FORESIGHT FINANCIAL GROUP
2014 Annual Report
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3106 NORTH ROCKTON AVENUE • ROCKFORD, ILLINOIS 61103 • www.foresightfg.com • 815.847.7500
www.foresightfg.com
State Bank
Freeport, IL
Dear Stockholders,
I am pleased to report that your company earned $8.26 million for 2014 up over 20% from 2013, representing
two consecutive record earnings years. We were able to deliver these results through a driven sales force that
increased loan out standings by 7.5% while maintaining our high credit quality standards. Our deposit team
also contributed to our growth with innovative new products. These products and our continued commitment
to quality service helped our deposit base to grow by almost 5%. Improved interest rate margins, decreased
credit costs and a marked decline in non-performing assets further contributed to our success. The company’s
basic earnings per share increased $0.40 to $2.27 and book value per share increased $2.10 per share to $24.96.
We believe our company is still undervalued in the marketplace and is the main reason the Board of Directors
approved continuation of our stock repurchase program. During 2014 we repurchased 63,962 shares through
the repurchase program.
Performance throughout 2014 and prior has positioned the company to look toward expansion into other
markets. Our strong capital affords us the ability to proactively seek and identify possible acquisition of banks
that fit our community bank model. This past year we began to add staff at the corporate level to strengthen our
management team. These additional company officers will position us to smoothly integrate banks that could
join our group.
We are encouraged as we look toward the future. Our past performance has placed us on solid footing to remain
on course to provide strong earnings and growth. Our team of professional bankers continues to innovate and
find new ways to serve our customers and fulfill their financial service needs. I look forward to sharing exciting
news in 2015 and beyond as we move forward staying true to our mission statement of “Community Building
through Community Banking”.
Respectfully,
Brent Myers, President and CEO
2
2014 ANNUAL REPORT
FORESIGHT Net Earnings Dollars (1,000,000s)
8.260
6.568
6.838
5.483
5.815
3.446
2009
2010
2011
2012
2013
2014
Trends in Combined Equity Capital and ALLL* to Non-Performing Assets (in 000s)
95,352
99,190
107,771
108,556
98,495
99,003
9.0 -
8.0 -
7.0 -
6.0 -
5.0 -
4.0 -
3.0 -
2.0 -
1.0 -
0 -
120,000 -
100,000 -
80,000 -
60,000 -
40,000 -
20,000 -
24,217
23,060
19,898
17,036
15,778
0 -
2009
2010
2011
2012
2013
10,265
2014
Equity Capital & ALLL
Non-Performing Assets
2014 ANNUAL REPORT
3
FORESIGHT
Trends in Assets, Deposits and Loans (In 000’s)
1,000,000 -
900,000 -
800,000 -
808,642
700,000 -
600,000 -
664,380
500,000 -
531,972
844,917
695,439
581,105
885,405
883,792
872,057
738,068
736,718
729,057
598,984
596,938
595,718
922,953
765,336
640,795
400,000 -
300,000 -
200,000 -
$25.00 -
$20.00 -
$15.00 -
$10.00 -
$5.00 -
0 -
2009
2010
2011
2012
Assets
2013
2014
Deposits
Loans
Common Stock Per Share Book & Market Value - December 31
$18.24
$19.31
$20.70
$21.17
$24.96
$21.00
$22.86
$18.75
$9.84
$10.30
$12.10
$12.18
2009
2010
2011
2012
2013
2014
Book Value
Market Value
4
2014 ANNUAL REPORT
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, 2014 and 2013, 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, stockholders’ equity, and cash flows for each of the years
consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each
in the three-year period ended December 31, 2014, 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.
2014 ANNUAL REPORT
5
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 2014, and the
results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2014, 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 27, 2015
6
2014 ANNUAL REPORT
FORESIGHT
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
2013
2014
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 $14,571 and $14,777,
Loans held for sale
respectively
Loans, net of allowance for loan losses of $14,571 and $14,777,
Foreclosed assets, net
respectively
Premises and equipment, net
Foreclosed assets, net
Other assets
Premises and equipment, net
Other assets
Total assets
2014
$20,717
8,336
$20,717
939
8,336
29,992
939
29,992
5,197
5,197
1,396
214,393
1,396
2,243
214,393
1,439
2,243
1,439
640,795
1,622
640,795
9,500
1,622
16,376
9,500
16,376
$922,953
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
19,277
9,746
19,277
$872,057
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
$922,953
$872,057
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Liabilities:
Noninterest-bearing
Deposits:
Interest-bearing
Noninterest-bearing
Total deposits
Interest-bearing
Federal funds purchased
Total deposits
Securities sold under agreements to repurchase
Federal funds purchased
Federal Home Loan Bank (FHLB) advances and other borrowings
Securities sold under agreements to repurchase
Subordinated debentures
Federal Home Loan Bank (FHLB) advances and other borrowings
Accrued interest payable and other liabilities
Subordinated debentures
Total liabilities
Accrued interest payable and other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock (no par value; authorized 500,000 shares)
Stockholders’ equity:
Common stock ($.25 par value; authorized 5,000,000 shares;
Preferred stock (no par value; authorized 500,000 shares)
3,898,449 and 3,879,357 shares issued, respectively)
Common stock ($.25 par value; authorized 5,000,000 shares;
Additional paid-in capital
3,898,449 and 3,879,357 shares issued, respectively)
Retained earnings
Additional paid-in capital
Treasury stock, at cost (273,619 and 209,657 shares, respectively)
Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost (273,619 and 209,657 shares, respectively)
Total stockholders’ equity
Accumulated other comprehensive income
Total stockholders’ equity
Total liabilities and stockholders’ equity
$97,745
667,591
$97,745
765,336
667,591
3,036
765,336
23,506
3,036
23,100
23,506
10,000
23,100
3,990
10,000
828,968
3,990
828,968
0
0
975
8,260
975
86,570
8,260
(5,312)
86,570
3,492
(5,312)
93,985
3,492
93,985
$922,953
$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
Total liabilities and stockholders’ equity
$922,953
$872,057
2014 ANNUAL REPORT
See Notes to Consolidated Financial Statements.
7
See Notes to Consolidated Financial Statements.
FORESIGHT A S S E T S
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF INCOME
(000s omitted except share data)
(000s omitted except share data)
(000s omitted except share data)
For the years ended December 31,
For the years ended December 31,
For the years ended December 31,
Interest and dividend income:
Interest and dividend income:
Interest and dividend income:
Loans, including fees
Loans, including fees
Loans, including fees
Debt securities:
Debt securities:
Debt securities:
Taxable
Taxable
Cash and due from banks
Taxable
Tax-exempt
Tax-exempt
Interest-bearing deposits in banks
Tax-exempt
Interest-bearing deposits in banks and other
Interest-bearing deposits in banks and other
Federal funds sold
Interest-bearing deposits in banks and other
Federal funds sold
Federal funds sold
Total cash and cash equivalents
Federal funds sold
Total interest and dividend income
Total interest and dividend income
Total interest and dividend income
Interest-bearing deposits in banks - term deposits
Interest expense:
Interest expense:
Securities:
Interest expense:
Deposits
Deposits
Securities held-to-maturity (HTM)
Deposits
Federal funds purchased
Federal funds purchased
Securities available-for-sale (AFS)
Federal funds purchased
Securities sold under agreements to repurchase
Securities sold under agreements to repurchase
Non-marketable equity securities, at cost
Securities sold under agreements to repurchase
FHLB and other borrowings
FHLB and other borrowings
Loans held for sale
FHLB and other borrowings
Subordinated debentures
Subordinated debentures
Loans, net of allowance for loan losses of $14,571 and $14,777,
Subordinated debentures
Total interest expense
Total interest expense
respectively
Total interest expense
Foreclosed assets, net
Premises and equipment, net
Other assets
Net interest and dividend income
Net interest and dividend income
Net interest and dividend income
Provision for loan losses
Provision for loan losses
Provision for loan losses
Total assets
Net interest and dividend income,
Net interest and dividend income,
Net interest and dividend income,
after provision for loan losses
after provision for loan losses
after provision for loan losses
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest income:
Noninterest income:
Noninterest income:
Customer service fees
Customer service fees
Customer service fees
Gain on sales and calls of AFS securities, net
Gain on sales and calls of AFS securities, net
Gain on sales and calls of AFS securities, net
Gain on sales of loans, net
Gain on sales of loans, net
Gain on sales of loans, net
Loan servicing fees, net
Loan servicing fees, net
Loan servicing fees, net
Other
Other
Other
Total noninterest income
Total noninterest income
Total noninterest income
Liabilities:
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) advances and other borrowings
Noninterest expenses:
Noninterest expenses:
Subordinated debentures
Noninterest expenses:
Salaries and employee benefits
Salaries and employee benefits
Accrued interest payable and other liabilities
Salaries and employee benefits
Occupancy expense of premises, net
Occupancy expense of premises, net
Total liabilities
Occupancy expense of premises, net
Outside services
Outside services
Outside services
Data processing
Data processing
Stockholders’ equity:
Data processing
Foreclosed assets, net
Foreclosed assets, net
Preferred stock (no par value; authorized 500,000 shares)
Foreclosed assets, net
Other
Other
Common stock ($.25 par value; authorized 5,000,000 shares;
Other
Total noninterest expenses
Total noninterest expenses
3,898,449 and 3,879,357 shares issued, respectively)
Total noninterest expenses
Additional paid-in capital
Retained earnings
Treasury stock, at cost (273,619 and 209,657 shares, respectively)
Accumulated other comprehensive income
Total stockholders’ equity
Income before income taxes
Income before income taxes
Income before income taxes
Income tax expense
Income tax expense
Income tax expense
Net income
Net income
Net income
Total liabilities and stockholders’ equity
Earnings per common share:
Earnings per common share:
Earnings per common share:
Basic
Basic
Basic
Diluted
Diluted
Diluted
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
2014
2014
2014
$29,495
$29,495
$29,495
3,076
3,076
3,076
3,512
3,512
3,512
104
104
104
6
6
6
36,193
36,193
36,193
5,136
5,136
5,136
14
14
14
70
70
70
188
188
188
600
600
600
6,008
6,008
6,008
30,185
30,185
30,185
2,621
2,621
2,621
27,564
27,564
27,564
1,150
1,150
1,150
125
125
125
1,118
1,118
1,118
655
655
655
2,364
2,364
2,364
5,412
5,412
5,412
12,651
12,651
12,651
2,463
2,463
2,463
261
261
261
417
417
417
487
487
487
4,992
4,992
4,992
21,271
21,271
21,271
11,705
11,705
11,705
3,445
3,445
3,445
$8,260
$8,260
$8,260
2013
2013
2013
$29,245
$29,245
2014
$29,245
2,945
2,945
$20,717
2,945
3,736
3,736
8,336
3,736
83
83
939
83
13
13
29,992
13
36,022
36,022
36,022
5,197
1,396
214,393
2,243
1,439
5,751
5,751
5,751
9
9
9
81
81
81
203
203
203
600
600
600
6,644
6,644
6,644
640,795
1,622
9,500
16,376
29,378
29,378
29,378
4,777
4,777
4,777
$922,953
24,601
24,601
24,601
1,166
1,166
1,166
156
156
156
1,535
1,535
1,535
751
751
751
2,379
2,379
2,379
5,987
5,987
5,987
$97,745
667,591
765,336
3,036
23,506
23,100
10,000
3,990
828,968
12,508
12,508
12,508
2,391
2,391
2,391
212
212
212
414
414
414
622
622
0
622
5,243
5,243
5,243
21,390
21,390
975
21,390
8,260
86,570
(5,312)
3,492
93,985
9,198
9,198
9,198
2,360
2,360
2,360
$6,838
$6,838
$6,838
$922,953
$1.87
$1.87
$1.87
$1.84
$1.84
$1.84
2012
2012
2012
$31,487
2013
$31,487
$31,487
3,472
3,472
$16,787
3,472
3,900
3,900
911
3,900
57
57
0
57
11
11
17,698
11
38,927
38,927
38,927
4,963
7,231
7,231
1,584
7,231
3
3
216,065
3
128
128
2,220
128
245
245
1,521
245
189
189
189
7,796
7,796
595,718
7,796
3,265
9,746
19,277
31,131
31,131
31,131
13,444
13,444
13,444
$872,057
17,687
17,687
17,687
1,275
1,275
1,275
191
191
$93,806
191
1,500
1,500
635,251
1,500
832
832
729,057
832
2,360
2,360
6,310
2,360
6,158
6,158
23,365
6,158
15,350
10,000
11,963
11,963
3,749
11,963
2,152
2,152
787,831
2,152
235
235
235
297
297
297
954
954
954
4,818
4,818
4,818
20,419
20,419
20,419
0
969
7,979
3,426
3,426
79,036
3,426
(4,098)
(20)
(20)
340
(20)
84,226
$3,446
$3,446
$3,446
$872,057
$0.60
$0.60
$0.60
$0.60
$0.60
$0.60
2014 ANNUAL REPORT
8
$2.27
$2.27
$2.27
$2.24
$2.24
$2.24
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
FORESIGHT CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(000s omitted except share data)
For the years ended December 31,
Net income
Other comprehensive income:
Unrealized holding (loss) gains on securities available for sale,
net of tax of $(2,052), $3,949 & $(494), respectively
Reclassification adjustments for net securities
gains recognized in income, net of tax of $50, $62 & $76, respectively
Total other comprehensive income (loss)
2014
$8,260
2013
2012
$6,838
$3,446
3,228
(5,625)
734
(75)
(94)
3,153
(5,719)
(115)
619
Total comprehensive income
$11,413
$1,119
$4,065
2014 ANNUAL REPORT
9
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,
A S S E T S
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Total cash and cash equivalents
Balance, January 1, 2012
Preferred Common
Stock
Stock
Additional
Paid-In
Capital
Retained
Earnings
$15,394
$966
$7,666
$71,193
Accumulated
Other
Comprehensive
Income
2014
$20,717
8,336
939
29,992
Treasury
Stock
($4,060)
Net income
Other comprehensive income
Redemption of preferred stock
Interest-bearing deposits in banks - term deposits
Securities:
Securities held-to-maturity (HTM)
Securities available-for-sale (AFS)
Non-marketable equity securities, at cost
Loans held for sale
Loans, net of allowance for loan losses of $14,571 and $14,777,
respectively
Foreclosed assets, net
Cash dividends on preferred stock
Premises and equipment, net
Other assets
Accretion of preferred stock warrants
Cash dividends ($.16 per share)
(15,750)
356
Stock-based compensation expense
3,446
(586)
(356)
(877)
97
5,197
1,396
214,393
2,243
1,439
640,795
1,622
9,500
16,376
$5,439
619
2013
$16,787
911
Total
0
17,698
$96,598
4,963
3,446
619
1,584
216,065
(15,750)
2,220
1,521
(586)
0
595,718
3,265
9,746
19,277
(877)
97
Total assets
Balance, December 31, 2012
0
966
7,763
72,820
$922,953
(4,060)
6,058
$872,057
83,547
Net income
LIABILITIES AND STOCKHOLDERS' EQUITY
6,838
Other comprehensive income (loss)
Purchase of treasury stock (2,000 shares)
Liabilities:
Deposits:
Cash dividends ($.17 per share)
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) advances and other borrowings
Stock-based compensation expense
Subordinated debentures
Balance, December 31, 2013
0
Accrued interest payable and other liabilities
Total liabilities
Stock options exercised
969
3
121
95
7,979
Net income
Cash dividends ($.20 per share)
Stockholders’ equity:
Other comprehensive income
Preferred stock (no par value; authorized 500,000 shares)
Common stock ($.25 par value; authorized 5,000,000 shares;
3,898,449 and 3,879,357 shares issued, respectively)
Additional paid-in capital
Retained earnings
Stock options exercised
Treasury stock, at cost (273,619 and 209,657 shares, respectively)
Accumulated other comprehensive income
Total stockholders’ equity
Purchase of treasury stock (63,962 shares)
Stock-based compensation expense
6
190
91
(621)
79,037
8,260
(727)
6,838
(5,719)
(5,719)
$97,745
667,591
(38)
765,336
3,036
23,506
23,100
10,000
3,990
828,968
(4,098)
339
(621)
(38)
124
95
$93,806
635,251
729,057
6,310
23,365
15,350
10,000
3,749
787,831
84,226
8,260
3,153
0
3,153
0
(1,214)
975
8,260
86,570
(5,312)
3,492
93,985
(727)
969
7,979
(1,214)
79,036
(4,098)
340
84,226
196
91
Balance, December 31, 2014
$0
Total liabilities and stockholders’ equity
$975
$8,260
$86,570
($5,312)
$922,953
$3,492
$93,985
$872,057
10
2014 ANNUAL REPORT
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
FORESIGHT CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s omitted except share data)
For the years ended December 31,
2013
2014
2012
2014
2013
A S S E T S
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash and due from banks
Net income
Interest-bearing deposits in banks
Adjustments to reconcile net earnings to net cash
Federal funds sold
provided by operating activities:
Total cash and cash equivalents
Provision for loan losses
Provision for foreclosed asset losses
Depreciation
Interest-bearing deposits in banks - term deposits
Net amortization of securities
Securities:
Deferred income tax benefit
Securities held-to-maturity (HTM)
Net gain on the sales and calls of AFS securities
Securities available-for-sale (AFS)
Net (gain) loss on the sales of foreclosed assets
Non-marketable equity securities, at cost
Stock-based compensation (income) expense
Loans held for sale
Net change in:
Loans, net of allowance for loan losses of $14,571 and $14,777,
Servicing rights
respectively
Loans held for sale
Foreclosed assets, net
Other assets
Premises and equipment, net
Accrued expenses and other liabilities
Other assets
Net cash provided by operating activities
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-bearing deposits in banks - term deposits
Proceeds from sales of AFS securities
Proceeds from maturities, calls, and paydowns of HTM securities
Liabilities:
Proceeds from maturities, calls, and paydowns of AFS securities
Deposits:
Purchases of AFS securities
Noninterest-bearing
Purchases of non-marketable equity securities
Loan originations and principal collections, net
Interest-bearing
Proceeds from sales of foreclosed assets
Total deposits
Purchases of premises and equipment, net
Federal funds purchased
Net cash used in investing activities
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) advances and other borrowings
CASH FLOWS FROM FINANCING ACTIVITIES:
Subordinated debentures
Net change in deposits
Accrued interest payable and other liabilities
Net change is securities sold under agreements to repurchase
Total liabilities
Cash dividends paid
Net change in federal funds purchased
Stockholders’ equity:
Proceeds from issuance of subordinated debentures
Preferred stock (no par value; authorized 500,000 shares)
Redemption of preferred stock
Common stock ($.25 par value; authorized 5,000,000 shares;
Stock options excercised
3,898,449 and 3,879,357 shares issued, respectively)
Purchase of treasury stock
Additional paid-in capital
Proceeds from lines of credit and FHLB advances and other borrowings
Retained earnings
Payments on lines of credit and FHLB advances and other borrowings
Treasury stock, at cost (273,619 and 209,657 shares, respectively)
Net cash (used in) provided by financing activities
Accumulated other comprehensive income
Total stockholders’ equity
Net increase (decrease) in cash and cash equivalents
$8,260
2,621
490
847
784
101
(125)
(205)
91
164
82
510
241
13,861
(234)
14,601
235
33,021
(41,378)
(23)
(48,871)
2,553
(622)
(40,718)
36,279
141
(727)
(3,274)
0
0
196
(1,214)
54,250
(46,500)
39,151
12,294
$6,838
$20,717
8,336
939
29,992
4,777
1,158
935
1,303
699
(156)
(2,853)
95
5,197
1,396
214,393
2,243
1,439
$3,446
$16,787
911
0
17,698
13,444
744
862
1,242
(1,642)
1,584
(191)
216,065
(207)
2,220
97
1,521
4,963
640,795
1,622
9,500
16,376
33
4,077
1,286
232
18,424
$922,953
(128)
595,718
(3,400)
3,265
812
9,746
(1,226)
19,277
13,853
$872,057
(250)
15,917
190
40,642
(69,702)
(36)
(5,046)
6,688
(451)
(12,048)
$97,745
667,591
765,336
3,036
23,506
23,100
10,000
3,990
828,968
0
(7,662)
(1,681)
(621)
1,196
0
0
124
(38)
32,600
(37,100)
(13,182)
975
8,260
86,570
(5,312)
3,492
93,985
(6,806)
(3,863)
6,685
359
65,079
(64,034)
$93,806
(7)
(14,765)
635,251
2,057
729,057
(977)
6,310
(9,466)
23,365
15,350
10,000
3,749
787,831
(1,350)
(2,652)
(1,463)
1,215
10,000
(15,750)
0
969
0
7,979
17,000
79,036
(11,550)
(4,098)
(4,550)
340
84,226
(163)
0
Cash and cash equivalents at beginning of year
Total liabilities and stockholders’ equity
17,698
$922,953
24,504
$872,057
24,667
Cash and cash equivalents at end of year
$29,992
$17,698
$24,504
See Notes to Consolidated Financial Statements.
2014 ANNUAL REPORT
See Notes to Consolidated Financial Statements.
11
FORESIGHT CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(000s omitted except share data)
For the years ended December 31,
A S S E T S
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Total cash and cash equivalents
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest-bearing deposits in banks - term deposits
Cash paid during the year for:
Interest
Securities:
Securities held-to-maturity (HTM)
Securities available-for-sale (AFS)
Income taxes
Non-marketable equity securities, at cost
Loans held for sale
Loans, net of allowance for loan losses of $14,571 and $14,777,
SUPPLEMENTAL SCHEDULE OF NONCASH AND
respectively
FINANCING ACTIVITIES:
Foreclosed assets, net
Foreclosed assets acquired in settlement of loans
Premises and equipment, net
Other assets
2014
2013
2014
$20,717
8,336
939
29,992
5,197
$6,042
$2,302
1,396
214,393
2,243
1,439
$1,173
640,795
1,622
9,500
16,376
2013
$16,787
911
2012
0
17,698
4,963
$6,826
$8,093
$1,935
$1,489
$2,009
1,584
216,065
2,220
1,521
$3,367
595,718
3,265
9,746
19,277
Total assets
$922,953
$872,057
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) advances and other borrowings
Subordinated debentures
Accrued interest payable and other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock (no par value; authorized 500,000 shares)
Common stock ($.25 par value; authorized 5,000,000 shares;
3,898,449 and 3,879,357 shares issued, respectively)
Additional paid-in capital
Retained earnings
Treasury stock, at cost (273,619 and 209,657 shares, respectively)
Accumulated other comprehensive income
Total stockholders’ equity
$97,745
667,591
765,336
3,036
23,506
23,100
10,000
3,990
828,968
0
975
8,260
86,570
(5,312)
3,492
93,985
$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
Total liabilities and stockholders’ equity
$922,953
$872,057
12
2014 ANNUAL REPORT
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 27, 2015,
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, and 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 balances in time deposits in banks with the remaining maturity being the determining factor for
inclusion in cash and cash equivalents with the non-maturing interest bearing deposits. Interest-bearing
deposits in banks are carried at cost.
2014 ANNUAL REPORT
13
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 held
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
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 in
Loans originated and intended for sale in the secondary market are carried at the lower of cost or market in
the aggregate.
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.
2014 ANNUAL REPORT
14
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 is
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-
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 general
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 qualitative
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 actual loss
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 economic
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
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 which
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 classified
the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified
as impaired. Factors considered by management in determining impairment include payment status,
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 due.
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 cash
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 observable
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 dependent. The
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 loan losses.
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 using the
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 collateral
loan’s effective rate at inception, unless collateral dependent, then reported using the fair value of collateral
method, less estimated costs to sell.
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 interest
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.
income is recognized on those loans until the principal balance has been collected.
2014 ANNUAL REPORT
15
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.
16
2014 ANNUAL REPORT
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.
2014 ANNUAL REPORT
17
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 2012 and 2013 consolidated financial statements have been reclassified to conform
to the 2014 presentation.
18
2014 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(aa) Adoption of New Accounting Standard
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 required additional
disclosures regarding amounts reclassified out of accumulated other comprehensive income.
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 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.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2014-09, Revenue from Contracts with Customers. The objective of this new standard is to provide a
common revenue standard for all entities that enter into contracts with customers to transfer goods or
services or contracts to transfer nonfinancial assets. This new accounting standard is effective for financial
statements issued for annual reporting periods beginning after December 15, 2016. The Company is
evaluating what impact this new standard will have on its financial statements.
2014 ANNUAL REPORT
19
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 (continued)
In June 2014, the FASB issued ASU No. 2014-11, Transfers and Servicing (Topic 860):"Repurchase-to-Maturity
Transactions, Repurchase Financings, and Disclosures." This Update aligns the accounting for repurchase-to-
maturity transactions and repurchase agreements executed as repurchase financings with the accounting
for other typical repurchase agreements. Going forward, these transactions would all be accounted for as
secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and
supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase
financing could be accounted for on a combined basis as a forward agreement, which has resulted in
outcomes referred to as off-balance-sheet accounting. The Update requires a new disclosure for
transactions economically similar to repurchase agreements in which the transferor retains substantially all
of the exposure to the economic return on the transferred financial assets throughout the term of the
transaction. The Update also requires expanded disclosures about the nature of collateral pledged in
repurchase agreements and similar transactions accounted for as secured borrowings. The Update is
effective for interim or annual period beginning after December 15, 2014. All of the Company's
repurchase agreements are typical in nature (i.e., not repurchase-to-maturity transactions or repurchase
agreements executed as a repurchase financing) and are accounted for as secured borrowings. As such, the
adoption of ASU No. 2014-11 is not expected to have a material impact on the Company's consolidated
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, 2014 and
2013 was approximately $481 and $899, 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.
20
2014 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
2014
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
State and municipal
$1,396
$60
($0)
$1,456
Held-to-Maturity
2013
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
State and municipal
$1,584
$41
($22)
$1,603
Available-for-Sale
2014
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
U.S. Government sponsored entities and agencies
State and municipal
Mortgage-backed – residential
$40,279
94,488
73,777
$369
4,834
1,582
($526)
(189)
(221)
Fair
Value
$40,122
99,133
75,138
$208,544
$6,785
($936)
$214,393
Available-for-Sale
2013
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
U.S. Government sponsored entities and agencies
State and municipal
Mortgage-backed - residential
$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
For the years ended December 31, 2014, 2013 and 2012, proceeds from sales of available-for-sale securities
amounted to $14,601, $15,917 and $6,685, 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
2014
$140
($15)
2013
2012
$361
($205)
$191
$0
Securities with carrying amounts of approximately $112,371 and $91,924 at December 31, 2014 and 2013,
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, 2014 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.
2014 ANNUAL REPORT
21
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
$257
89
407
643
Fair
Value
$260
98
433
665
$1,396
$1,456
Amortized
Cost
Fair
Value
$6,242
17,546
48,770
62,209
134,767
73,777
$6,339
17,915
50,162
64,839
139,255
75,138
$208,544
$214,393
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, 2014 and
2013:
2014
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 and agencies
State and municipal
Mortgage-backed - residential
$5,454
5,358
5,547
$48
52
29
Total temporarily impaired
$16,359
$129
13
19
8
40
$18,777
4,214
14,396
$37,387
$478
137
192
$807
55
13
26
94
There were no held-to-maturity securities in an unrealized loss position as of December 31, 2014.
22
2014 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(3)
Securities (continued)
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 and agencies
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
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
Residential real estate
Agricultural real estate
Commercial:
Commercial and industrial
Agricultural production
Consumer and other
Allowance for loan losses
Totals
2014 ANNUAL REPORT
2014
2013
$216,722
105,426
85,839
160,600
73,703
13,076
655,366
(14,571)
$182,993
109,209
79,076
158,945
68,124
12,148
610,495
(14,777)
$640,795
$595,718
23
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
2014
$10,818
1,702
145
12,665
(2,434)
$3,858
893
105
4,856
(619)
$101
26
18
145
(42)
$14,777
2,621
268
17,666
(3,095)
$10,231
$4,237
$103
$14,571
Allowance for loan losses:
Individually evaluated for impairment
Collectively evaluated for impairment
$4,089
6,142
$993
3,244
$23
80
$5,105
9,466
Totals
$10,231
$4,237
$103
$14,571
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
24
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
2014 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(000s omitted except share data)
(4) Loans (continued)
(4) Loans (continued)
Detailed analysis of loans evaluated for impairment by portfolio segment for the year ended December 31
Detailed analysis of loans evaluated for impairment by portfolio segment for the year ended December 31
follows:
follows:
Loans:
Loans:
Individually evaluated for impairment
Individually evaluated for impairment
Collectively evaluated for impairment
Collectively evaluated for impairment
Totals
Totals
Loans:
Loans:
Individually evaluated for impairment
Individually evaluated for impairment
Collectively evaluated for impairment
Collectively evaluated for impairment
Totals
Totals
Real Estate
Real Estate
2014
2014
Commercial
Commercial
Consumer
Consumer
Total
Total
$25,593
$25,593
382,394
382,394
$407,987
$407,987
$5,009
$5,009
229,294
229,294
$234,303
$234,303
$107
$107
12,969
12,969
$13,076
$13,076
$30,709
$30,709
624,657
624,657
$655,366
$655,366
Real Estate
Real Estate
2013
2013
Commercial
Commercial
Consumer
Consumer
Total
Total
$27,883
$27,883
343,395
343,395
$371,278
$371,278
$5,440
$5,440
221,629
221,629
$227,069
$227,069
$119
$119
12,029
12,029
$12,148
$12,148
$33,442
$33,442
577,053
577,053
$610,495
$610,495
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:
Recorded
Recorded
Investment
Investment
Principal
Principal
Balance
Balance
2014
2014
Related
Related
Allowance
Allowance
Average
Average
Investment
Investment
Interest
Interest
Recognized
Recognized
Loans with no related
Loans with no related
allowance for loan losses:
allowance for loan losses:
Real estate:
Real estate:
Commercial real estate
Commercial real estate
Residential real estate
Residential real estate
Agricultural real estate
Agricultural real estate
Commercial
Commercial
Commercial & industrial
Commercial & industrial
Agricultural production
Agricultural production
Consumer and other
Consumer and other
Totals
Totals
Loans with an allowance
Loans with an allowance
for loan losses:
for loan losses:
Real estate:
Real estate:
Commercial real estate
Commercial real estate
Residential real estate
Residential real estate
Agricultural real estate
Agricultural real estate
Commercial
Commercial
Commercial & industrial
Commercial & industrial
Agricultural production
Agricultural production
Consumer and other
Consumer and other
Totals
Totals
Grand Totals
Grand Totals
2014 ANNUAL REPORT
$4,518
$4,518
3,335
3,335
602
602
3,060
3,060
356
356
50
50
11,921
11,921
13,141
13,141
3,997
3,997
0
0
1,552
1,552
41
41
57
57
18,788
18,788
$30,709
$30,709
$4,699
$4,699
3,495
3,495
602
602
3,076
3,076
356
356
50
50
12,278
12,278
13,142
13,142
4,195
4,195
0
0
1,581
1,581
41
41
58
58
19,017
19,017
$31,295
$31,295
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2,713
2,713
1,376
1,376
0
0
975
975
18
18
23
23
5,105
5,105
$5,105
$5,105
$5,035
$5,035
3,432
3,432
605
605
3,102
3,102
390
390
56
56
12,620
12,620
13,255
13,255
4,078
4,078
0
0
1,733
1,733
44
44
64
64
19,174
19,174
$31,793
$31,793
$192
$192
91
91
11
11
115
115
21
21
3
3
433
433
539
539
114
114
0
0
70
70
0
0
4
4
727
727
$1,161
$1,161
25
FORESIGHT
(4) Loans (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
Recorded
Investment
Principal
Balance
2013
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
$12,439
2,566
662
3,815
0
89
$14,304
3,420
662
3,985
0
90
Total
19,571
22,461
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
5,897
6,319
0
1,578
47
30
5,904
6,529
0
1,580
47
30
N/A
N/A
N/A
N/A
N/A
N/A
2,897
2,599
0
546
26
15
$12,904
2,834
659
3,915
0
112
20,424
5,895
6,425
0
1,696
50
33
$586
75
31
93
0
6
791
329
185
0
75
0
2
591
13,871
14,090
6,083
14,099
$33,442
$36,551
$6,083
$34,523
$1,382
26
2014 ANNUAL REPORT
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
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.
2014 ANNUAL REPORT
27
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
2014
$201,266
95,875
84,601
151,092
72,749
12,971
$877
3,638
636
5,723
557
0
$14,579
5,913
602
3,785
356
105
$41
$216,722
105,426
85,839
160,600
73,703
13,076
Total
$618,554
$11,431
$25,340
$41
$655,366
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
Loan aging information by class of loan at December 31 follows:
As of December 31, 2014
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
$1,538
320
50
89
$1,859
1,866
437
777
7
$1,859
3,404
437
1,097
50
96
$6,943
Total
$1,997
$4,946
28
2014 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
As of December 31, 2014
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
$1,859
3,404
437
1,097
50
96
$209,193
107,692
85,402
$211,052
111,096
85,839
159,503
73,653
13,157
160,600
73,703
13,076
$121
1
7
Total
$6,943
$648,600
$655,366
$129
$2,703
3,775
437
1,536
41
22
$8,514
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
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
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.
2014 ANNUAL REPORT
29
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
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:
Real Estate:
Commercial real estate
Commercial
Commercial & industrial
Total
Real Estate:
Commercial real estate
Commercial
Commercial & industrial
Total
Number of
Loans
Pre-Modification
Investment
Post-Modification
Investment
2014
3
2
5
$2,551
232
$2,783
2013
$1,833
232
$2,065
Number of
Loans
Pre-Modification
Investment
Post-Modification
Investment
8
4
12
$8,832
491
$9,323
$9,207
491
$9,698
The following table summarizes troubled debt restructurings that defaulted at December 31, within 12 months
of their modification date:
Real Estate:
Commercial real estate
Total
Real Estate:
Commercial real estate
Residential real estate
Total
As of December 31, 2014
Number of
Loans
Recorded
Investment
3
3
$7,576
$7,576
As of December 31, 2013
Number of
Loans
Recorded
Investment
2
2
4
$738
776
$1,514
30
2014 ANNUAL REPORT
FORESIGHT
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, 2014 and 2013, were approximately $316,755 and $311,845,
respectively. Custodial escrow balances maintained in conjunction with serviced loans were approximately
$3,055 and $2,861 at December 31, 2014 and 2013, respectively.
The following summarizes the activity pertaining to mortgage servicing rights for the years ended December
31:
Balance at beginning of year
Mortgage servicing rights capitalized
Mortgage servicing rights amortized
Balance at end of year
2014
$1,615
404
(568)
$1,451
2013
$1,648
643
(676)
$1,615
2012
$1,521
940
(813)
$1,648
The approximate fair values of the mortgage servicing rights were $2,627 and $2,449 as of December 31, 2014
and 2013.
(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
mortgage loan commitment binds the Company to lend funds to a potential borrower at a specified interest
rate and within a specified period of time, generally up to 60-days after inception of the rate lock. It is the
Company’s practice to enter into mandatory delivery forward commitments for the future delivery of residential
mortgage loans to third-party investors when an interest rate lock commitment is granted. These mandatory
delivery forward commitments bind the Company to deliver a residential mortgage loan to a third-party
investor even if the underlying loan never funds. As of December 31, 2014 and 2013, the Company had
approximately $1,221 and $538 in interest rate lock commitments outstanding. As of December 31, 2014 and
2013, the Company had approximately $2,442 and $2,293 in mandatory delivery forward commitments
outstanding. These outstanding mortgage loan commitments are considered to be derivatives. The
approximate fair values associated with these derivatives were considered to be immaterial as of December 31,
2014 and 2013.
(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:
Balance at beginning of year
Provision for losses
Write-downs
Reductions from sales
Recoveries
Balance at end of year
2014
$1,892
490
0
(435)
0
$1,947
2013
$3,711
807
0
(2,626)
0
$1,892
2012
$3,320
744
0
(353)
0
$3,711
2014 ANNUAL REPORT
31
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
2014
2013
$2,074
11,289
10,395
23,758
14,258
$9,500
$2,065
11,146
9,967
23,178
13,432
$9,746
Depreciation expense for the years ended December 31, 2014, 2013 and 2012 amounted to $847, $935 and
$862, 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
Other
2014
2013
$5,455
5,369
1,451
3,253
848
$5,282
4,793
1,615
5,480
2,107
$16,376
$19,277
(10) Time Deposits
The aggregate amount of time deposits with minimum a denomination of $250 was approximately $37,745 and
$22,735 at December 31, 2014 and 2013, respectively.
At December 31, 2014, the scheduled maturities of time deposits are as follows:
2015
2016
2017
2018
2019 and thereafter
$133,481
122,992
58,117
29,870
24,355
$368,815
32
2014 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.
(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 $241, $249, and $215, for 2014,
2013, and 2012, 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 $9,234 and $9,148 as of
December 31, 2014 and 2013, 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 $825, $854, and $875 at December 31, 2014, 2013, and 2012, respectively. Salary-continuation expenses
were $46, $42, and $41 in 2014, 2013, and 2012, 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
2014
$2,302
1,042
3,344
(131)
232
101
$1,035
626
1,661
524
175
699
Total income tax expense
$3,445
$2,360
$992
630
1,622
(1,270)
(372)
(1,642)
($20)
2013
2012
2014 ANNUAL REPORT
33
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:
2014
2013
2012
% of
Pretax
Earnings
% of
Pretax
Earnings
% of
Pretax
Earnings
Amount
Amount
Amount
$3,980
34.0%
$3,127
34.0%
$1,165
34.0%
(1,257)
(73)
(10.7%)
(0.6%)
(1,339)
(59)
(14.6%)
(0.6%)
(1,413)
(65)
(41.2%)
(1.9%)
841
(46)
7.2%
(0.4%)
529
102
5.8%
1.1%
170
123
4.9%
3.6%
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
$3,445
29.5%
$2,360
25.7%
($20)
(.6%)
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, 2014 and 2013 are summarized as follows:
Deferred tax assets:
Allowance for loan losses
Allowance for losses on foreclosed assets
Alternative minimum tax
Deferred compensation and other
Total deferred tax assets
Deferred tax liabilities:
FHLB stock dividend
Available-for-sale securities
Depreciation
Mortgage servicing rights and other
Total deferred tax liabilities
Net deferred tax assets
2014
2013
$5,700
831
202
397
7,130
129
2,356
794
598
3,877
$3,253
$5,763
660
202
656
7,281
129
227
800
645
1,801
$5,480
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 2012.
34
2014 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 $21,560 and $20,625 at December 31, 2014 and 2013,
respectively. Activity for related party loans for the year ended December 31, 2014 is as follows:
Balance at beginning of year
New credits
Participated outside the Company
Repayments
Balance at end of year
2014
$20,625
10,025
(1,475)
(7,615)
$21,560
Deposit accounts from related parties totaled approximately $10,954 and $10,074 at December 31, 2014 and
2013, 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
2014
$162,142
503
219
$162,864
2013
$142,503
377
394
$143,274
2014 ANNUAL REPORT
35
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(15) Financial Instruments with Off-Balance-Sheet Risk and Concentrations (continued)
Financial instruments with off-balance-sheet risk (continued):
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.
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 $23,506 and $23,365 at December 31, 2014 and
2013, respectively, and are collateralized by investment securities with fair values of approximately $38,997 and
$38,934. The weighted-average interest rates on these agreements were 0.27% and 0.29% at December 31,
2014 and 2013, respectively. Securities sold under agreements to repurchase mature on a daily basis.
(17) Federal Home Loan Bank (FHLB) and Federal Reserve Advances
Fixed-rate advances with rates ranging from .15% to 2.64% and .15% to
3.16% and weighted average rates of .86% and 1.05% as of December
31, 2014 and 2013, respectively. Interest is payable monthly with
principal due at maturity.
2014
2013
$23,100
$15,350
Advances are collateralized by 1-4 family mortgage loans, other qualifying loans and securities. The total
amounts of collateral securing FHLB advances were approximately $83,973 and $77,634 as of December 31,
2014 and 2013, respectively. FHLB advances are subject to a prepayment penalty if they are repaid prior to
maturity.
36
2014 ANNUAL REPORT
FORESIGHT
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)
(17) Federal Home Loan Bank (FHLB) and Federal Reserve Advances (continued)
(17) Federal Home Loan Bank (FHLB) and Federal Reserve Advances (continued)
(17) Federal Home Loan Bank (FHLB) and Federal Reserve Advances (continued)
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 Banks participate in the Federal Reserve Bank of Chicago’s Discount Window Lending Program. Primary
The primary advance interest rate at December 31, 2014 was 75-basis points. Outstanding advances were $0 at
advances generally mature daily and bear interest at a general approved rate in relation to the federal funds rate.
The Banks participate in the Federal Reserve Bank of Chicago’s Discount Window Lending Program. Primary
December 31, 2014 and 2013. Advances are collateralized by investment securities pledged totaling
The primary advance interest rate at December 31, 2014 was 75-basis points. Outstanding advances were $0 at
advances generally mature daily and bear interest at a general approved rate in relation to the federal funds rate.
approximately $10,622 and $10,791 at December 31, 2014 and 2013, respectively, to the Federal Reserve Bank.
December 31, 2014 and 2013. Advances are collateralized by investment securities pledged totaling
The primary advance interest rate at December 31, 2014 was 75-basis points. Outstanding advances were $0 at
approximately $10,622 and $10,791 at December 31, 2014 and 2013, respectively, to the Federal Reserve Bank.
December 31, 2014 and 2013. Advances are collateralized by investment securities pledged totaling
At December 31, the scheduled maturities of Federal Home Loan Bank advances and other borrowings are as
approximately $10,622 and $10,791 at December 31, 2014 and 2013, respectively, to the Federal Reserve Bank.
follows:
At December 31, the scheduled maturities of Federal Home Loan Bank advances and other borrowings are as
follows:
At December 31, the scheduled maturities of Federal Home Loan Bank advances and other borrowings are as
follows:
2014
2015
2014
2016
2015
2014
2017
2016
2015
2018
2017
2016
2019
2018
2017
2019
2018
2019
2013
2014
2014
2013
$9,250
2013
3,600
$9,250
1,800
3,600
$9,250
700
1,800
3,600
0
700
1,800
0
0
700
0
0
$15,350
0
$15,350
2014
$0
12,100
$0
6,300
12,100
$0
3,200
6,300
12,100
1,000
3,200
6,300
500
1,000
3,200
500
1,000
$23,100
500
$23,100
$23,100
$15,350
(18) Subordinated Debentures
(18) Subordinated Debentures
(18) Subordinated Debentures
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
The Company issued $10,000,000 of Subordinated Debentures in the fiscal year ended 2012 that qualify as Tier
Subordinated Debentures for capital raising purposes primarily for the redemption of preferred stock as part of
2 regulatory capital (with certain limitations applicable) for the Company. The Company issued the
The Company issued $10,000,000 of Subordinated Debentures in the fiscal year ended 2012 that qualify as Tier
the Troubled Asset Relief Program. The Debentures mature on August 30, 2019 and the Company may
Subordinated Debentures for capital raising purposes primarily for the redemption of preferred stock as part of
2 regulatory capital (with certain limitations applicable) for the Company. The Company issued the
redeem some or all of the Subordinated Debentures at any time after the third anniversary of their issuance in
the Troubled Asset Relief Program. The Debentures mature on August 30, 2019 and the Company may
Subordinated Debentures for capital raising purposes primarily for the redemption of preferred stock as part of
accordance with the contract price limitations. The redemption may be subject to approval by the Federal
redeem some or all of the Subordinated Debentures at any time after the third anniversary of their issuance in
the Troubled Asset Relief Program. The Debentures mature on August 30, 2019 and the Company may
Reserve and must be on a pro rata basis amongst all holders. The terms call for interest payments to be made
accordance with the contract price limitations. The redemption may be subject to approval by the Federal
redeem some or all of the Subordinated Debentures at any time after the third anniversary of their issuance in
quarterly in arrears on the last day of March, June, September and December. The annual rate of interest on
Reserve and must be on a pro rata basis amongst all holders. The terms call for interest payments to be made
accordance with the contract price limitations. The redemption may be subject to approval by the Federal
the Subordinated Debentures is 6.00%. The interest payments can be deferred for so long as the Company or a
quarterly in arrears on the last day of March, June, September and December. The annual rate of interest on
Reserve and must be on a pro rata basis amongst all holders. The terms call for interest payments to be made
specific Bank remains subject to any regulatory order limiting or prohibiting the payment of dividends or
the Subordinated Debentures is 6.00%. The interest payments can be deferred for so long as the Company or a
quarterly in arrears on the last day of March, June, September and December. The annual rate of interest on
interest on indebtedness of the Company, including the Debentures. If interest payments are deferred, the
specific Bank remains subject to any regulatory order limiting or prohibiting the payment of dividends or
the Subordinated Debentures is 6.00%. The interest payments can be deferred for so long as the Company or a
interest will accrue until paid. The agreement contains certain restrictive covenants that are effective if the
interest on indebtedness of the Company, including the Debentures. If interest payments are deferred, the
specific Bank remains subject to any regulatory order limiting or prohibiting the payment of dividends or
Company is in default on the debentures.
interest will accrue until paid. The agreement contains certain restrictive covenants that are effective if the
interest on indebtedness of the Company, including the Debentures. If interest payments are deferred, the
Company is in default on the debentures.
interest will accrue until paid. The agreement contains certain restrictive covenants that are effective if the
Company is in default on the debentures.
(19) Fair Value Measurements
(19) Fair Value Measurements
(19) 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
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in
participants on the measurement date. The standard describes three levels of inputs that may be used to
the principal or most advantageous market for the asset or liability in an orderly transaction between market
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in
measure fair value:
participants on the measurement date. The standard describes three levels of inputs that may be used to
the principal or most advantageous market for the asset or liability in an orderly transaction between market
measure fair value:
participants on the measurement date. The standard describes three levels of inputs that may be used to
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has
measure fair value:
the ability to access as of the measurement date.
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 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets
the ability to access as of the measurement date.
or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets
corroborated by observable market data.
or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets
corroborated by observable market data.
or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be
Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions
corroborated by observable market data.
that market participants would use in pricing an asset or liability.
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.
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.
2014 ANNUAL REPORT
37
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(19) 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.
38
2014 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(19) 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, 2014
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
$214,393
$214,393
$13,683
$1,622
$13,683
$1,622
Collateral-dependent impaired loans, which are measured for impairment using the fair value of collateral, had a
carrying value of $18,788 with specific reserves of $5,105 as of December 31, 2014.
Foreclosed assets, which are measured at the lower of carrying or fair value less costs to sell, were carried at
their fair value of $1,622, which is comprised of the outstanding balance of $3,569, net of an allowance for
losses of $1,947 as of December 31, 2014.
As of December 31, 2013
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
$216,065
$216,065
Assets measured at fair value
on a non-recurring basis:
Assets:
Collateral-dependent impaired loans
Foreclosed assets
$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.
2014 ANNUAL REPORT
39
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(19) Fair Value Measurements (continued)
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, 2014:
Collateral dependent impaired loans,
net of specific reserves
Foreclosed assets
Valuation
Technique
Unobservable
Input
Range
Sales comparison
approach
Sales comparison
approach
Appraised values
10% - 20%
Appraised values
10% - 20%
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 (Level 1).
Interest-bearing deposits in other banks: The carrying amounts are reasonable estimates of fair value (Level 1).
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 (Level 2).
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 (Level 3).
Loans held for sale: The fair values of loans held for sale are based on commitments on hand from investors
or prevailing market prices (Level 2).
40
2014 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(19) 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 (Level 3).
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 (Level 3).
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 (Level 2).
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
(Level 3).
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
(Level 3).
Accrued interest: The carrying amounts of accrued interest approximate their fair value (Level 3).
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 (Level 3).
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, 2014
Fair
Value
Carrying
Amount
December 31, 2013
Carrying
Amount
Fair
Value
$20,717
8,336
215,789
2,243
1,439
640,795
5,369
$20,717
8,336
215,848
2,243
1,439
642,671
5,369
$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
$765,336
3,036
$769,590
3,036
$729,057
6,310
$732,476
6,310
23,506
23,100
10,000
670
23,511
23,140
10,000
670
23,365
15,350
10,000
704
23,369
15,447
10,000
704
2014 ANNUAL REPORT
41
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(20) Stock-Compensation Plans
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 and 2012.
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
2014
2013
2012
1.64%
10
29.71%
1.05%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
For the years ended December 31, 2014, 2013 and 2012, the Company recognized $109, $95 and $97 in
compensation expense for stock options, respectively. No tax benefits were recognized for the three year
period ended December 31, 2014. As of December 31, 2014, stock-based compensation expense not yet
recognized totaled $155, and is expected to be recognized over a weighted-average remaining period of
approximately five years. The intrinsic value of options exercised during the years ended December 31, 2014,
2013 and 2012 was $168, $99 and $0, respectively.
42
2014 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(20) 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, 2014:
Shares under option, beginning of year
Granted during the year
Forfeited and expired during the year
Exercised during the year
Weighted
Average
Exercise
Price
$10.29
19.00
10.49
Options
142,057
25,000
0
(19,914)
Shares under option, end of year
147,143
$11.74
Options exercisable, end of year
96,627
$10.25
Shares available for grant, end of year
116,738
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
5.7
9.2
6.0
5.3
$1,202
50
(168)
$1,363
$1,039
Non-vested options, December 31, 2013
Granted during the year
Vested during the year, net
Forfeited or expired during the year
Non-vested options, December 31, 2014
Number of
Options
Weighted
Average
Fair Value
at Grant
51,031
25,000
(25,515)
0
50,516
$2.79
4.88
3.48
0
$4.17
The following table summarizes information about fixed stock options outstanding at December 31, 2014:
Exercise Price
$10.00
$10.25
$10.50
$19.00
Number Outstanding
19,143
83,000
20,000
25,000
147,143
Remaining
Contractual Life
(Years)
3.0
5.8
5.6
9.2
Number Exercisable
15,771
64,856
16,000
0
96,627
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.
2014 ANNUAL REPORT
43
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(20) Stock-Compensation Plans (continued)
The following table summarizes information regarding unvested restricted stock and shares outstanding at
December 31, 2014:
Restricted stock, December 31, 2013
Granted during the year
Forfeited during the year
Vested during the year
Restricted stock, December 31, 2014
Unvested
Shares
Weighted Average
Grant Value
0
8,516
(254)
0
8,262
$0
19.00
19.00
0
$19.00
During 2014, total compensation expense of $59 (before tax benefits of $24) was recorded from amortization
of restricted shares expected to vest. Future projected compensation expense (before tax benefits) assuming all
restricted shares eventually vest to employees would be $78 and $20 for years 2015 and 2016, respectively.
(21) Stock Repurchase Program
In October 2013 and October 2014, the Company’s Board of Directors authorized a stock repurchase program
authorizing an aggregate repurchase of up to 100,000 of common stock at market price, each year. For the
years ended December 31, 2014 and 2013, the Company had repurchased 63,962 and 2,000 shares under this
program, respectively.
The purchase price for the shares of the Company’s stock repurchased is reflected as a reduction to
shareholders’ equity. In accordance with accounting guidance, 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.
(22) 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
2014
2013
2012
$8,260
0
0
$8,260
$6,838
0
0
$6,838
$3,446
(877)
(356)
$2,213
Average number of common shares outstanding
Effect of dilutive options
3,638,004
57,420
3,661,934
54,982
3,659,504
28,345
Average number of common shares outstanding used
to calculate diluted earnings per common share
3,695,424
3,716,916
3,687,849
44
2014 ANNUAL REPORT
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(23) 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.
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, 2014, that the Company and the
Banks meet all capital-adequacy requirements to which they are subject.
As of December 31, 2014, 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
$107,104
25,135
22,164
15,478
24,899
9,642
$90,351
22,830
20,093
14,107
22,688
8,865
$90,351
22,830
20,093
14,107
22,688
8,865
15.42%
13.72%
13.45%
14.17%
14.29%
15.69%
13.01%
12.46%
12.19%
12.92%
13.02%
14.43%
9.99%
9.25%
9.75%
9.82%
10.30%
10.31%
$55,556
14,656
13,182
8,738
13,941
4,916
$27,778
7,328
6,591
4,369
6,971
2,458
$36,182
9,873
8,242
5,749
8,810
3,441
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
$18,320
16,477
10,923
17,427
6,145
N/A
$10,992
9,886
6,554
10,456
3,687
N/A
$12,342
10,302
7,186
11,013
4,301
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, 2014:
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
2014 ANNUAL REPORT
45
FORESIGHT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(23) Regulatory Matters (continued)
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
$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%
(24) Lease Commitments
One of the banks has operating lease commitments on office space in Loves Park, Illinois. The terms of the
Perryville lease location requires base lease amounts of approximately $77 per year. The lease expires
September 2015 and is renewable up to four additional one year terms. The terms of North Second lease
location require base lease amounts of approximately $34 per year. The lease expires September 2020 and is
renewable up to two additional five year terms. Rent expense of $92 and $111 was recognized in 2014 and
2013, respectively.
In addition, there is an operating lease agreement for bank premises in Winnebago, and Kankakee, Illinois.
The Winnebago lease requires payment of approximately $51 per year, expiring November 2015. There is no
formal lease for the Kankakee location. The Bank is verbally agreeing to pay $7 for 2015. The minimum lease
commitments is $146 for 2015.
(25) Subsequent Event
In February, 2015, the Company entered into a definitive agreement to acquire 100% of the common shares
of State Bank of Herscher. The consummation of the transaction is still contingent upon regulatory approval
and is expected to occur in 2015. As part of the terms of the proposed transaction, the acquired bank will
become a wholly owned subsidiary of the Company and certain intangible assets and the assets and liabilities
of the acquired bank will be adjusted to estimated fair value. The amount of these adjustments has not been
determined at this time.
46
2014 ANNUAL REPORT
FORESIGHT
General Information
Foresight Financial Group, Inc.
3106 North Rockton Ave.
Rockford, IL 61103
815.847.7500 ph
815.967.6107 fx
Email: dcooke@ffgbank.net
Directors
Registrar, transfer agent and
change of address:
Computershare Shareholder Services
PO Box 30170
College Station, TX 77842-3170
800.368.5948 ph
www.computershare.com/investor
Foresight common stock is listed
on the OTCQB Marketplace
under the symbol FGFH
For more information, contact
Foresight Financial Group, Inc. at
the corporate address or visit our
website at www.foresightfg.com
Foresight Financial Group, Inc.
Rockford, IL
Lena State Bank
Lena, IL
State Bank of Davis
Davis, IL
John Collman
Stephen G. Gaddis
John Jeschke
Fred Kundert
Brent Myers
Carolyn Sluiter, D.V.M.
Robert W. Stenstrom
Judd Thruman, J.D.
Doug Wagner
Northwest Bank of Rockford
Rockford, IL
Stephen G. Gaddis
Charles B. Kullberg
Stephen P. McKeever
John J. Morrissey, C.P.A.
Brent Myers
Robert W. Stenstrom
Tom Walsh
Todd Bussian, O.D.
Gordon Dammann, D.D.S.
John Jeschke
James Moest, D.V.M.
Brent Myers
Steven Rothschadl
Judd Thruman, J.D.
Dan Dietmeier
John Jeschke
Brent Myers
Thomas Olsen
Carolyn Sluiter, D.V.M.
Richard Stenzinger, C.P.A.
Judd Thruman, J.D.
German-American State Bank
German Valley, IL
State Bank
Freeport, IL
Robert Borneman
John Collman
Robert Ebbesmeyer, D.V.M.
Jack Janssen
Angela K. Larson
James G. Sacia
Michael Schirger, J.D.
Jeffrey M. Sterling
Douglas Cross
Mary Hartman
Bruce Johnson
Dr. Joe Kanosky
Fred Kundert
Marilyn Smit
Brian Stewart
Ken Thompson
Doug Wagner
2014 ANNUAL REPORT
47
FORESIGHT
CONSOLIDATING SCHEDULE 1 - BALANCE SHEET
(000s omitted except share data)
December 31, 2014
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
$4,052
23
992
45,558
534
155,395
20
983
3,906
$1,569
293
113
1,215
1,371
38,543
313
100,196
23
1,024
1,403
Total assets
$211,463
$146,063
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
$20,560
162,282
182,842
2,322
4,500
1,035
$14,299
104,892
119,191
0
7,197
4,500
335
Total liabilities
190,699
131,223
Stockholders’ equity:
Preferred stock
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive income
Total stockholders’ equity
400
2,794
16,899
671
20,764
100
1,582
12,424
734
14,840
Total liabilities and stockholders’ equity
$211,463
$146,063
48
2014 ANNUAL REPORT
FORESIGHT Northwest
Bank
State
Bank
Lena
State Bank
Foresight Financial
Group, Inc.
Eliminations
Consolidated
Total
$8,995
6,398
0
1,744
25
48,214
695
1,439
170,792
1,364
4,360
5,082
$4,901
15
826
1,744
51,534
448
161,390
0
1,794
2,615
$1,202
9
0
1,100
30,544
253
52,900
5
484
2,895
$10,557
122
210
855
475
92,075
($10,559)
1,598
(1,598)
(92,075)
$20,717
$8,336
939
5,197
1,396
214,393
2,243
1,439
640,795
1,622
9,500
16,376
$249,108
$225,267
$89,392
$104,294
($102,634)
$922,953
$35,377
180,647
216,024
0
2,373
6,000
1,183
$22,183
159,064
181,247
0
13,676
6,100
627
225,580
201,650
1,450
7,199
14,181
698
1,000
4,594
17,094
929
23,528
23,617
$5,507
71,084
76,591
714
260
2,000
501
80,066
500
3,693
4,672
461
9,326
($181)
(10,378)
(10,559)
(10,559)
(3,450)
(19,861)
(65,270)
(3,494)
(92,075)
$10,000
309
10,309
0
975
8,259
86,570
(5,312)
3,493
93,985
$97,745
667,591
765,336
3,036
23,506
23,100
10,000
3,990
828,968
0
975
8,260
86,570
(5,312)
3,492
93,985
$249,108
$225,267
$89,392
$104,294
($102,634)
$922,953
2014 ANNUAL REPORT
49
FORESIGHT For the year ended December 31, 2014
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
50
German-American
State Bank
State Bank
of Davis
$7,303
$4,308
628
668
3
13
2
8,617
1,441
2
56
1,499
7,118
385
6,733
319
68
698
1,085
2,390
396
197
359
(73)
1,137
4,406
3,412
1,135
759
678
2
24
1
5,772
859
5
43
3
910
4,862
573
4,289
106
1
215
322
963
195
137
148
6
715
2,164
2,447
747
$2,277
$1,700
2014 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
$8,478
$7,276
$2,126
673
700
25
1
9,877
1,254
3
10
39
1,306
8,571
1,000
610
886
20
1
8,793
1,136
3
17
84
1,240
7,553
550
406
580
17
1
3,130
465
1
6
472
2,658
113
7,571
7,003
2,545
4
19
23
0
600
600
(577)
0
(577)
($19)
(19)
($19)
(19)
0
0
410
8
1,118
655
576
2,767
4,756
1,102
98
375
293
1,823
8,447
1,891
464
208
45
688
941
2,140
315
264
304
16
721
3,760
4,184
1,400
$1,427
$2,784
2014 ANNUAL REPORT
107
3
181
291
704
188
157
75
106
395
1,625
1,211
272
$939
$9,129
($9,129)
1,480
10,609
1,698
267
38
139
201
2,343
7,689
(573)
$8,262
(1,474)
(10,603)
(630)
(844)
(1,474)
(9,129)
($9,129)
$29,495
3,076
3,512
5
99
6
36,193
5,136
14
70
188
600
6,008
30,185
2,621
27,564
1,150
0
125
1,118
655
2,364
5,412
12,651
2,463
261
417
487
4,992
21,271
11,705
3,445
$8,260
51
FORESIGHT Notes
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52
2014 ANNUAL REPORT
FORESIGHT Board of Directors
John Collman
Stephen G. Gaddis
John Jeschke,
Chairman
Fred Kundert
Brent Meyers
Carolyn Sluiter
Robert W. Stenstrom
Judd Thruman
Doug Wagner
Bank Presidents
Mary Hartman
State Bank, Freeport
Brent Meyers
Lena State Bank &
State Bank of Davis
Jeffrey Sterling
German American
State Bank
Tom Walsh
Northwest Bank
2014 ANNUAL REPORT
53
FORESIGHT An “Enterprising” Look to the Future
Last year’s annual
report cover fea-
tured
the word,
“ E n t e r p r i s i n g . ”
With
the Great
Recession behind
us, this word was chosen to illustrate Foresight’s desire
to embark on new ventures. We particularly liked the
word “Enterprising,” because it is a verb, an action word
indicating we are willing to undertake important new
projects marked by imagination and initiative and will
do so in an energetic fashion.
We believe that capitalizing on this
expansion opportunity is an investment
in our future while staying true to
our mission of providing excellent
community banking services.
This initiative triggered an evaluation by the Board of
Directors and Management of Foresight Financial Group
of where our company has been successful and where
we strive to further succeed with a focus on enriching
shareholder value, enhancing product services, and
improving efficiency. It became evident that expanding
our market footprint would accomplish such ambitions.
This objective led us to research the marketplace for
State Bank of Hersher 12-31-14 (Unaudited - in millions)
135
127
80
150 -
125 -
100 -
75 -
50 -
25 -
0 -
54
State Bank of Hersher, Hersher, IL
State Bank of Hersher, Branch
growth and expansion opportunities and ultimately to
acquire the State Bank of Herscher*.
The State Bank of Herscher was chartered in 1902 by a group
of community citizens with a vision to provide services to
the local community in a culture where bank employees
take the time to know their customers, a principle deeply
ingrained with Foresight and its’ affiliate banks.
State Bank of Herscher’s board of directors is excited about
becoming a member of Foresight Financial Group because
of our mission of Community Building through Community
Banking. Our acquisition of the State Bank of Herscher will
allow for continuous service to the local people, families
and businesses, as it has been for over a century.
We believe that capitalizing on this expansion opportunity
is an investment in our future while staying true to our
mission of providing excellent community banking services.
Assets
Loans
Deposit Accounts
*Pending regulatory approval
2014 ANNUAL REPORT
FORESIGHT The Banks of Foresight
LENA
FREEPORT
DAVIS
PECATONICA
WINNABAGO
SEWARD
GERMAN
VALLEY
MACHESNEY PARK
LOVES PARK
ROCKFORD
KANKAKEE
HERSHER
I L L I N O I S
2014 ANNUAL REPORT
55
FORESIGHT 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”
FORESIGHT FINANCIAL GROUP
2014 Annual Report
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3106 NORTH ROCKTON AVENUE • ROCKFORD, ILLINOIS 61103 • www.foresightfg.com • 815.847.7500