateralizing a residential mortgage loan. This new
accounting standard is effective for financial statements issued for annual periods beginning after
December 15, 2014. The Company does not believe this will have a significant impact on its financial
statements.
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income. When adopted, this guidance will require the Company to provide information
about the amounts reclassified out of accumulated other comprehensive income by component, including
the respective line items of net income significantly affected by those reclassifications. This new
accounting standard is effective for reporting periods beginning after December 15, 2013. The adoption
of this standard will likely require additional disclosures regarding amounts reclassified out of accumulated
other comprehensive income.
In January 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2014-02, Accounting for Goodwill. This guidance will allow the Company to elect an
accounting alternative to amortize goodwill on a straight-line basis over 10 years, or less than 10 years if
another useful life is more appropriate. This new accounting standard is effective for financial statements
issued for annual periods beginning after December 15, 2014. The Company is still evaluating whether it
will elect this accounting alternative to goodwill and, if so, the impact it will have on its financial
statements.
(2) Cash and Due From Banks
The Banks are required to maintain reserve balances, in cash or on deposit with the Federal Reserve
Bank, based upon a percentage of deposits. The total required reserve balances as of December 31, 2013
and 2012 was approximately $899 and $435, respectively.
In the normal course of business, the Company maintains cash and due from bank balances in accounts
with correspondent banks. Balances in these accounts may exceed the Federal Insurance Deposit
Corporation’s insured limit of $250,000.
22
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(3) Securities
The following tables reflect the amortized costs and approximate fair values of securities at December 31:
Held-to-Maturity
2013
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
State and municipal
$1,584
$41
($22)
$1,603
Held-to-Maturity
2012
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
State and municipal
$1,728
$108
$0
$1,836
Available-for-Sale
2013
U.S. Government sponsored entities
State and municipal
Mortgage-backed – residential
Available-for-Sale
2012
U.S. Government sponsored entities
State and municipal
Mortgage-backed - residential
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$45,565
95,008
74,924
$239
3,169
1,329
($2,188)
(952)
(1,029)
Fair
Value
$43,616
97,225
75,224
$215,497
$4,737
($4,169)
$216,065
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
$32,916
95,497
75,289
$728
7,277
2,476
($97)
(143)
(98)
Fair
Value
$33,547
102,631
77,667
$203,702
$10,481
($338)
$213,845
For the years ended December 31, 2013, 2012 and 2011, proceeds from sales of available-for-sale securities
amounted to $15,917, $6,685 and $13,996, respectively. Gross realized gains and losses from the sales and
calls of available-for-sale securities for the years ended December 31 are as follows:
Realized gains
Realized losses
2013
$361
($205)
2012
2011
$191
$0
$368
($34)
Securities with carrying amounts of approximately $91,924 and $99,121 at December 31, 2013 and 2012,
respectively, were pledged to secure public deposits and for other purposes as required or permitted by law.
The amortized costs and fair values of securities at December 31, 2013 are shown below by contractual
maturities, except for U.S. agencies which are shown by contractual maturities or their expected call dates if the
call dates are considered likely to occur based on present market conditions. Expected maturities may differ
from contractual maturities on mortgage-backed securities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
2013 ANNUAL REPORT
23
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(3) Securities (continued)
Held-to-Maturity
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
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
Mortgage-backed - residential
Amortized
Cost
$235
335
215
799
Fair
Value
$235
355
226
787
$1,584
$1,603
Amortized
Cost
Fair
Value
$4,651
23,257
51,179
61,486
140,573
74,924
$4,690
23,874
50,949
61,328
140,841
75,224
$215,497
$216,065
The following tables show the fair values and unrealized losses aggregated by investment category and length
of time that individual securities have been in a continuous unrealized loss position, at December 31, 2013 and
2012:
2013
Held-to-Maturity
Less than 12 Months
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
12 Months or More
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
State and municipal
Total temporarily impaired
$429
$429
$22
$22
2
2
$0
$0
$0
$0
0
0
2013
Available-for-Sale
Less than 12 Months
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
12 Months or More
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
U.S. Government sponsored
entities
State and municipal
Mortgage-backed - residential
$30,520
14,905
37,632
$1,612
716
1,001
79
56
65
$4,523
1,189
1,731
Total temporarily impaired
$83,057
$3,329
200
$7,443
$577
236
27
$840
16
4
2
22
There were no held-to-maturity securities in an unrealized loss position at December 31, 2012.
24
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(3)
Securities (continued)
2012
Available-for-Sale
Less than 12 Months
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
12 Months or More
Gross
Unrealized
Loss
No.
of
Securities
Fair Value
U.S. Government sponsored
entities
State and municipal
Mortgage-backed - residential
$11,601
1,995
7,153
$97
33
98
Total temporarily impaired
$20,749
$228
37
6
11
54
$0
246
0
$0
110
0
$246
$110
0
1
0
1
Unrealized losses on securities have not been recognized into income because the bonds are of high credit
quality, management has the intent and ability to hold for the foreseeable future and the decline in fair value is
largely due to market interest rate fluctuations and current bond markets. The fair value is expected to recover
as the bonds approach their maturity dates and/or market rates. The unrealized losses on the remaining
securities have not been recognized into income because the bonds are of high credit quality and management
has the intent and ability to hold for the foreseeable future.
(4) Loans
The following table presents total loans at December 31 by portfolio segment and class of loan:
Real estate:
Commercial real estate
Agricultural real estate
Residential real estate
Commercial:
Commercial and industrial
Agricultural production
Consumer and other
Allowance for loan losses
2013
2012
$182,993
79,076
109,209
158,945
68,124
12,148
610,495
(14,777)
$180,822
71,715
110,903
175,945
59,669
12,832
611,886
(14,948)
$595,718
$596,938
2013 ANNUAL REPORT
25
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
Detailed analysis of the allowance for loan losses by portfolio segments at December 31 are as follows:
Balance at beginning of year
Provision charged to operations, net
Recoveries on loans previously charged-off
Less loans charged-off
Balance at end of year
Real Estate
Commercial
Consumer
Total
2013
$10,290
3,386
117
13,793
(2,975)
$4,547
1,346
146
6,039
(2,181)
$111
45
16
172
(71)
$14,948
4,777
279
20,004
(5,227)
$10,818
$3,858
$101
$14,777
Allowance for loan losses:
Individually evaluated for impairment
Collectively evaluated for impairment
$5,205
5,613
$863
2,995
$15
86
$6,083
8,694
Totals
$10,818
$3,858
$101
$14,777
Balance at beginning of year
Provision charged to operations, net
Recoveries on loans previously charged-off
Less loans charged-off
Balance at end of year
Allowance for loan losses:
Individually evaluated for impairment
Collectively evaluated for impairment
Totals
Balance at beginning of year
Provision charged to operations, net
Recoveries on loans previously charged-off
Less loans charged-off
Balance at end of year
Allowance for loan losses:
Individually evaluated for impairment
Collectively evaluated for impairment
Totals
Real Estate
Commercial
Consumer
Total
2012
$7,216
12,110
108
19,434
(9,144)
$3,836
1,319
338
5,493
(946)
$121
15
51
187
(76)
$11,173
13,444
497
25,114
(10,166)
$10,290
$4,547
$111
$14,948
$4,776
5,514
$10,290
$1,518
3,029
$4,547
$22
89
$6,316
8,632
$111
$14,948
Real Estate
Commercial
Consumer
Total
2011
$7,331
5,888
124
13,343
(6,127)
$4,594
1,376
97
6,067
(2,231)
$240
(69)
65
236
(115)
$12,165
7,195
286
19,646
(8,473)
$7,216
$3,836
$121
$11,173
$2,934
4,282
$7,216
$812
3,024
$3,836
$8
113
$3,754
7,419
$121
$11,173
26
2013 ANNUAL REPORT
FORESIGHT
(4) Loans (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
Detailed analysis of loans evaluated for impairment by portfolio segment for the year ended December 31
follows:
Detailed analysis of loans evaluated for impairment by portfolio segment for the year ended December 31
follows:
2013
Loans:
Individually evaluated for impairment
Loans:
Collectively evaluated for impairment
Individually evaluated for impairment
Collectively evaluated for impairment
Totals
Totals
Loans:
Individually evaluated for impairment
Loans:
Collectively evaluated for impairment
Individually evaluated for impairment
Collectively evaluated for impairment
Totals
Real Estate
Real Estate
$27,883
343,395
$27,883
343,395
$371,278
$371,278
Real Estate
Real Estate
$21,118
342,322
$21,118
342,322
$363,440
Commercial
2013
Commercial
$5,440
221,629
$5,440
221,629
$227,069
Consumer
Consumer
$119
12,029
$119
12,029
$12,148
Total
Total
$33,442
577,053
$33,442
577,053
$610,495
$227,069
2012
Commercial
2012
Commercial
$6,847
228,767
$6,847
228,767
$235,614
$12,148
$610,495
Consumer
Consumer
$196
12,636
$196
12,636
$12,832
Total
Total
$28,161
583,725
$28,161
583,725
$611,886
Totals
$363,440
$235,614
$12,832
$611,886
Detailed information regarding impaired loans by class of loan as of December 31 follows:
Detailed information regarding impaired loans by class of loan as of December 31 follows:
2013
Recorded
Investment
Recorded
Investment
Principal
Balance
Principal
Balance
2013
Related
Allowance
Related
Allowance
Average
Investment
Average
Investment
Interest
Recognized
Interest
Recognized
Loans with no related
allowance for loan losses:
Loans with no related
Real estate:
allowance for loan losses:
Commercial real estate
Real estate:
Residential real estate
Commercial real estate
Agricultural real estate
Residential real estate
Commercial
Agricultural real estate
Commercial & industrial
Commercial
Agricultural production
Commercial & industrial
Consumer and other
Agricultural production
Consumer and other
Totals
Totals
Loans with an allowance
for loan losses:
Loans with an allowance
Real estate:
for loan losses:
Commercial real estate
Real estate:
Residential real estate
Commercial real estate
Agricultural real estate
Residential real estate
Commercial
Agricultural real estate
Commercial & industrial
Commercial
Agricultural production
Commercial & industrial
Consumer and other
Agricultural production
Consumer and other
Totals
$12,439
2,566
$12,439
662
2,566
662
3,815
0
3,815
89
0
89
19,571
$14,304
3,420
$14,304
662
3,420
662
3,985
0
3,985
90
0
90
22,461
19,571
22,461
5,897
6,319
5,897
0
6,319
0
1,578
47
1,578
30
47
30
13,871
5,904
6,529
5,904
0
6,529
0
1,580
47
1,580
30
47
30
14,090
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2,897
2,599
2,897
0
2,599
0
546
26
546
15
26
15
6,083
$12,904
2,834
$12,904
659
2,834
659
3,915
0
3,915
112
0
112
20,424
20,424
5,895
6,425
5,895
0
6,425
0
1,696
50
1,696
33
50
33
14,099
14,099
$34,523
$34,523
$586
75
$586
31
75
31
93
0
93
6
0
6
791
791
329
185
329
0
185
0
75
0
75
2
0
2
591
591
$1,382
$1,382
27
Totals
Grand Totals
Grand Totals
2013 ANNUAL REPORT
13,871
$33,442
14,090
$36,551
6,083
$6,083
$33,442
$36,551
$6,083
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
Loans with no related
allowance for loan losses:
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
Total
Loans with an allowance
for loan losses:
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
Total
Grand Total
Recorded
Investment
Principal
Balance
2012
Related
Allowance
Average
Investment
Interest
Recognized
$1,491
3,826
167
4,092
0
159
9,735
9,175
6,459
0
2,401
354
37
$1,602
5,062
167
4,241
0
220
11,292
9,698
7,340
0
3,962
358
38
18,426
21,396
N/A
N/A
N/A
N/A
N/A
N/A
2,342
2,434
0
1,186
332
22
6,316
$1,554
4,376
174
4,756
0
201
11,061
9,257
6,673
0
2,505
416
40
18,891
$54
140
0
215
0
10
419
334
225
0
92
0
2
653
$28,161
$32,688
$6,316
$29,951
$1,072
28
2013 ANNUAL REPORT
FORESIGHT
(4) Loans (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
Recorded
Investment
Principal
Balance
2011
Related
Allowance
Average
Investment
Interest
Recognized
Loans with no related
allowance for loan losses:
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
$9,557
7,543
295
4,037
0
130
$10,163
8,535
295
5,039
0
130
Total
21,562
24,162
Loans with an allowance
for loan losses:
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
Total
Grand Total
3,402
7,459
0
998
363
60
3,448
8,072
0
1,015
363
99
N/A
N/A
N/A
N/A
N/A
N/A
714
2,220
0
472
340
8
$6,965
6,086
215
4,086
0
131
17,483
2,489
6,211
0
771
267
62
$227
227
0
176
0
9
639
149
339
0
54
0
2
544
12,282
12,997
3,754
9,800
$33,844
$37,159
$3,754
$27,283
$1,183
The Company regularly evaluates various attributes of loans to determine the appropriateness of the allowance
for loan losses. The Company generally monitors credit quality indicators for all loans using the following
internally prepared ratings:
'Pass' ratings are assigned to loans with adequate collateral and debt service ability such that collectability of the
contractual loan payments is highly probable.
'Special Mention' ratings are assigned to loans where management has some concern that the collateral or debt
service ability may not be adequate, though the collectability of the contractual loan payments is still probable.
'Substandard' ratings are assigned to loans that do not have adequate collateral and/or debt service ability such
that collectability of the contractual loan payments is no longer probable.
'Doubtful' ratings are assigned to loans that do not have adequate collateral and/or debt service ability, and
collectability of the contractual loan payments is unlikely.
2013 ANNUAL REPORT
29
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
Information regarding the credit quality indicators most closely monitored by class of loan at December 31
follows:
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial:
Commercial & industrial
Agricultural production
Consumer and other
Pass
Special
Mention
Substandard Doubtful
Totals
2013
$161,622
95,867
77,733
151,405
67,979
12,003
$3,503
5,956
681
4,561
98
27
$17,868
7,386
662
2,662
118
$317
47
$182,993
109,209
79,076
158,945
68,124
12,148
Total
$566,609
$14,826
$28,696
$364
$610,495
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial:
Commercial & industrial
Agricultural production
Consumer and other
Pass
Special
Mention
Substandard Doubtful
Totals
2012
$161,858
92,191
71,064
166,925
59,306
12,591
$12,720
12,455
484
3,458
9
54
$6,244
6,209
167
5,561
301
187
$48
54
$180,822
110,903
71,715
175,944
59,670
12,832
Total
$563,935
$29,180
$18,669
$102
$611,886
Loan aging information by class of loan at December 31 follows:
As of December 31, 2013
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
Loans Past Due
30-89 Days
Loans Past Due
90+ Days
Total
Past Due
$3,552
3,596
461
18
211
$2,044
4,493
221
560
8
$5,596
8,089
221
1,021
18
219
Total
$7,838
$7,326
$15,164
30
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
As of December 31, 2013
Total Past
Due
Total
Current
Total
Loans
90+ Days
Due and
Accruing Interest
Total
Non-accrual
Loans
Real Estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial:
Commercial & industrial
Agricultural production
Consumer and other
$5,596
8,089
221
1,021
18
219
$177,397
101,323
78,855
$182,993
109,412
79,076
157,924
68,305
11,929
158,945
68,323
12,148
Total
$15,164
$595,733
$610,897
$419
168
120
6
$713
$4,492
5,831
53
1,373
47
4
$11,800
As of December 31, 2012
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Consumer and other
Total
As of December 31, 2012
Real Estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial:
Commercial & industrial
Agricultural production
Consumer and other
Loans Past Due
30-89 Days
Loans Past Due
90+ Days
Total
Past Due
$1,203
1,424
1,599
57
$4,283
$1,715
2,641
2,377
301
40
$7,074
$2,918
4,065
3,976
301
97
$11,357
Total Past
Due
Total
Current
Total
Loans
90+ Days
Due and
Accruing Interest
Total
Non-accrual
Loans
$2,918
4,065
3,976
301
97
$169,709
115,053
71,715
$172,627
119,118
71,715
171,960
59,368
12,724
175,936
59,669
12,821
$292
103
12
11
$2,428
4,402
167
2,432
355
64
$9,848
Total
$11,357
$600,529
$611,886
$418
When, for economic or legal reasons related the borrower's financial difficulties, the Company grants a
concession to the borrower that the Company would not otherwise consider, the modified loan is classified as
a troubled debt restructuring. Loan modifications may consist of forgiveness of interest and/or principal, a
reduction of the interest rate, interest only payments for a period of time, and/or extending amortization
terms. All troubled debt restructurings are classified as impaired loans.
2013 ANNUAL REPORT
31
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(000s omitted except share data)
(4) Loans (continued)
(4) Loans (continued)
(4) Loans (continued)
(4) Loans (continued)
The following table presents information regarding modifications of loans that are classified as troubled debt
The following table presents information regarding modifications of loans that are classified as troubled debt
restructurings by class of loan that occurred during the years ended December 31:
The following table presents information regarding modifications of loans that are classified as troubled debt
restructurings by class of loan that occurred during the years ended December 31:
The following table presents information regarding modifications of loans that are classified as troubled debt
restructurings by class of loan that occurred during the years ended December 31:
2013
restructurings by class of loan that occurred during the years ended December 31:
2013
Pre-Modification
2013
Pre-Modification
Investment
2013
Pre-Modification
Investment
Pre-Modification
Investment
Investment
$8,832
$8,832
$8,832
$8,832
Post-Modification
Post-Modification
Investment
Post-Modification
Investment
Post-Modification
Investment
Investment
$9,207
$9,207
$9,207
$9,207
Real Estate:
Real Estate:
Commercial real estate
Real Estate:
Commercial real estate
Residential real estate
Real Estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Commercial
Commercial & industrial
Agricultural production
Consumer and Other
Commercial & industrial
Agricultural production
Consumer and Other
Agricultural production
Consumer and Other
Total
Consumer and Other
Total
Total
Total
491
491
491
491
491
491
491
491
$9,323
$9,323
$9,323
2012
$9,323
2012
Pre-Modification
2012
Pre-Modification
Investment
2012
Pre-Modification
Investment
Pre-Modification
Investment
Investment
$3,605
$3,605
261
$3,605
261
$3,605
261
261
$9,698
$9,698
$9,698
$9,698
Post-Modification
Post-Modification
Investment
Post-Modification
Investment
Post-Modification
Investment
Investment
$3,605
$3,605
167
$3,605
167
$3,605
167
167
Real Estate:
Real Estate:
Commercial real estate
Real Estate:
Commercial real estate
Residential real estate
Real Estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial real estate
Residential real estate
Agricultural real estate
Commercial
Residential real estate
Agricultural real estate
Commercial
Commercial & industrial
Agricultural real estate
Commercial
Commercial & industrial
Agricultural production
Commercial
Commercial & industrial
Agricultural production
Consumer and Other
Commercial & industrial
Agricultural production
Consumer and Other
Agricultural production
Consumer and Other
Total
Consumer and Other
Total
Total
The following table summarizes troubled debt restructurings that defaulted at December 31, within 12 months
Total
The following table summarizes troubled debt restructurings that defaulted at December 31, within 12 months
of their modification date:
The following table summarizes troubled debt restructurings that defaulted at December 31, within 12 months
of their modification date:
The following table summarizes troubled debt restructurings that defaulted at December 31, within 12 months
of their modification date:
of their modification date:
$3,866
$3,866
$3,866
$3,866
$3,772
$3,772
$3,772
$3,772
As of December 31, 2013
As of December 31, 2013
As of December 31, 2013
As of December 31, 2013
Number of
Number of
Loans
Number of
Loans
Number of
Loans
Loans
8
8
0
8
0
0
8
0
0
0
0
4
0
4
0
4
0
0
4
0
0
0
0
12
0
12
12
12
Number of
Number of
Loans
Number of
Loans
Number of
Loans
Loans
5
5
2
5
2
0
5
2
0
2
0
0
0
0
0
0
0
0
0
0
0
0
0
7
0
7
7
7
Real Estate:
Real Estate:
Commercial real estate
Real Estate:
Commercial real estate
Residential real estate
Real Estate:
Commercial real estate
Residential real estate
Commercial real estate
Residential real estate
Total
Residential real estate
Total
Total
Total
Real Estate:
Real Estate:
Commercial real estate
Real Estate:
Commercial real estate
Residential real estate
Real Estate:
Commercial real estate
Residential real estate
Commercial real estate
Residential real estate
Total
Residential real estate
Total
Total
Total
32
Number of
Number of
Loans
Number of
Loans
Number of
Loans
Loans
2
2
2
2
2
2
2
4
2
4
4
4
Number of
Number of
Loans
Number of
Loans
Number of
Loans
Loans
3
3
6
3
6
3
6
9
6
9
9
9
Recorded
Recorded
Investment
Recorded
Investment
Recorded
Investment
Investment
$738
$738
776
$738
776
$738
776
$1,514
776
$1,514
$1,514
$1,514
Recorded
Recorded
Investment
Recorded
Investment
Recorded
Investment
Investment
$3,886
$3,886
2,037
$3,886
2,037
$3,886
2,037
$5,924
2,037
$5,924
$5,924
$5,924
2013 ANNUAL REPORT
As of December 31, 2012
As of December 31, 2012
As of December 31, 2012
As of December 31, 2012
FORESIGHT
(5) Loan Servicing
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(5) Loan Servicing
Loans serviced for others are not included in the accompanying consolidated balance sheets. Mortgage loans
serviced for others as of December 31, 2013 and 2012, were approximately $311,845 and $277,333,
Loans serviced for others are not included in the accompanying consolidated balance sheets. Mortgage loans
respectively. Custodial escrow balances maintained in conjunction with serviced loans were approximately
serviced for others as of December 31, 2013 and 2012, were approximately $311,845 and $277,333,
$2,861 and $2,536 at December 31, 2013 and 2012, respectively.
respectively. Custodial escrow balances maintained in conjunction with serviced loans were approximately
$2,861 and $2,536 at December 31, 2013 and 2012, respectively.
The following summarizes the activity pertaining to mortgage servicing rights for the years ended December
31:
The following summarizes the activity pertaining to mortgage servicing rights for the years ended December
31:
Mortgage servicing rights:
Balance at beginning of year
Mortgage servicing rights:
Mortgage servicing rights capitalized
Balance at beginning of year
Mortgage servicing rights amortized
Mortgage servicing rights capitalized
Mortgage servicing rights amortized
Balance at end of year
2012
$1,521
940
$1,521
(813)
940
(813)
$1,648
2011
$1,529
643
$1,529
(651)
643
(651)
$1,521
2013
$1,648
643
$1,648
(676)
643
(676)
$1,615
2012
2011
2013
Balance at end of year
The approximate fair values of the mortgage servicing rights were deemed to be greater than their respective
carrying values as of December 31, 2013, 2012, and 2011 and the differences between the fair values and
The approximate fair values of the mortgage servicing rights were deemed to be greater than their respective
carrying values were considered immaterial.
carrying values as of December 31, 2013, 2012, and 2011 and the differences between the fair values and
carrying values were considered immaterial.
(6) Mortgage Banking Loan Commitments
$1,648
$1,521
$1,615
(6) Mortgage Banking Loan Commitments
The Company enters into commitments to fund residential mortgage loans (interest rate locks) at specified
times in the future, with the intention that these loans will be subsequently sold to third-party investors. A
The Company enters into commitments to fund residential mortgage loans (interest rate locks) at specified
mortgage loan commitment binds the Company to lend funds to a potential borrower at a specified interest
times in the future, with the intention that these loans will be subsequently sold to third-party investors. A
rate and within a specified period of time, generally up to 60-days after inception of the rate lock. It is the
mortgage loan commitment binds the Company to lend funds to a potential borrower at a specified interest
Company’s practice to enter into mandatory delivery forward commitments for the future delivery of
rate and within a specified period of time, generally up to 60-days after inception of the rate lock. It is the
residential mortgage loans to third-party investors when an interest rate lock commitment is granted. These
Company’s practice to enter into mandatory delivery forward commitments for the future delivery of
mandatory delivery forward commitments bind the Company to deliver a residential mortgage loan to a third-
residential mortgage loans to third-party investors when an interest rate lock commitment is granted. These
party investor even if the underlying loan never funds. As of December 31, 2013 and 2012, the Company had
mandatory delivery forward commitments bind the Company to deliver a residential mortgage loan to a third-
approximately $538 and $3,537 in interest rate lock commitments outstanding. As of December 31, 2013 and
party investor even if the underlying loan never funds. As of December 31, 2013 and 2012, the Company had
2012, the Company had approximately $2,293 and $11,440 in mandatory delivery forward commitments
approximately $538 and $3,537 in interest rate lock commitments outstanding. As of December 31, 2013 and
outstanding. These outstanding mortgage loan commitments are considered to be derivatives. The
2012, the Company had approximately $2,293 and $11,440 in mandatory delivery forward commitments
approximate fair values associated with these derivatives were considered to be immaterial as of December 31,
outstanding. These outstanding mortgage loan commitments are considered to be derivatives. The
2013 and 2012.
approximate fair values associated with these derivatives were considered to be immaterial as of December 31,
2013 and 2012.
(7) Allowance for Losses on Foreclosed Assets
(7) Allowance for Losses on Foreclosed Assets
Foreclosed assets are presented in the balance sheets net of an allowance for losses. Activity in the allowance
for losses on foreclosed assets for the years ended December 31, was as follows:
Foreclosed assets are presented in the balance sheets net of an allowance for losses. Activity in the allowance
for losses on foreclosed assets for the years ended December 31, was as follows:
2011
2012
2013
Balance at beginning of year
Provision for losses
Balance at beginning of year
Write-downs
Provision for losses
Reductions from sales
Write-downs
Recoveries
Reductions from sales
Recoveries
Balance at end of year
Balance at end of year
2013
$3,711
807
$3,711
0
807
(2,626)
0
0
(2,626)
0
$1,892
$1,892
2012
$3,320
744
$3,320
0
744
(353)
0
0
(353)
0
$3,711
$3,711
2011
$910
2,410
$910
0
2,410
0
0
0
0
0
$3,320
$3,320
2013 ANNUAL REPORT
33
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(8) Premises and Equipment
The components of premises and equipment at December 31 are as follows:
Land
Buildings and leasehold improvements
Furniture, fixtures, and equipment
Less accumulated depreciation
2013
2012
$2,065
11,146
9,967
23,178
13,432
$9,746
$2,065
10,978
9,686
22,729
12,499
$10,230
Depreciation expense for the years ended December 31, 2013, 2012 and 2011 amounted to $935, $862 and
$799, respectively.
(9) Other Assets
The components of other assets at December 31 are as follows:
Cash surrender value of bank-owned life insurance
Accrued interest receivable
Mortgage servicing rights, net of accumulated amortization
Net deferred tax assets
Federal Deposit Insurance Corporation assessments
Other
2013
2012
$5,282
4,793
1,615
5,480
0
2,107
$5,110
4,935
1,648
2,321
1,334
1,934
$19,277
$17,282
(10) Time Deposits
The aggregate amount of time deposits with minimum a denomination of $100 was approximately $124,518
and $132,364 at December 31, 2013 and 2012, respectively.
At December 31, 2013, the scheduled maturities of time deposits are as follows:
2014
2015
2016
2017
2018 and thereafter
$149,507
83,731
57,831
35,380
23,027
$349,476
34
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(11) Dividends
State banking regulations restrict the amount of dividends that a bank may pay to its stockholders. The
regulations provide that dividends are limited to the balance of undivided profits, subject to capital-adequacy
requirements, plus an additional amount equal to the bank’s current-year earnings through the date of any
declaration of dividends. Additionally, dividends were limited under the terms of the TARP agreement, as
described in Note 23, in 2011 and 2012.
(12) Employee Benefit Plans
The Company and the Banks maintain a 401(k) plan with profit sharing features covering substantially all
employees under which they match 50% of eligible employee contributions to a maximum employee
contribution of 6% of annual salary. Total 401(k) expense was approximately $260, $215, and $247, for 2013,
2012, and 2011, respectively. Each plan participant elects how the employer contributions are invested.
Participants choose between purchasing the Company’s common stock or investing in the plan’s investment
funds.
In addition, Northwest, German-American, and Lena maintain salary-continuation plans whereby certain
officers are provided with guaranteed annual payments for periods ranging from ten to thirteen years after
reaching a retirement age of 65. The salary-continuation plans are funded by whole life insurance policies
purchased by the Banks which had an aggregate death benefit of approximately $9,148 and $9,099 as of
December 31, 2013 and 2012, respectively (see Note 9 for cash surrender value of bank-owned life insurance).
The Banks accrue for the total amounts to be paid over the employee’s active service life. The accrued
benefits were $854, $875, and $894 at December 31, 2013, 2012, and 2011, respectively. Salary-continuation
expenses were $42, $41, and $51 in 2013, 2012, and 2011, respectively.
(13) Income Taxes
The components of income tax expense (benefit) for the years ended December 31 are as follows:
Current – federal
Current – state
Deferred – federal
Current – state
2013
$1,035
626
1,661
524
175
699
2012
2011
$992
630
1,622
(1,270)
(372)
(1,642)
$1,623
857
2,480
(144)
(330)
(474)
Total income tax expense
$2,360
($20)
$2,006
2013 ANNUAL REPORT
35
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(13) Income Taxes (continued)
A reconciliation of the differences between the statutory federal income tax rate and the effective
federal income tax rate with the resulting dollar amounts is shown in the following table:
2013
2012
2011
% of
Pretax
Earnings
% of
Pretax
Earnings
Amount
% of
Pretax
Earnings
Amount
Amount
$3,127
34.0%
$1,165
34.0%
$2,915
34.0%
(1,339)
(59)
(14.6%)
(0.6%)
(1,413)
(65)
(41.2%)
(1.9%)
(1,452)
(63)
(16.9%)
(0.7%)
529
102
5.8%
1.1%
170
123
4.9%
3.6%
348
258
4.1%
3.0%
Statutory federal tax
Increase (decrease) in taxes
resulting from:
Tax-exempt interest
Bank-owned life insurance
State taxes, net of
federal benefit
Other
Effective tax rates
$2,360
25.7%
($20)
(.6%)
$2,006
23.5%
The tax effects of existing temporary differences that give rise to significant portions of the deferred tax
liabilities and deferred tax assets at December 31, 2013 and 2012 are summarized as follows:
Deferred tax assets:
Allowance for loan losses
Allowance for losses on foreclosed assets and non-accrual interest
Deferred compensation and other
Total deferred tax assets
Deferred tax liabilities:
FHLB stock dividend
Security accretion
Available-for-sale securities
Depreciation
Mortgage servicing rights and other
Total deferred tax liabilities
Net deferred tax assets
2013
2012
$5,763
660
858
7,281
129
33
227
800
612
1,801
$5,480
$5,825
1,516
723
8,064
129
47
4,085
848
634
5,743
$2,321
No valuation allowance has been recorded since deferred tax assets are expected to be realized.
With few exceptions, the Company is no longer subject to federal or state examinations by tax authorities for
years before 2011.
36
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(14) Transactions with Related Parties
The Company and subsidiary banks have had, and may be expected to have in the future, loans or other
banking transactions in the ordinary course of business with directors, significant stockholders, principal
officers, their immediate families, and affiliated companies in which they are principal stockholders (commonly
referred to as related parties). In management’s opinion, these loans and transactions were on the same terms
as those for comparable loans and transactions with non-related parties.
Loans to related parties amounted to approximately $20,625 and $16,656 at December 31, 2013 and 2012,
respectively.
Deposit accounts from related parties totaled approximately $10,074 and $10,233 at December 31, 2013 and
2012, respectively.
(15) Financial Instruments with Off-Balance-Sheet Risk and Concentrations
Financial instruments with off-balance-sheet risk:
The Banks are parties to financial instruments with off-balance-sheet risk in the normal course of business to
meet the financing needs of their customers. These financial instruments include commitments to extend
credit, credit lines, letters of credit, and overdraft protection. They involve, to varying degrees, elements of
credit risk in excess of amounts recognized on the consolidated balance sheets.
The Banks’ exposures to credit losses in the event of nonperformance by the other parties to the financial
instruments, for commitments to extend credit, and letters of credit are represented by the contractual
amounts of those instruments. The Banks use the same credit policies in making commitments and issuing
letters of credit as they do for on-balance-sheet instruments.
A summary of the contractual amounts of the Banks’ exposure to off-balance-sheet risk as of December 31 is
approximately as follows:
Unused lines of credit and other loan commitments
Commercial letters of credits
Performance and standby letters of credit
2013
$142,503
377
394
$143,274
2012
$123,738
395
616
$124,749
Commitments to extend credit are agreements to lend to customers as long as there are no violations of any
conditions established in the contracts. Commitments generally have fixed expiration dates or other
termination clauses and may require the payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily represent future cash
requirements. The credit risk involved in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers. The Banks evaluate each customer’s credit worthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Banks upon extension of credit, is based
on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts
receivable, inventory, crops, livestock, property and equipment, residential real estate, and income-producing
commercial properties.
Standby, performance and commercial letters of credit are conditional commitments issued by the Banks to
guarantee the performance of a customer to a third party. They are considered financial guarantees under
FASB guidance. The fair value of these financial guarantees is considered immaterial.
2013 ANNUAL REPORT
37
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(15) Financial Instruments with Off-Balance-Sheet Risk and Concentrations (continued)
Concentration of credit risk:
The Company and its subsidiary banks provide several types of loans to customers including real estate,
agricultural, commercial, and installment loans. The largest component of loans is secured by residential real
estate, commercial real estate, or other interest in real property. Lending activities are conducted with
customers in a wide variety of industries as well as with individuals with a wide variety of credit requirements.
The Company does not have a concentration of loans in any specific industry. Credit risk, as it relates to the
Company’s business activities, tends to be geographically concentrated in that the majority of the customer
base lies within the surrounding communities served by its subsidiary banks.
(16) Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase amounted to $23,365 and $25,046 at December 31, 2013 and
2012, respectively, and are secured by investment securities with fair values of approximately $38,934 and
$36,227. The weighted-average interest rates on these agreements were 0.29% and 0.18% at December 31,
2013 and 2012, respectively. Securities sold under agreements to repurchase mature on a daily basis.
(17) Federal Home Loan Bank (FHLB) Advances and Other Borrowings
FHLB:
2013
2012
Fixed-rate advances with rates ranging from .15% to 3.16% and weighted
average of . 07% to 3.16% as of December 31, 2013 and 2012,
respectively. Interest is payable monthly with principal due at maturity.
$15,350
$19,850
Advances are collateralized by 1-4 family mortgage loans and other qualifying loans. The total amounts of
collateral securing FHLB advances were approximately $77,634 and $82,708 as of December 31, 2013 and
2012, respectively.
The Banks participate in the Federal Reserve Bank of Chicago’s Discount Window Lending Program. Primary
advances generally mature daily and bear interest at a general approved rate in relation to the federal funds rate.
The primary advance interest rate at December 31, 2013 was 75-basis points. Outstanding advances were $0 at
December 31, 2013 and 2012. Advances are secured by investment securities pledged totaling approximately
$10,791 and $11,663 at December 31, 2013 and 2012, respectively, to the Federal Reserve Bank.
38
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(17) Federal Home Loan Bank (FHLB) Advances and Other Borrowings (continued)
At December 31, the scheduled maturities of Federal Home Loan Bank advances and other borrowings are as
follows:
2013
2014
2015
2016
2017
2018
2013
$0
9,250
3,600
1,800
700
0
$15,350
2012
$11,100
2,750
4,000
1,300
700
0
$19,850
The Company issued $10,000,000 of Subordinated Debentures in the fiscal year ended 2012 that qualify as Tier
2 regulatory capital (with certain limitations applicable) for the Company. The Company issued the
Subordinated Debentures for capital raising purposes primarily for the redemption of preferred stock as part
of the Troubled Asset Relief Program. Note 22 details the Troubled Asset Relief Program. The Debentures
mature on August 30, 2019 and the Company may redeem some or all of the Subordinated Debentures at any
time after the third anniversary of their issuance in accordance with the contract price limitations. The
redemption may be subject to approval by the Federal Reserve and must be on a pro rata basis amongst all
holders. The terms call for interest payments to be made quarterly in arrears on the last day of March, June,
September and December. The annual rate of interest on the Subordinated Debentures is 6.00%. The interest
payments can be deferred for so long as the Company or a specific Bank remains subject to any regulatory
order limiting or prohibiting the payment of dividends or interest on indebtedness of the Company, including
the Debentures. If interest payments are deferred the interest will accrue until paid. The agreement contains
certain restrictive covenants that are effective if the Company is in default on the debentures.
(18) Fair Value Measurements
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. The standard describes three levels of inputs that may be used to
measure fair value:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company 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 the Company’s own assumptions about the
assumptions that market participants would use in pricing an asset or liability.
2013 ANNUAL REPORT
39
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(18) Fair Value Measurements (continued)
The following is a description of valuation methodologies used for assets recorded at fair value:
Securities available-for-sale: The fair values of the Company’s securities available-for-sale are primarily determined
by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities
without relying exclusively on quoted prices for specific securities, but rather by relying on the securities’
relationship to other benchmark quoted securities. The values determined by matrix pricing are considered
Level 2 fair value measurements.
Collateral-dependent impaired loans: The Company does not record loans at fair value on a recurring basis.
However, from time to time, fair value adjustments are recorded on these loans to reflect (1) partial write-
downs, through charge-offs or specific reserve allowances, that are based on the current appraised or market-
quoted value of the underlying collateral or (2) the full charge-off of the loan carrying value. The fair value of
collateral dependent impaired loans is generally based on recent real estate appraisals. Adjustments are
routinely made in the appraisal process by independent appraisers to adjust for differences between the
comparable sales and income data available. Such adjustments are usually significant and typically result in a
Level 3 classification. Non-real estate collateral may be valued using an appraisal, net book value of the
borrower’s financial statements or aging reports, adjusted or discounted based on management’s expertise and
knowledge of the borrower and borrower’s business. Fair value measurements prepared internally are based
on management's comparisons to sales of comparable assets, but include significant unobservable data and are
therefore considered Level 3 measurements.
Foreclosed assets: Real estate acquired through or in lieu of loan foreclosure are not measured at fair value on a
recurring basis. However, other real estate is initially measured at fair value (less estimated costs to sell) when
it is acquired and may also be measured at fair value (less estimated costs to sell) if it becomes subsequently
impaired. The fair value measurement for each property may be obtained from an independent appraiser or
prepared internally. Fair value measurements obtained from independent appraisers generally utilize a market
approach based on sales of comparable assets and/or an income approach. Such measurements are usually
considered Level 2 measurements. However, management routinely evaluates fair value measurements of
independent appraisers by comparing actual selling prices to the most recent appraisals. If management
determines significant adjustments should be made to the independent appraisals based on these evaluations,
these measurements are considered Level 3 measurements. Fair value measurements prepared internally are
based management's comparisons to sales of comparable assets, but include significant unobservable data and
are therefore considered Level 3 measurements.
Mortgage servicing rights: Loan servicing rights are initially recorded at approximate fair value and are
subsequently measured using the amortization method which requires servicing rights to be amortized into
non-interest income in proportion to, and over the period of, the estimated future net servicing income of the
underlying loans. Loan servicing rights are valued for impairment subsequent to initial recording. Impairment
is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest
rate, loan type and investor type. Loan servicing rights do not trade in an active market with readily observable
prices. Accordingly, the Company determines the fair value of loan servicing rights by estimating the present
value of the future cash flows associated with the loans being serviced. Key economic assumptions used in
measuring the fair value of loan servicing rights include prepayment speeds and discount rates. While market-
based data is used to determine the input assumptions, the Company incorporates its own estimates of
assumptions market participants would use in determining fair value of loan servicing rights (Level 3).
40
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(18) Fair Value Measurements (continued)
The following table presents the Company’s approximate fair-value hierarchy for the assets measured at fair
value as of December 31:
As of December 31, 2013
Assets measured at fair value
on a recurring basis:
Assets:
Securities available-for-sale
Assets measured at fair value
on a non-recurring basis:
Assets:
Collateral-dependent impaired loans
Foreclosed assets
Fair Value Measurements at
Reporting Date Using
(Level 2)
(Level 1)
(Level 3)
Total
$216,065
$216,065
$7,788
$3,265
$7,788
$3,265
Collateral-dependent impaired loans, which are measured for impairment using the fair value of collateral, had
a carrying value of $13,871 with specific reserves of $6,083 as of December 31, 2013.
Foreclosed assets, which are measured at the lower of carrying or fair value less costs to sell, were carried at
their fair value of $3,265, which is comprised of the outstanding balance of $5,157, net of an allowance for
losses of $1,892 as of December 31, 2013.
The following table presents quantitative information about level 3 fair value measurements for financial
instruments measured at fair value on a non-recurring basis at December 31, 2013:
Collateral dependent impaired loans,
net of specific reserves
Foreclosed assets
Fair
Value
$7,788
$3,265
Valuation
Technique
Unobservable
Input
Sales comparison
approach
Sales comparison
approach
Appraised values
Appraised values
Management reduced the appraised values by estimated selling and holding costs in a range of 10% to
40%.
2013 ANNUAL REPORT
41
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(18) Fair Value Measurements (continued)
As of December 31, 2012
Assets measured at fair value
on a recurring basis:
Assets:
Securities available-for-sale
Fair Value Measurements at
Reporting Date Using
(Level 2)
(Level 1)
(Level 3)
Total
$213,845
$213,845
Assets measured at fair value
on a non-recurring basis:
Assets:
Collateral-dependent impaired loans
Foreclosed assets
$12,110
$6,770
$12,110
$6,770
Collateral-dependent impaired loans, which are measured for impairment using the fair value of collateral, had
a carrying value of $18,426 with specific reserves of $6,316 as of December 31, 2012.
Foreclosed assets, which are measured at the lower of carrying or fair value less costs to sell, were carried at
their fair value of $6,770, which is comprised of the outstanding balance of $10,481, net of an allowance for
losses of $3,711 as of December 31, 2012.
FASB guidance 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. In cases where quoted
market prices are not available, fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. In that regard, the derived fair value estimates may not be realized in
immediate settlement of the instrument. Accounting guidance excludes certain financial instruments and
certain nonfinancial instruments from its disclosure requirements. These fair value disclosures may not
represent the fair value of the Company.
The following methods and assumptions were used to estimate the fair value of each class of financial
instruments for which it is practicable to estimate that value:
Cash and cash equivalents: The carrying amounts are reasonable estimates of fair value.
Interest-bearing deposits in other banks: The carrying amounts are reasonable estimates of fair value.
Securities: See previous description in this footnote for securities available-for-sale. The fair values of the
Company’s securities held-to-maturity are primarily determined by matrix pricing, which is a
mathematical technique used widely in the industry to value debt securities without relying exclusively on
quoted prices for specific securities, but rather by relying on the securities’ relationship to other
benchmark quoted securities.
Non-marketable equity securities: No ready market exists for the equity securities as they have no quoted
market value. The carrying amount of equity securities approximates its fair value.
Loans held for sale: The fair values of loans held for sale are based on commitments on hand from
investors or prevailing market prices.
42
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(18) Fair Value Measurements (continued)
Loans: For variable-rate loans that re-price frequently and with no significant change in credit risk, fair
values are based on carrying values. Fair values for other loans are estimated using discounted cash flow
analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar
credit quality. For fair value estimates for collateral-dependent impaired loans, see previous description in
this footnote.
Deposits: The fair values disclosed for demand deposits, savings accounts, and certain money market
deposits are, by definition, equal to the amount payable on demand at the reporting date (carrying
amounts). Fair values for certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.
Federal funds purchased and securities sold under agreements to repurchase: The carrying amounts of federal funds
and securities sold under agreements to repurchase approximate fair value.
FHLB advances: The fair value of FHLB advances was estimated using discounted cash flow analyses
based on the Company’s current incremental borrowing rates for similar types of borrowing
arrangements.
Subordinated debentures: The fair value of subordinated debentures approximates their fair value based on
the Company’s current incremental borrowing rate approximating the instruments current fixed rate.
Other borrowings: The carrying amounts of other borrowings approximate their fair value.
Accrued interest: The carrying amounts of accrued interest approximate their fair value.
Off-balance-sheet financial instruments: No estimated fair value is attributable to unused lines of credit and
letters of credit as they are deemed immaterial.
The estimated fair values of the Company’s financial instruments as of December 31 are as follows:
Financial assets:
Cash and cash equivalents
Interest-bearing deposits in other banks
Securities
Non-marketable equity securities
Loans held for sale
Loans, net of allowance
Accrued interest receivable
Financial liabilities:
Deposits
Federal funds purchased
Securities sold under
agreements to repurchase
FHLB advances and other borrowings
Subordinated Debentures
Accrued interest payable
December 31, 2013
Fair
Value
Carrying
Amount
December 31, 2012
Carrying
Amount
Fair
Value
$17,698
4,963
217,649
2,220
1,521
595,718
4,793
$17,698
4,963
217,668
2,220
1,521
597,900
4,793
$24,504
4,713
215,573
2,184
5,598
596,938
4,935
$24,504
4,713
215,681
2,184
5,598
597,466
4,935
$729,057
6,310
$732,476
6,310
$736,718
5,114
$741,050
5,114
23,365
15,350
10,000
704
23,369
15,447
10,000
704
25,046
19,850
10,000
886
25,051
20,105
10,000
886
2013 ANNUAL REPORT
43
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(19) Stock-Compensation Plans
The Company has entered into non-qualified and incentive stock option agreements whereby shares of
common stock were made available for purchase by certain executive officers. All incentive and non-qualified
options have been issued pursuant to various shareholder approved stock option plans. In May of 2008, the
stockholders’ approved an additional 100,000 shares of common stock be made available for future purchase
by certain officers. Under these agreements, the exercise price of each option equals the market price of the
Company’s stock on the grant date. The options’ maximum terms are ten years. The options vest under a
three, five or seven year period after the date of grant. The Company’s general practice is to use previously
authorized but unissued shares of common stock to satisfy stock option exercises. Currently, the Company
has a sufficient number of authorized common shares to satisfy expected stock option exercises, but treasury
stock may also be used.
The fair value of each option award is estimated on the date of grant using a closed form option valuation
model (Black-Scholes) based on the assumptions noted in the table below. Expected volatilities are based on
historical volatilities of the Company’s common stock. The Company uses historical data to estimate option
exercise and post-vesting termination behavior. The expected term of options granted is based on historical
data and represents the period of time that options granted are expected to be outstanding, which takes into
account that the options are not transferable. The risk-free interest rate for the expected term of the option is
based on the U.S. Treasury yield in effect at the time of the grant.
No options were granted for the years ended December 31, 2013, 2012, and 2011.
The fair value of options granted is estimated on the date of grant using the following weighted-average
assumptions:
Risk-free interest rate
Expected option life
Expected stock-price volatility
Dividend yield
2013
2012
2011
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
For the years ended December 31, 2013, 2012 and 2011, the Company recognized $95, $97 and $98 in
compensation expense for stock options, respectively. No tax benefits were recognized for the three year
period ended December 31, 2013. As of December 31, 2013, stock-based compensation expense not yet
recognized totaled $142, and is expected to be recognized over a weighted-average remaining period of 1.4
years. The intrinsic value of options exercised during the years ended December 31, 2013, 2012 and 2011 was
$99, $0 and $4, respectively. The total fair value of shares vested during the years ended December 31, 2013,
2012 and 2011 was $494, $341 and $338, respectively.
During 2010, the Company modified the exercise price on 49,760 fully and partially vested incentive stock
options outstanding affecting thirteen employees. The options were originally granted in 2004, 2005 and 2008
and represented a weighted average exercise price of $19.57 per share. As a result of the modification, the
weighted average exercise price on the modified options was reduced to $10.43 per share. Consistent with
generally accepted accounting principles, the Company revaluated the fair value of the modified options
resulting in additional compensation expense of $75 to be recognized over the remaining vesting period. For
the modified options already fully vested, the Company recognized the additional compensation expense in
2010. The fair value of the stock options granted in 2008, 2005 and 2004 were revised from $5.08, $12.55 and
$9.37 per share, respectively as originally reported to modified fair values of $7.21, $14.08, and $10.74 per
share, respectively.
44
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(19) Stock-Compensation Plans (continued)
The following tables summarize the activity of options and non-vested shares granted, exercised, or forfeited
for the year ended December 31, 2013:
Shares under option, beginning of year
Granted during the year
Forfeited and expired during the year
Exercised during the year
2013
157,490
0
(2,389)
(13,044)
10.16
10.77
Shares under option, end of year
142,057
$10.29
Options exercisable, end of year
91,026
$10.30
Shares available for grant, end of year
150,000
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
$10.32
6.4
$292
100
$1,202
$769
5.7
5.5
Non-vested options, December 31, 2012
Granted during the year
Vested during the year, net
Forfeited or expired during the year
Non-vested options, December 31, 2013
Number of
Options
Weighted
Average
Fair Value
at Grant
79,351
0
(25,931)
(2,389)
51,031
$3.09
3.66
4.44
$2.79
The following table summarizes information about fixed stock options outstanding at December 31,
2013:
Exercise Price
$10.00
$10.25
$10.50
$11.00
Number Outstanding
at 12/31/13
23,497
90,680
20,000
7,880
142,057
Remaining
Contractual Life
(Years)
4.0
6.5
6.5
0.5
Number Exercisable
at 12/31/13
16,754
54,392
12,000
7,880
91,026
During 2012, the Company approved a new equity incentive plan to promote the long-term financial success
of the Company through stock based awards to employees, directors or service providers who contribute to
that success. This equity incentive plan permits Company management to approve and grant a maximum of
150,000 shares of common stock based awards in the form of any combination of stock options, stock
appreciation rights, stock awards or cash incentive awards. As of December 31, 2013, no awards under this
plan have been granted.
2013 ANNUAL REPORT
45
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(19) Stock-Compensation Plans (continued)
In October 2013, the Company’s Board of Directors authorized a stock repurchase program. The Company’s
Board of Directors had authorized an aggregate repurchase of up to 100,000 of common stock at market price.
As of December 31, 2013 the Company had repurchased 2,000 shares under this program.
The purchase price for the shares of the Company’s stock repurchased is reflected as a reduction to
shareholders’ equity. In accordance with Accounting Principles Board Opinion No. 6, “Status of Accounting
Research Bulletins,” the Company is required to allocate the purchase price of the repurchased shares as (i) a
reduction to retained earnings until retained earnings are zero and then as an increase to accumulated deficit
and (ii) a reduction of common stock and additional paid-in capital.
(20) Earnings Per Common Share
For the years ended December 31, earnings per common share have been computed based on the following:
Net income
Less - preferred stock dividends
Less - accretion of preferred stock warrants
Net income available to common stockholders
2013
2012
2011
$6,838
0
0
$6,838
$3,446
(877)
(356)
$2,213
$6,568
(818)
(150)
$5,600
Average number of common shares outstanding
Effect of dilutive options
3,661,934
54,982
3,659,504
28,345
3,659,306
26,162
Average number of common shares outstanding used
to calculate diluted earnings per common share
3,716,916
3,687,849
3,685,468
(21) Regulatory Matters
The Company and Banks 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 Banks must meet specific capital guidelines that involve quantitative
measures of the assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting
practices. The capital amounts and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
46
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(21) Regulatory Matters (continued)
Quantitative measures established by regulation to ensure capital adequacy require the Company and its
subsidiaries 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 that as of December 31, 2013, that the Company and the
Banks meet all capital-adequacy requirements to which they are subject.
As of December 31, 2013, the most recent notifications from the Federal Deposit Insurance Corporation
(FDIC) categorized all five Banks as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, minimum total risk-based, Tier-I risk-based, and Tier-I leverage
ratios as set forth in the table must be maintained. There are no conditions or events occurring since the
FDIC notified each Bank which management believes have changed the categories of the Banks.
The actual capital amounts and ratios for the Company and Banks as of December 31 are presented in the
following tables:
Amount
In $000s
Actual
Ratio
Minimum Capital
Requirement
Amount
In $000s
Ratio
Minimum
To Be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount
In $000s
Ratio
$102,007
24,558
20,843
14,363
23,282
8,993
$83,747
22,379
18,889
13,175
21,089
8,282
$83,747
22,379
18,889
13,175
21,089
8,282
15.59%
14.25%
13.41%
15.19%
13.44%
16.09%
12.80%
12.99%
12.15%
13.93%
12.17%
14.82%
9.62%
9.47%
9.75%
9.38%
9.80%
10.23%
$52,340
13,787
12,434
7,566
13,863
4,471
$26,170
6,894
6,217
3,783
6,932
2,235
$34,837
9,455
7,753
5,620
8,611
3,240
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
N/A
$17,234
15,543
9,458
17,329
5,588
N/A
$10,340
9,326
5,675
10,398
3,353
N/A
$11,818
9,691
7,025
10,764
4,050
N/A
10.00%
10.00%
10.00%
10.00%
10.00%
N/A
6.00%
6.00%
6.00%
6.00%
6.00%
N/A
5.00%
5.00%
5.00%
5.00%
5.00%
As of December 31, 2013:
Total Capital to Risk
Weighted Assets:
Company
Northwest
German
Davis
Freeport
Lena
Tier-I Capital to Risk
Weighted Assets:
Company
Northwest
German
Davis
Freeport
Lena
Tier-I Capital to
Average Assets:
Company
Northwest
German
Davis
Freeport
Lena
2013 ANNUAL REPORT
47
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(21) Regulatory Matters (continued)
As of December 31, 2012:
Total Capital to Risk
Weighted Assets:
Company
Northwest
German
Davis
Freeport
Lena
Tier-I Capital to Risk
Weighted Assets:
Company
Northwest
German
Davis
Freeport
Lena
Tier-I Capital to
Average Assets:
Company
Northwest
German
Davis
Freeport
Lena
$95,572
23,492
19,466
13,568
21,495
8,668
$77,350
21,277
17,444
12,364
19,428
8,011
$77,350
21,277
17,444
12,364
19,428
8,011
14.68%
13.43%
12.11%
14.26%
13.10%
16.78%
11.88%
12.17%
10.85%
13.00%
11.84%
15.51%
8.74%
8.78%
8.57%
8.97%
8.97%
10.05%
$52,082
13,989
12,861
7,609
13,124
4,132
$26,041
6,994
6,431
3,805
6,562
2,066
$35,403
9,688
8,140
5,512
8,660
3,189
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
N/A
$17,486
16,077
9,511
16,405
5,165
N/A
$10,492
9,646
5,707
9,843
3,099
N/A
$12,110
10,175
6,890
10,825
3,987
N/A
10.00%
10.00%
10.00%
10.00%
10.00%
N/A
6.00%
6.00%
6.00%
6.00%
6.00%
N/A
5.00%
5.00%
5.00%
5.00%
5.00%
(22) TARP Capital Purchase Plan (in actual dollars)
On May 15, 2009, as part of the United States Treasury Department’s (UST) Troubled Asset Relief Program
(TARP) Capital Purchase Program, the Company issued 15,000 shares of fixed rate cumulative perpetual
preferred stock (Series A preferred stock) to the UST for total proceeds of $15,000. The Series A preferred
stock had no par value and a redemption value of $1,000 per share. The UST also received warrants to
purchase 750 shares of fixed rate cumulative preferred stock (Series B preferred stock) for an exercise price of
$.01 per share. The UST immediately exercised the warrants. The Series B preferred stock had no par value
and a redemption value of $1,000 per share. The Series A and Series B preferred stock were redeemable by
the Company at any time. The dividend rate on the Series A preferred stock was 5% for the first five years
and 9% thereafter. The dividend rate on the Series B preferred stock was 9%. Dividends on the preferred
stock were cumulative and were payable quarterly in arrears on the 15th of February, May, August and
November. The redemption value of the 750 shares of Series B preferred stock was being accreted as an
increase to preferred stock over five years which was the Company’s expected redemption period. The Series
A and Series B preferred stock were included as Tier-1 capital for regulatory purposes.
Under the terms of the TARP agreement, the Company was subject to certain dividend limitations.
Generally, without the UST’s consent, the Company was limited to a maximum quarterly dividend of $.08 per
common share until May 14, 2012. Additionally, without the UST’s consent, the Company was limited to a
maximum dividend of 103% of the aggregate per share dividends of the prior fiscal year for the period from
May 15, 2012 to May 14, 2019.
Additionally under the terms of the TARP agreement, without the consent of the UST, the Company
generally could not acquire additional shares of treasury stock, except in connection with the administration
of any employee benefit plan in the ordinary course of business and consistent with past practice. The TARP
agreement also placed certain restrictions on executive compensation, the effect of which did not have a
material effect on the consolidated financial statements.
48
2013 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(22) TARP Capital Purchase Plan (in actual dollars) (continued)
Effective December 11, 2012, the Company redeemed the Series A and B preferred stock for total proceeds
of $15,750. As a result, the Company is no longer under the terms of the TARP agreement as of December
31, 2012.
(23) Lease Commitments
One of the banks has an operating lease commitment on office space in Loves Park, Illinois. The terms of
the lease require base lease amounts of $75 per year. The lease expires September 2014 and is renewable up
to five additional one year terms. Rent expense of $75 and $18 were recognized in 2013 and 2012,
respectively.
In addition, there is an operating lease agreement for bank premises in Rockford, Winnebago, and Kankakee,
Illinois. The Rockford and Winnebago leases require payment of approximately $51 per year for 2013 and
2014, expiring April 2015. There is no formal lease for the Kankakee location. The Bank is verbally agreeing
to pay $7 for 2014.
The minimum lease commitments are as follows:
2014
2015
$166
43
2013 ANNUAL REPORT
49
FORESIGHT
CONSOLIDATING SCHEDULE 1 - BALANCE SHEET
(000s omitted except share data)
December 31, 2013
A S S E T S
German-American
State Bank
State Bank
of Davis
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Interest-bearing deposits in banks - term deposits
Securities:
Securities held-to-maturity
Securities available-for-sale
Non-marketable equity securities, at cost
Loans held for sale
Loans, net
Foreclosed assets, net
Premises and equipment
Other assets
Investment in subsidiary banks
$3,407
27
748
40,622
534
147,708
85
996
4,173
$1,844
225
0
1,215
1,559
44,035
313
84,205
148
1,018
2,124
Total assets
$198,300
$136,686
LIABILITIES AND STOCKHOLDLERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing
Interest-bearing
Total deposits
Federal funds purchased
Securities sold under agreements to repurchase
Federal Home Loan Bank borrowings and other
Subordinated debentures
Accrued interest payable and other liabilities
$21,072
151,450
172,522
1,283
4,500
983
$12,992
103,185
116,177
3,099
4,159
0
304
Total liabilities
179,288
123,739
Stockholders’ equity:
Preferred stock
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive income
Total stockholders’ equity
400
2,775
15,714
123
19,012
100
1,571
11,504
(228)
12,947
Total liabilities and stockholders’ equity
$198,300
$136,686
50
2013 ANNUAL REPORT
FORESIGHT Northwest
Bank
State
Bank
Lena
State Bank
Foresight Financial
Group, Inc.
Eliminations
Consolidated
Total
$6,666
49
0
1,000
25
51,111
672
1,521
159,567
2,218
4,519
5,473
$3,259
7
0
1,250
48,820
448
157,552
171
1,807
2,808
$1,611
3
0
1,350
31,477
253
46,655
180
488
3,277
$7,491
31
463
918
1,421
84,154
($7,491)
600
(600)
(84,154)
$16,787
911
0
4,963
1,584
216,065
2,220
1,521
595,718
3,265
9,746
19,276
$232,821
$216,122
$85,294
$94,478
($91,645)
$872,056
$30,966
170,549
201,515
425
3,274
4,000
1,162
$20,594
153,791
174,385
484
13,420
5,850
566
210,376
194,705
1,450
7,175
13,754
66
1,000
4,579
15,510
328
22,445
21,417
$8,331
63,617
71,948
1,019
2,512
1,000
482
76,961
500
3,685
4,097
51
8,333
($150)
(7,341)
(7,491)
(7,491)
(3,450)
(19,785)
(60,579)
(340)
(84,154)
$10,000
252
10,252
0
969
7,979
79,035
(4,098)
341
84,226
$93,805
635,251
729,056
6,310
23,365
15,350
10,000
3,749
787,830
0
969
7,979
79,035
(4,098)
341
84,226
$232,821
$216,122
$85,294
$94,478
($91,645)
$872,056
2013 ANNUAL REPORT
51
FORESIGHT For the year ended December 31, 2013
Interest and dividend income:
Loans, including fees
Securities:
Taxable
Tax-exempt
Dividends
Interest-bearing deposits in banks
Federal funds sold
Total interest and dividend income
Interest expense:
Deposits
Federal funds purchased
Securities sold under agreements to repurchase
Federal Home Loan Bank advances and other borrowings
Subordinated debentures
Total interest expense
Net interest and dividend income
Provision for loan losses
Net interest and dividend income,
after provision for loan losses
Noninterest income:
Customer service fees
Equity in earnings of subsidiaries
Gain on sales and calls of AFS securuties, net
Gain on sales of loans, net
Loan-servicing fees
Other
Total noninterest income
Noninterest expenses:
Salaries and employee benefits
Occupancy expense of premises, net
Outside services
Data processing
Foreclosed assets, net
Other
Total noninterest expenses
Income before income taxes
Income tax expense (benefit)
Net income
52
German-American
State Bank
State Bank
of Davis
$7,299
$4,278
534
670
2
11
2
8,518
1,496
3
53
1,552
6,966
510
6,456
338
18
695
1,051
2,181
416
188
331
4
1,116
4,236
3,271
1,082
662
735
1
8
5
5,689
990
1
43
0
1,034
4,655
800
3,855
117
23
222
362
946
184
127
134
39
601
2,031
2,186
624
$2,189
$1,562
2013 ANNUAL REPORT
FORESIGHT CONSOLIDATING SCHEDULE 2 - STATEMENT OF INCOME
(000s omitted except share data)
Northwest
Bank
State
Bank
Lena
State Bank
Foresight Financial
Group, Inc.
Eliminations
Consolidated
Total
$8,334
$7,241
$2,093
$29,245
733
804
24
3
9,898
1,420
2
13
34
1,469
8,429
1,950
605
946
19
2
8,813
1,306
2
25
111
1,444
7,369
1,200
411
581
18
1
3,104
551
1
5
557
2,547
321
6,479
6,169
2,226
377
109
1,535
751
615
3,387
5,064
1,059
93
411
(21)
2,030
8,636
1,230
154
213
6
641
860
2,030
316
190
312
652
3,500
3,529
1,118
$1,076
$2,411
121
0
190
311
703
198
139
82
555
1,677
860
132
$728
12
12
0
600
600
(588)
(4)
(584)
($12)
(12)
($12)
(12)
0
0
$7,966
($7,966)
16
7,982
346
16
59
600
289
1,310
6,088
(750)
(7,966)
1,238
202
(584)
(856)
0
(7,966)
$6,838
($7,966)
2,945
3,736
3
80
13
36,022
5,751
9
81
203
600
6,644
29,378
4,777
24,601
1,166
0
156
1,535
751
2,379
5,987
12,508
2,391
212
414
622
5,243
21,390
9,198
2,360
$6,838
2013 ANNUAL REPORT
53
FORESIGHT GENERAL INFORMATION
Foresight Financial Group, Inc.
3106 North Rockton Ave.
Rockford, IL 61103
Phone: 815/847-7500
Fax: 815/967-6107
E-mail: dcooke@ffgbank.net
Registrar, Transfer Agent and
Change of Address:
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
Telephone: 1-800-368-5948
E-mail: info@rtco.com
Internet Address: www.rtco.com
Foresight common stock is listed
on the NASDAQ Bulletin Board
under the symbol FGFH
For more information,
contact Foresight
Financial Group, Inc. at its
Corporate Address
or visit our
website at
www.foresightfg.com
DIRECTORS
Foresight Financial Group, Inc.
Rockford, IL
John Collman
Stephen G. Gaddis
John Jeschke
Fred Kundert
Brent Myers
Dr. Carolyn Sluiter
Robert W. Stenstrom
Doug Wagner
Richard L. Weigle
Northwest Bank of Rockford
Rockford, IL
German-American State Bank
German Valley, IL
State Bank of Davis
Davis, IL
Robert Borneman
John Collman
Jack Janssen
Gary R. Johnson
Angela K. Larson
James G. Sacia
Jeffrey M. Sterling
Richard Weigle
Stephen G. Gaddis
Charles B. Kullberg
Stephen P. McKeever
John J. Morrissey
Brent Myers
Robert W. Stenstrom
Tom Walsh
Lena State Bank
Lena, IL
Todd Bussian, O.D.
Dr. Gordon Dammann
John Jeschke
Dr. James Moest
Brent Myers
Steven Rothschadl
Dan Dietmeier
John Jeschke
Brent Myers
Thomas Olsen
Dr. Carolyn Sluiter
Judd Thruman
State Bank
Freeport, IL
Douglas Cross
Bruce Johnson
Dr. Joe Kanosky
Fred Kundert
Marilyn Smit
Brian Stewart
Sharon Summers
Ken Thompson
Doug Wagner
54
2013 ANNUAL REPORT
FORESIGHT
2013 ANNUAL REPORT
R
P R I
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PRI
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C O M M U N I T Y
B U I L D I N G
T H R O U G H
C O M M U N I T Y
B A N K I N G
3106 NORTH ROCKTON AVENUE • ROCKFORD, ILLINOIS 61103 • www.foresightfg.com • 815.847.7500