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CommunityBuildingThroughCommunityBanking
The Foresight Banks
Freeport, IL
www.foresightfg.com
Dear Stockholders,
In 2015 we reached three tremendous milestones for our company: Reaching $1 billion in assets,
earning $10 million in earnings and acquiring the State Bank of Herscher.
We reached $1 billion dollars in asset size in July of 2015. A majority of the asset growth was due
to the acquisition of State Bank of Herscher yet Foresight also had success growing organically.
We continue to hold the largest market share in Stephenson County. Our
efforts to strengthen our customer relationships have rewarded us with
solid core market growth year after year.
This past year was the first time Foresight earned $10 million in our
company’s history. Our total loan growth increased by $69 million to reach
$711 million compared to $642 million in 2014. Deposit growth, a key goal
for 2015 increased by $148 million to $913 million, a 19.3% increase over 2014.
Obtaining this goal can be attributed to many of you as local shareholders
who utilize our banking services and functions for both your businesses
and yourselves personally.
Our third milestone was the acquisition of State Bank of Herscher.
Our company and our bank worked to achieve a successful calculated
acquisition in July and we are thrilled to declare our merger with this institution was smooth
and well executed by our Foresight team. Our successful acquisition of State Bank of Herscher
in the Kankakee market area had a significant influence in our success for 2015. Alongside the
merger came an experienced staff. State Bank of Herscher has already contributed to the quality
of people who we are proud to have as part of Foresight Financial Group. It is now more than
ever we are working towards expanding and growing to benefit you, our shareholder’s and your
expectations of your company’s financial future.
We are pleased to report the stock price ended the year at $24.60, a 17% increase over the duration
of 2015 and a 2-year increase of 31%. Book value increased over 10% to $27.59 per share. ROA was
1.05% and ROE was improved to 10.75%. Provision expense reduced by $961,000 and is projected
to drop back farther in 2016. Non-performing assets did increase in 2015 due to the acquisition of
the State Bank of Herscher. This increase was factored into the purchase price of the bank. We
have already made significant progress in reducing the non-performing assets in 2016.
Foresight Financial Group has also strengthened in adding qualified staff into our corporate office,
an area that we will continue to strengthen. In conjunction with these additions and changes, 2016
will bring the addition of our very own corporate headquarters in Winnebago, IL. This complex
will house Foresight’s employees and be the center for our flourishing company. We are excited
about the expansion and are confident its addition will enhance our productivity for another year
of success for 2016.
We look forward to adding to the value of State Bank of Herscher’s performance as a community
bank dedicated to our mission of community building. Our team of dedicated, committed and
caring Foresight Bankers from throughout our network of strong community banks is anxious to
share their expertise and enthusiasm which has fueled Foresight’s growth and success with our
new member bank and its staff. We are confident that we have built an operational infrastructure,
and a strong team of exceptional people who will add to our future success and profitability for
years to come. We thank you, our shareholders, for your continuing confidence in us as your
executive leadership team and look forward to the challenges and prosperity that 2016 will bring.
With these elements of strength and your continued support, we can continue to pursue in
confidence our mission of Community Building through Community Banking.
Respectfully,
Brent Myers, President and CEO
2
FORESIGHT 2015 Annual Report Net Earnings DOLLARS (1,000,000s)
Net Earnings dollars (1,000,000s)
10,544
8.260
6.568
6.838
5.815
3.446
11.0 -
10.0 -
9.0 -
8.0 -
7.0 -
6.0 -
5.0 -
4.0 -
3.0 -
2.0 -
1.0 -
0 -
2010
2011
2012
2013
2014
2015
Trends in Combined Equity Capital and ALLL*to Non-Performing Assets (000s)
Trends in Combined Equity Capital and ALLL* to Non-Performing Assets (in 000s)
120,000 -
100,000 -
99,190
107,771
98,495
99,003
117,995
108,556
80,000 -
60,000 -
40,000 -
20,000 -
23,060
19,898
17,036
15,778
10,265
15,936
0 -
2010
2011
2012
2013
2014
2015
Equity Capital & ALLL
Non-Performing Assets
3
FORESIGHT 2015 Annual Report
Trends in Assets, Deposits, Loans (000’s)
Trends in Assets, Deposits and Loans (In 000’s)
1,100,000 -
1,000,000 -
900,000 -
800,000 -
844,917
885,405
883,792
872,057
695,439
581,105
738,068
736,718
598,984
596,938
729,057
595,718
700,000 -
600,000 -
500,000 -
400,000 -
300,000 -
200,000 -
1,076,551
922,953
913,250
765,336
640,795
708,271
2010
2011
2012
2013
Assets
2014
2015
Deposits
Loans
Common Stock Per Share Book & Market Value December 31
Common Stock Per Share Book & Market Value - December 31
$30.00 -
$25.00 -
$20.00 -
$15.00 -
$19.31
$20.70
$21.17
$27.59
$24.60
$24.96
$21.00
$22.86
$18.75
$10.00 -
$10.30
$12.10
$12.18
$5.00 -
0 -
4
2010
2011
2012
2013
2014
2015
Book Value
Market Value
FORESIGHT 2015 Annual Report
Trends in Assets, Deposits, Loans (000’s)
Common Stock Per Share Book & Market Value December 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
Wipfli LLP
Wipfli LLP
4949 Harrison Avenue
4949 Harrison Avenue
Rockford, Illinois 61108
Rockford, Illinois 61108
815.399.7700
815.399.7700
Fax 815.399.7644
Fax 815.399.7644
www.wipfli.com
www.wipfli.com
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors
To the Board of Directors
Foresight Financial Group, Inc.
Foresight Financial Group, Inc.
We have audited the accompanying consolidated financial statements of Foresight Financial Group, Inc. and
We have audited the accompanying consolidated financial statements of Foresight Financial Group, Inc. and
Subsidiaries, which comprise the consolidated balances sheets as of December 31, 2013 and 2012, and the related
Subsidiaries, which comprise the consolidated balance sheets as of December 31, 2015 and 2014, and the related
consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each
consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years
of the years in the three-year period ended December 31, 2013, and the related notes to the financial statements.
in the three-year period ended December 31, 2015, 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 consolidated financial
free from material misstatement, whether due to fraud or error.
statements that are 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. Those standards
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
consolidated financial statements are free of material misstatement.
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.
5
FORESIGHT 2015 Annual Report
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, 2015 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,
2015, in accordance with accounting principles generally accepted in the United States.
Report on Supplementary Information
Our audits were 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 analysis
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. In our opinion, the information is fairly stated in all material respects in relation to the
consolidated financial statements as a whole.
Rockford, Illinois
March 7, 2016
6
FORESIGHT 2015 Annual Report
A S S E T S
A S S E T S
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Total cash and cash equivalents
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Total cash and cash equivalents
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
Premises and equipment, net
Other assets
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 $14,841 and $14,571,
respectively
Foreclosed assets, net
Premises and equipment, net
Core deposit intangible
Other assets
Total assets
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
2014
2015
$20,717
8,336
939
29,992
$21,461
5,398
1,047
27,906
5,197
13,878
1,396
868
214,393
277,300
2,243
2,852
1,439
3,050
640,795
1,622
9,500
16,376
708,271
3,106
11,694
1,847
25,779
$922,953
2013
2014
$16,787
$20,717
911
8,336
0
939
17,698
29,992
4,963
5,197
1,584
216,065
2,220
1,521
1,396
214,393
2,243
1,439
595,718
640,795
3,265
1,622
9,746
9,500
19,277
0
16,376
$872,057
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
$1,076,551
$922,953
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Liabilities:
Noninterest-bearing
Deposits:
Interest-bearing
Noninterest-bearing
Total deposits
Interest-bearing
Federal funds purchased
Total deposits
Securities sold under agreements to repurchase
Federal funds purchased
Federal Home Loan Bank (FHLB) advances and other borrowings
Securities sold under agreements to repurchase
Subordinated debentures
Federal Home Loan Bank (FHLB) advances and other borrowings
Accrued interest payable and other liabilities
Subordinated debentures
Total liabilities
Accrued interest payable and other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock (no par value; authorized 500,000 shares)
Stockholders’ equity:
Common stock ($.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
3,924,836 and 3,898,449 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 (293,619 and 273,619 shares, respectively)
Total stockholders’ equity
Accumulated other comprehensive income
Total stockholders’ equity
Total liabilities and stockholders’ equity
$97,745
667,591
$122,283
765,336
790,967
3,036
913,250
23,506
503
23,100
23,600
10,000
20,846
3,990
10,000
828,968
5,198
973,397
0
$93,806
635,251
729,057
6,310
23,365
15,350
10,000
3,749
787,831
$97,745
667,591
765,336
3,036
23,506
23,100
10,000
3,990
828,968
0
0
975
8,260
981
86,570
8,613
(5,312)
96,385
3,492
(5,787)
93,985
2,962
103,154
$922,953
0
969
7,979
975
79,036
8,260
(4,098)
86,570
340
(5,312)
84,226
3,492
93,985
$872,057
Total liabilities and stockholders’ equity
$1,076,551
$922,953
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
7
FORESIGHT 2015 Annual Report A S S E T S
Total assets
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
Premises and equipment, net
Other assets
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF INCOME
(000s omitted except share data)
(000s omitted except share data)
For the years ended December 31,
For the years ended December 31,
Interest and dividend income:
Interest and dividend income:
Loans, including fees
Loans, including fees
Debt securities:
Debt securities:
Taxable
Cash and due from banks
Taxable
Tax-exempt
Interest-bearing deposits in banks
Tax-exempt
Interest-bearing deposits in banks and other
Federal funds sold
Interest-bearing deposits in banks and other
Federal funds sold
Total cash and cash equivalents
Federal funds sold
Total interest and dividend income
Total interest and dividend income
Interest expense:
Interest expense:
Deposits
Deposits
Federal funds purchased
Federal funds purchased
Securities sold under agreements to repurchase
Securities sold under agreements to repurchase
FHLB and other borrowings
FHLB and other borrowings
Subordinated debentures
Subordinated debentures
Total interest expense
Total interest expense
Net interest and dividend income
Net interest and dividend income
Provision for loan losses
Provision for loan losses
Net interest and dividend income,
Net interest and dividend income,
after provision for loan losses
after provision for loan losses
Noninterest income:
Noninterest income:
Liabilities:
Customer service fees
Customer service fees
Gain on sales and calls of AFS securities, net
Deposits:
Gain on sales and calls of AFS securities, net
Gain on sales of loans, net
Noninterest-bearing
Gain on sales of loans, net
Loan servicing fees, net
Interest-bearing
Loan servicing fees, net
Gain on acquisition bargain purchase
Total deposits
Gain on acquisition bargain purchase
Other
Federal funds purchased
Other
Total noninterest income
Securities sold under agreements to repurchase
Total noninterest income
Federal Home Loan Bank (FHLB) advances and other borrowings
Noninterest expenses:
Subordinated debentures
Noninterest expenses:
Salaries and employee benefits
Accrued interest payable and other liabilities
Salaries and employee benefits
Occupancy expense of premises, net
Total liabilities
Occupancy expense of premises, net
Outside services
Outside services
Data processing
Stockholders’ equity:
Data processing
Foreclosed assets, net
Preferred stock (no par value; authorized 500,000 shares)
Foreclosed assets, net
Other
Common stock ($.25 par value; authorized 5,000,000 shares;
Other
Total noninterest expenses
3,898,449 and 3,879,357 shares issued, respectively)
Total noninterest expenses
Additional paid-in capital
Income before income taxes
Retained earnings
Income before income taxes
Treasury stock, at cost (273,619 and 209,657 shares, respectively)
Income tax expense
Accumulated other comprehensive income
Income tax expense
Total stockholders’ equity
Net income
Net income
Total liabilities and stockholders’ equity
LIABILITIES AND STOCKHOLDERS' EQUITY
Earnings per common share:
Earnings per common share:
Basic
Basic
Diluted
Diluted
CONSOLIDATED BALANCE SHEETS
(000s omitted except share data)
December 31,
2015
2015
$31,908
$31,908
3,437
3,437
3,455
3,455
223
223
16
16
39,039
39,039
5,310
5,310
10
10
71
71
318
318
600
600
6,309
6,309
32,730
32,730
1,660
1,660
31,070
31,070
1,165
1,165
426
426
1,338
1,338
740
740
1,133
1,133
2,854
2,854
7,656
7,656
14,139
14,139
2,627
2,627
236
236
582
582
601
601
6,286
6,286
24,471
24,471
14,255
14,255
3,711
3,711
$10,544
$10,544
2014
2014
$29,495
2014
$29,495
3,076
$20,717
3,076
3,512
8,336
3,512
104
939
104
6
29,992
6
36,193
36,193
5,197
1,396
214,393
2,243
1,439
640,795
1,622
9,500
16,376
5,136
5,136
14
14
70
70
188
188
600
600
6,008
6,008
30,185
30,185
2,621
2,621
$922,953
27,564
27,564
1,150
1,150
125
125
1,118
1,118
655
655
0
0
2,364
2,364
5,412
5,412
$97,745
667,591
765,336
3,036
23,506
23,100
10,000
3,990
828,968
12,651
12,651
2,463
2,463
261
261
417
417
487
0
487
4,992
4,992
21,271
975
21,271
8,260
11,705
86,570
11,705
(5,312)
3,445
3,492
3,445
93,985
$8,260
$8,260
$922,953
2013
2013
$29,245
2013
$29,245
2,945
$16,787
2,945
3,736
911
3,736
83
0
83
13
17,698
13
36,022
36,022
4,963
5,751
1,584
5,751
9
216,065
9
81
2,220
81
203
1,521
203
600
600
6,644
595,718
6,644
3,265
29,378
9,746
29,378
19,277
4,777
4,777
$872,057
24,601
24,601
1,166
1,166
156
156
1,535
$93,806
1,535
751
635,251
751
0
729,057
0
2,379
6,310
2,379
5,987
23,365
5,987
15,350
10,000
12,508
3,749
12,508
2,391
787,831
2,391
212
212
414
414
622
622
5,243
5,243
21,390
969
21,390
7,979
9,198
79,036
9,198
(4,098)
2,360
340
2,360
84,226
$6,838
$6,838
$872,057
0
$1.87
$1.87
$1.84
$1.84
8
$2.90
$2.90
$2.85
$2.85
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
$2.27
$2.27
$2.24
$2.24
FORESIGHT 2015 Annual Report CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(000s omitted except share data)
For the years ended December 31,
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(000s omitted except share data)
(000s omitted except share data)
December 31,
For the years ended December 31,
2014
2013
2015
Net income
A S S E T S
Other comprehensive income:
Unrealized holding (loss) gains on securities available for sale,
Net income
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Total cash and cash equivalents
net of tax of $41, ($2,052) & $3,949, respectively
net of tax of $41, ($2,052) & $3,949, respectively
Reclassification adjustments for net securities
Other comprehensive income:
gains recognized in income, net of tax of $169, $50 & $62, respectively
Interest-bearing deposits in banks - term deposits
Unrealized holding (loss) gains on securities available for sale,
Securities:
Total other comprehensive income (loss)
Securities held-to-maturity (HTM)
Reclassification adjustments for net securities
Securities available-for-sale (AFS)
gains recognized in income, net of tax of $169, $50 & $62, respectively
Total comprehensive income
Non-marketable equity securities, at cost
Loans held for sale
Loans, net of allowance for loan losses of $14,571 and $14,777,
respectively
Total comprehensive income
Foreclosed assets, net
Premises and equipment, net
Other assets
Total other comprehensive income (loss)
$10,544
2015
(104)
$10,544
(426)
(104)
(530)
(426)
$10,014
(530)
$10,014
2014
$8,260
2014
3,228
$8,260
$20,717
8,336
939
29,992
(75)
3,228
5,197
3,153
(75)
$11,413
3,153
1,396
214,393
2,243
1,439
$11,413
640,795
1,622
9,500
16,376
$6,838
2013
(5,625)
$6,838
(94)
(5,625)
(5,719)
(94)
$1,119
(5,719)
$1,119
2013
$16,787
911
0
17,698
4,963
1,584
216,065
2,220
1,521
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
See Notes to Consolidated Financial Statements.
$922,953
$872,057
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
9
FORESIGHT 2015 Annual Report
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, 2013
Preferred Common
Stock
Stock
Additional
Paid-In
Capital
Retained
Earnings
$0
$966
$7,763
$72,820
Net income
Other comprehensive loss
Cash dividends ($.17 per share)
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 $14,777,
Stock options exercised
respectively
Foreclosed assets, net
Stock-based compensation expense
Premises and equipment, net
Other assets
Purchase of treasury stock (2,000 shares)
3
Balance, December 31, 2013
0
969
6,838
(621)
121
95
7,979
79,037
Total assets
Net income
Other comprehensive income
LIABILITIES AND STOCKHOLDERS' EQUITY
Cash dividends ($.20 per share)
Purchase of treasury stock (63,962 shares)
Liabilities:
Deposits:
Noninterest-bearing
Interest-bearing
Stock options exercised
Total deposits
Federal funds purchased
Stock-based compensation expense
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
Other comprehensive loss
Balance, December 31, 2014
Net income
975
6
0
190
91
8,260
Cash dividends ($.20 per share)
Purchase of treasury stock (20,000 shares)
Stockholders’ equity:
Preferred stock (no par value; authorized 500,000 shares)
Common stock ($.25 par value; authorized 5,000,000 shares;
3,898,449 and 3,879,357 shares issued, respectively)
Stock options exercised
Additional paid-in capital
Retained earnings
Treasury stock, at cost (273,619 and 209,657 shares, respectively)
Accumulated other comprehensive income
Total stockholders’ equity
Restricted stock vested (3,660 shares)
Stock-based compensation expense
5
1
226
76
51
8,260
(727)
86,570
10,544
(729)
2014
Accumulated
Other
Comprehensive
Income
Treasury
Stock
$20,717
8,336
939
29,992
($4,060)
2013
$16,787
911
Total
0
17,698
$83,547
6,838
4,963
(5,719)
1,584
216,065
2,220
1,521
(621)
(38)
124
95
595,718
3,265
9,746
19,277
84,226
$6,058
(5,719)
339
$872,057
8,260
3,153
3,153
(727)
(1,214)
196
91
$93,806
635,251
729,057
6,310
23,365
15,350
10,000
3,749
787,831
93,985
10,544
(530)
3,492
(530)
5,197
1,396
214,393
2,243
1,439
(38)
640,795
1,622
9,500
16,376
(4,098)
$922,953
(1,214)
$97,745
667,591
765,336
3,036
23,506
23,100
10,000
3,990
828,968
(5,312)
0
(475)
975
8,260
86,570
(5,312)
3,492
93,985
(729)
0
(475)
231
969
7,979
79,036
(4,098)
340
84,226
77
51
Balance, December 31, 2015
$0
Total liabilities and stockholders’ equity
$981
$8,613
$96,385
($5,787)
$922,953
$2,962
$103,154
$872,057
10
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
FORESIGHT 2015 Annual Report 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
2013
2014
2015
A S S E T S
Cash and due from banks
Interest-bearing deposits in banks
Federal funds sold
Total cash and cash equivalents
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses
Provision for foreclosed asset (gains) 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 on the sales of foreclosed assets
Non-marketable equity securities, at cost
Stock-based compensation expense
Loans held for sale
Net change in:
Loans, net of allowance for loan losses of $14,571 and $14,777,
Loans held for sale
respectively
Other assets
Foreclosed assets, net
Accrued interest payable and other liabilities
Premises and equipment, net
Net cash provided by operating activities
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-bearing deposits in banks - term deposits
Proceeds from sales of AFS securities
Proceeds from maturities, calls, and paydowns of HTM securities
Proceeds from maturities, calls, and paydowns of AFS securities
Purchases of AFS securities
Purchases of non-marketable equity securities
Loan originations and principal collections, net
Proceeds from sales of foreclosed assets
Cash and cash equivalents from bank acquisition
Purchases of premises and equipment, net
Net cash used in investing activities
Liabilities:
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) advances and other borrowings
Subordinated debentures
CASH FLOWS FROM FINANCING ACTIVITIES:
Accrued interest payable and other liabilities
Net change in deposits
Total liabilities
Net change is securities sold under agreements to repurchase
Cash dividends paid
Net change in federal funds purchased
Stock options excercised
Purchase of treasury stock
Proceeds from lines of credit and FHLB advances and other borrowings
Payments on lines of credit and FHLB advances and other borrowings
Net cash (used in) provided by financing activities
Stockholders’ equity:
Preferred stock (no par value; authorized 500,000 shares)
Common stock ($.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
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Total liabilities and stockholders’ equity
Cash and cash equivalents at end of year
$10,544
1,660
(756)
886
1,689
318
(426)
(121)
51
$8,260
$20,717
8,336
939
29,992
5,197
1,396
214,393
2,243
1,439
2,621
490
847
784
101
(125)
(205)
91
(1,611)
(3,425)
(1,261)
7,548
640,795
1,622
9,500
16,376
82
674
241
13,861
$922,953
(8,681)
20,475
565
60,813
(113,401)
0
(13,815)
2,930
23,756
(161)
(27,519)
23,474
94
(729)
(2,533)
308
(475)
41,290
(43,544)
17,885
(2,086)
(234)
14,601
235
33,021
(41,378)
(23)
(48,871)
2,553
0
(622)
(40,718)
$97,745
667,591
765,336
3,036
23,506
23,100
10,000
3,990
828,968
36,279
141
(727)
(3,274)
0
196
(1,214)
54,250
(46,500)
39,151
12,294
975
8,260
86,570
(5,312)
3,492
93,985
29,992
17,698
$922,953
$16,787
$6,838
911
0
17,698
4,777
1,158
935
4,963
1,303
699
1,584
(156)
216,065
(2,853)
2,220
95
1,521
4,077
595,718
1,319
3,265
232
9,746
18,424
19,277
$872,057
(250)
15,917
190
40,642
(69,702)
(36)
$93,806
(5,046)
635,251
6,688
729,057
0
6,310
(451)
23,365
(12,048)
15,350
10,000
3,749
(7,662)
787,831
(1,681)
(621)
1,196
124
(38)
969
32,600
7,979
(37,100)
79,036
(13,182)
(4,098)
340
(6,806)
84,226
0
24,504
$872,057
$27,906
$29,992
$17,698
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
11
FORESIGHT 2015 Annual Report 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
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
Total cash and cash equivalents
INFORMATION:
Cash paid during the year for:
Interest-bearing deposits in banks - term deposits
Interest
Securities:
Securities held-to-maturity (HTM)
Income taxes
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 $14,777,
SUPPLEMENTAL SCHEDULE OF NONCASH
respectively
INVESTING ACTIVITIES:
Foreclosed assets, net
Assets acquired in exchange for deposits and liabilities assumed
Premises and equipment, net
Other assets
SUPPLEMENTAL SCHEDULE OF NONCASH
Total assets
FINANCING ACTIVITIES:
Foreclosed assets acquired in settlement of loans
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Federal funds purchased
Securities sold under agreements to repurchase
Federal Home Loan Bank (FHLB) advances and other borrowings
Subordinated debentures
Accrued interest payable and other liabilities
Total liabilities
Stockholders’ equity:
Preferred stock (no par value; authorized 500,000 shares)
Common stock ($.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
2014
2013
2015
$20,717
8,336
939
29,992
5,197
$6,239
$3,901
1,396
214,393
2,243
1,439
$127,975
640,795
1,622
9,500
16,376
2014
$16,787
2013
911
0
17,698
4,963
$6,042
$6,826
$2,302
$0
$1,935
1,584
216,065
2,220
1,521
595,718
3,265
9,746
19,277
$0
$922,953
$872,057
$1,878
$1,173
$1,489
$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
See Notes to Consolidated Financial Statements.
12
See Notes to Consolidated Financial Statements.
FORESIGHT 2015 Annual Report 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, Machesney Park, and Herscher, Illinois areas. Its primary deposit products are demand deposits and
certificates of deposit and its primary lending products are agriculture, 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), Lena State Bank (Lena), and State Bank of
Herscher (Herscher) (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 March 7, 2016,
which is the date the financial statements were available to be issued.
(d) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The allowance for loan losses, fair values of securities, fair values of
foreclosed assets, deferred tax assets, pension benefit obligations and fair values of financial instruments
are particularly susceptible 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.
(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.
13
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(000s omitted except share data)
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(g) Securities
(g) Securities
(g) Securities
(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
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
available for sale (AFS) and recorded at fair value, with unrealized gains or losses excluded from earnings
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
Debt securities that management has the positive intent and ability to hold to maturity are classified as held
available for sale (AFS) and recorded at fair value, with unrealized gains or losses excluded from earnings
are
and reported in other comprehensive income or loss. Amortization premiums
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
to maturity (HTM) and recorded at amortized cost. Securities not classified as HTM are classified as
are
and reported in other comprehensive income or loss. Amortization premiums
recognized in interest income using the interest method over the estimated lives of the securities. Declines
available for sale (AFS) and recorded at fair value, with unrealized gains or losses excluded from earnings
are
and reported in other comprehensive income or loss. Amortization premiums
available for sale (AFS) and recorded at fair value, with unrealized gains or losses excluded from earnings
recognized in interest income using the interest method over the estimated lives 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
and reported in other comprehensive income or loss. Amortization premiums
recognized in interest income using the interest method over the estimated lives of the securities. Declines
and reported in other comprehensive income.
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. Gains and losses on the sale of securities are recorded on the
recognized in interest income using the interest method over the estimated lives 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. Gains and losses on the sale of securities are recorded on the
trade date and are determined using the specific-identification method.
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. Gains and losses on the sale of securities are recorded on the
Purchase premiums and discounts are recognized in interest income using the interest method over the
trade date and are determined using the specific-identification method.
are reflected in earnings as realized losses. Gains and losses on the sale of securities are recorded on the
trade date and are determined using the specific-identification method.
terms of the securities. Declines in the fair value of HTM and AFS securities below their cost that are
In estimating other-than-temporary impairment losses, management considers (1) the length of time and
trade date and are determined using the specific-identification method.
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
the extent to which the fair value has been less than cost, (2) the financial condition and near-term
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
prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer
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
In estimating other-than-temporary impairment losses, management considers (1) the length of time and
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.
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
the extent to which the fair value has been less than cost, (2) the financial condition and near-term
for a period of time sufficient to allow for any anticipated recovery in fair value.
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.
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.
discounts
discounts
discounts
discounts
and
and
and
and
(h) Non-Marketable Equity Securities
(h) Non-Marketable Equity Securities
(h) Non-Marketable Equity Securities
(h) Non-Marketable Equity Securities
(i) Loans Held for Sale
(h) Non-Marketable Equity Securities
(i) Loans Held for Sale
(i) Loans Held for Sale
(i) Loans Held for Sale
(i) Loans Held for Sale
The Banks, as members of the Federal Home Loan Bank (FHLB) system, are required to maintain a
Gains and losses on the sale of securities are recorded on the trade date and are determined using the
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 0.85% of their
specific-identification method.
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 0.85% of their
mortgage-related assets or 5% of advances from the FHLB. The Banks may choose to invest in amounts
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 0.85% of their
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
minimum investment in capital stock of the FHLB in an amount equal to the greater of 0.85% of their
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
established by the FHLB. FHLB stock is reported at cost since no ready market exists and it has no
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
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
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
The Banks, as members of the Federal Home Loan Bank (FHLB) system, are required to maintain a
quoted market value. FHLB stock is periodically evaluated for impairment based on the ultimate recovery
of par value.
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
minimum investment in capital stock of the FHLB in an amount equal to the greater of 1% of their
of par value.
quoted market value. FHLB stock is periodically evaluated for impairment based on the ultimate recovery
of par value.
mortgage-related assets or 5% of advances from the FHLB. The Banks may choose to invest in amounts
of par value.
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
Loans originated and intended for sale in the secondary market are carried at the lower of cost or market in
quoted market value. FHLB stock is periodically evaluated for impairment based on the ultimate recovery
Loans originated and intended for sale in the secondary market are carried at the lower of cost or market in
the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to
Loans originated and intended for sale in the secondary market are carried at the lower of cost or market in
of par value.
the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to
income.
Loans originated and intended for sale in the secondary market are carried at the lower of cost or market in
the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to
income.
the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to
income.
Mortgage loans held for sale are generally sold with mortgage servicing rights retained by the Company.
income.
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
Mortgage loans held for sale are generally sold with mortgage servicing rights retained by the Company.
Loans originated and intended for sale in the secondary market are carried at the lower of cost or market in
The carrying value of mortgage loans sold is reduced by the cost allocated to the associated mortgage
servicing rights. Realized gains or losses on sales of mortgage loans are recognized based on the difference
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 aggregate.
servicing rights. Realized 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.
The carrying value of mortgage loans sold is reduced by the cost allocated to the associated mortgage
servicing rights. Realized 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.
servicing rights. Realized 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.
Mortgage loans held for sale are generally sold with mortgage servicing rights retained by the Company.
between the selling price and the carrying value of the related mortgage loans sold.
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
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or
between the selling price and the carrying value of the related mortgage loans sold.
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or
payoff generally are reported at their outstanding unpaid principal balances adjusted for purchase
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or
payoff generally are reported at their outstanding unpaid principal balances adjusted for purchase
premiums or discounts, charge-offs, and an allowance for loan losses. Interest on loans is accrued daily
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or
payoff generally are reported at their outstanding unpaid principal balances adjusted for purchase
premiums or discounts, charge-offs, and an allowance for loan losses. Interest on loans is accrued daily
(j) Loans and Allowance for Loan Losses
based on the unpaid principal balance.
payoff generally are reported at their outstanding unpaid principal balances adjusted for purchase
premiums or discounts, charge-offs, and an allowance for loan losses. Interest on loans is accrued daily
based on the unpaid principal balance.
premiums or discounts, charge-offs, and an allowance for loan losses. Interest on loans is accrued daily
based on the unpaid principal balance.
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or
A loan is considered to be delinquent when payments have not been made according to contractual terms,
based on the unpaid principal balance.
pay-off are stated at the amount of unpaid principal balances less the allowance for loan losses. Interest
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 a
A loan is considered to be delinquent when payments have not been made according to contractual terms,
income is accrued daily on the outstanding balances.
typically evidenced by nonpayment of a monthly installment by the due date. The accrual of interest on a
loan is generally discontinued when the loan becomes 90 days delinquent unless the credit is well-secured
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 a
loan is generally discontinued when the loan becomes 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 at an
typically evidenced by nonpayment of a monthly installment by the due date. The accrual of interest on a
loan is generally discontinued when the loan becomes 90 days delinquent unless the credit is well-secured
A loan is considered to be delinquent when payments have not been made according to contractual terms,
and in the process of collection. Credit card loans and other personal loans are typically charged-off at an
earlier date if collection of principal or interest is considered doubtful. Generally, interest accrued but not
loan is generally discontinued when the loan becomes 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 at an
typically evidenced by nonpayment of a monthly installment by the due date. The accrual of interest on
earlier date if collection of principal or interest is considered doubtful. Generally, interest accrued but not
collected for loans that are placed on nonaccrual status or charged off is reversed against interest income.
and in the process of collection. Credit card loans and other personal loans are typically charged-off at an
earlier date if collection of principal or interest is considered doubtful. Generally, interest accrued but not
loans is discontinued at the time the loan is 90-days delinquent unless the credit is well-secured and in the
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-recovery method, until qualifying for
earlier date if collection of principal or interest is considered doubtful. Generally, interest accrued but not
collected for loans that are placed on nonaccrual status or charged off is reversed against interest income.
process of collection. Credit card loans and other personal loans are typically charged off no later than
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 principal and interest amounts
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-recovery method, until qualifying for
180-days delinquent. Generally, loans are placed on non-accrual or charged-off at an earlier date if
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 assured.
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 principal and interest amounts
collection of principal or interest is considered doubtful.
contractually due are brought current and future payments are reasonably assured.
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 assured.
contractually due are brought current and future payments are reasonably assured.
(j) Loans and Allowance for Loan Losses
(j) Loans and Allowance for Loan Losses
(j) Loans and Allowance for Loan Losses
(j) Loans and Allowance for Loan Losses
.
.
.
.
.
14
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(j) Loans and Allowance for Loan Losses (continued)
Loan-origination fees and direct origination costs are generally recognized as income or expense when
received or incurred since capitalization of these fees and costs would not have a significant impact on the
consolidated financial statements.
The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are
charged against the allowance when management believes the uncollectibility of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the
allowance balance required using past loan loss experience, the nature and volume of the portfolio,
information about specific borrower situations and estimated collateral values, economic conditions, and
other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is
available for any loan that, in management's judgment, should be charged off.
The allowance consists of specific and general components. The specific component relates to loans that
are individually classified as impaired. A loan is impaired when, based on current information and events,
it is probable that the Company will be unable to collect all amounts due according to the contractual
terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and
for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings
(TDRs) and classified as impaired.
Factors considered by management in determining impairment include payment status, collateral value,
and the probability of collecting scheduled principal and interest payments when due. Loans that
experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls on case-by-case basis,
taking into consideration all of the circumstances surrounding the loan and the borrower, including the
length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the
shortfall in relation to the principal and interest owed.
All problem loans are individually evaluated for impairment. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows
using the loan's existing rate or at the fair value of collateral if repayment is expected from the collateral.
Troubled debt restructurings are individually evaluated for impairment and included in the separately
identified impairment disclosures. TDRs are measured at the present value of estimated future cash flows
using the loan’s effective rate at inception. If a TDR is considered to be a collateral dependent loan, the
loan is reported, net, at the fair value of the collateral. For TDRs that subsequently default, the Company
determines the amount of the allowance on that loan in accordance with the accounting policy for the
allowance for loan losses on loans individually identified as impaired
The general component covers loans that are collectively evaluated for impairment. Large groups of
smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively
evaluated for impairment, and accordingly, they are not included in the impairment disclosures. The
general allowance component also includes loans that are not individually identified for impairment
evaluation, such as commercial loans below the individual evaluation threshold, as well as those loans that
are individually evaluated but are not considered impaired.
15
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(j) Loans and Allowance for Loan Losses
The general component is based on historical loss experience adjusted for current qualitative factors. The
historical loss experience is determined by portfolio segment or loan class and is based on the actual loss
history experienced by the Company. This actual losss experience is supplemented with other economic
factors based on the risks present for each portfolio segment or loan class. These economic factors
include: 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 selection and underwriting
standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of
lending management and employees; national and economic trends and conditions; industry conditions;
and effects of changes in credit concentrations.
Management considers the following when assessing the risk in the loan portfolio:
Residential real estate loans are affected by the local residential real estate market, the local
economy, and, for variable rate mortgages, movement in indices tied to these loans. At the time
of origination the Company evaluates the borrower's repayment ability through a review of debt
to income and credit scores. Appraisals are generally obtained to support the loan amount.
Financial information is obtained from the borrowers and/or the individual project to evaluate
cash flows sufficiency to service debt at the time of origination.
Agricultural and commercial real estate loans are dependent on the industries tied to these loans.
Agricultural loans are primarily for land acquisition. Commercial real estate loans are primarily
secured by office and industrial buildings, warehouses, retail shopping facilities and various
special purpose properties, including hotels and restaurants. Financial information is obtained
from the borrowers and/or the individual project to evaluate cash flows sufficiency to service
debt and is periodically updated during the life of the loan. Loan performance may be adversely
affected by factors impacting the general economy or conditions specific to the real estate market
such as geographic location and/or property type.
Commercial and agricultural loans are primarily for working capital, physical asset expansion,
asset acquisition loans and other. These loans are made based primarily on historical and
projected cash flow of the borrower and secondarily on the underlying collateral provided by the
borrower. The cash flows of borrowers, however, may not behave as forecasted and collateral
securing loans may fluctuate in value due to economic or individual performance factors.
Financial information is obtained from the borrowers to evaluate cash flows sufficiency to service
debt and is periodically updated during the life of the loan.
Consumer and other loans may take the form of installment loans, demand loans, or single
payment loans and are extended to individuals for household, family, and other personal
expenditures. At the time of origination the Company evaluates the borrower's repayment ability
through a review of debt to income and credit scores.
(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.
16
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(1) Summary of Significant Accounting Policies (continued)
(l) Loan Servicing
(l) Loan Servicing
(l) Loan Servicing
Mortgage servicing rights are recognized as separate assets when rights are acquired through a sale of loans
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,
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
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
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
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
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
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
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.
prices for similar assets with similar characteristics, when available, or based upon discounted cash flows
using market-based assumptions.
using market-based assumptions.
Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual
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
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.
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.
mortgage servicing rights is offset against loan servicing fee income.
(m) Rate Lock Commitments
(m) Rate Lock Commitments
(m) Rate Lock Commitments
Commitments to fund mortgage loans (interest-rate locks) to be sold into the secondary market and
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
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
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
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
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
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
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.
of these derivatives to be immaterial to the consolidated financial statements and, accordingly, has elected
not to record fair values associated with these derivatives.
not to record fair values associated with these derivatives.
(n) Foreclosed Assets
(n) Foreclosed Assets
(n) Foreclosed Assets
Assets acquired through or instead of loan foreclosure are initially recorded at fair value less estimated cost
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
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.
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
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.
Revenues and expenses from operations and changes in the valuation allowance are included in net
expenses from foreclosed assets.
expenses from foreclosed assets.
(o) Premises and Equipment
(o) Premises and Equipment
(o) Premises and Equipment
Premises and equipment are carried at cost less accumulated depreciation, based on the estimated useful
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
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.
lives of the assets. Depreciation is generally computed on the straight-line method over estimated useful
lives ranging from 3 to 40 years.
lives ranging from 3 to 40 years.
(p) Bank-Owned Life Insurance
(p) Bank-Owned Life Insurance
(p) Bank-Owned Life Insurance
The Bank has purchased life insurance policies on certain key employees and directors. Bank-owned life
The Bank has purchased life insurance policies on certain key employees and directors. Bank-owned life
insurance is recorded at its cash surrender value, or the amount that can be realized.
The Bank has purchased life insurance policies on certain key employees and directors. Bank-owned life
insurance is recorded at its cash surrender value, or the amount that can be realized.
insurance is recorded at its cash surrender value, or the amount that can be realized.
(q) Significant Group Concentrations of Credit Risk
(q) Significant Group Concentrations of Credit Risk
(q) Significant Group Concentrations of Credit Risk
Most of the Company’s activities are with customers located in the area and communities noted above.
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
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
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.
which the Company engages. The Company does not have any significant concentrations with any one
industry or customer.
industry or customer.
17
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(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.
(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 and State Bank of Herscher, other than trust cash on deposit
at the Bank, are not included in these financial statements because they are not assets of the Company.
18
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(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) Advertising
Advertising costs are expensed as incurred.
(aa) Reclassifications
Certain amounts in the 2013 and 2014 consolidated financial statements have been reclassified to conform
to the 2015 presentation.
(bb) Adoption of New Accounting Standard
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 was effective for financial statements issued for annual periods beginning after
December 15, 2014. The adoption of this standard required additional disclosures for residential real
estate loans in process of foreclosure.
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 was
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 did not have a material impact on the Company's consolidated financial
statements.
19
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(1) Summary of Significant Accounting Policies (continued)
(bb) Adoption of New Accounting Standard
Newly Issued Not Yet Effective Accounting Standards
In May 2014, the FASB issued 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, 2017. The Company is evaluating what impact this new standard will have on its financial statements.
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and
Financial Liabilities. This standard makes a number of changes to the recognition and measurement
standards of financial instruments, including the following changes: 1) equity securities with a readily
determinable fair value will have to be measured at fair value with changes in fair value recognized in net
income; 2) entities that are public business entities will no longer be required to disclose the method(s) and
significant assumptions used to estimate the fair value that is required to be disclosed for financial
instruments measured at amortized cost; and 3) entities that are public business entities will be required to
use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
This new standard is effective for consolidated financial statements issued for annual reporting periods,
and interim periods within those annual periods, beginning after December 15, 2017. The Company does
not believe the adoption of the standard with have a significant impact on its financial statements except
that it will no longer disclose the method(s) and significant assumptions used to estimate the fair value that
is required to be disclosed for financial instruments measured at amortized cost as permitted by the
standard.
(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, 2015 and 2014
was approximately $625 and $481, 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. Management believes these financial institutions have strong credit ratings and that
credit risk related to these deposits is not material.
Interest-bearing deposits consist of certificates of deposit at other financial institutions. Certificates of deposit
are in denominations of $250 or less and are fully insured by the FDIC. Certificates of deposit maturing in
2016 totaled $1,100 and are included with cash and cash equivalents.
Maturities of certificates of deposits as of December 31, 2015 are as follows:
2017
2018
2019
2020
2021 and thereafter
20
$3,982
4,484
3,978
1,209
225
$13,878
FORESIGHT 2015 Annual Report
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
2015
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
State and municipal
$868
$48
($0)
$916
Held-to-Maturity
2014
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
State and municipal
$1,396
$60
($0)
$1,456
Available-for-Sale
2015
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
U.S. Government sponsored entities and agencies
State and municipal
Mortgage-backed – residential
$69,117
109,054
94,258
$477
4,448
861
($214)
(142)
(559)
Fair
Value
$69,380
113,360
94,560
$272,429
$5,786
($915)
$277,300
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
For the years ended December 31, 2015, 2014 and 2013, proceeds from sales of available-for-sale securities
amounted to $20,475, $14,601 and $15,917, 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
2015
$589
($163)
2014
2013
$140
($15)
$361
($205)
Securities with carrying amounts of approximately $142,769 and $112,371 at December 31, 2015 and 2014,
respectively, were pledged to secure public deposits and for other purposes as required or permitted by law.
21
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(3) Securities (continued)
The amortized costs and fair values of securities at December 31, 2015 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.
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
Fair
Value
$170
93
605
0
$868
$171
101
644
0
$916
Amortized
Cost
Fair
Value
$34,453
30,887
53,495
59,336
178,171
94,258
$34,668
31,674
55,149
61,249
182,740
94,560
$272,429
$277,300
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, 2015 and
2014:
2015
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
$18,023
10,530
53,408
$114
79
474
32
33
80
$4,300
1,503
4,263
Total temporarily impaired
$81,961
$667
145
$10,066
$100
63
85
$248
14
6
7
27
22
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(3) Securities (continued)
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, 2015 and 2014.
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.
(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
2015
2014
$247,491
127,936
89,803
167,905
73,526
16,451
723,112
(14,841)
$216,722
105,426
85,839
160,600
73,703
13,076
655,366
(14,571)
$708,271
$640,795
23
FORESIGHT 2015 Annual Report
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
Allowance for loan losses:
Individually evaluated for impairment
Collectively evaluated for impairment
Loans acquired with deteriorated credit
Loans acquired without deteriorated credit
Real Estate
Commercial
Consumer
Total
2015
$10,231
1,720
73
12,024
(1,173)
$4,237
(62)
27
4,202
(305)
$103
2
22
127
(34)
$14,571
1,660
122
16,353
(1,512)
$10,851
$3,897
$93
$14,841
$3,899
6,952
0
0
$460
3,437
0
0
$6
87
0
0
$4,365
10,476
0
0
Totals
$10,851
$3,897
$93
$14,841
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
24
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
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
Detailed analysis of loans evaluated for impairment by portfolio segment for the year ended December 31
follows:
Real Estate
Commercial
Consumer
Total
2015
Loans:
Individually evaluated for impairment
Collectively evaluated for impairment
$26,788
438,442
$6,315
235,116
$108
16,343
$33,211
689,901
Totals
$465,230
$241,431
$16,451
$723,112
Real Estate
Commercial
Consumer
Total
2014
Loans:
Individually evaluated for impairment
Collectively evaluated for impairment
$25,593
382,394
$5,009
229,294
$107
12,969
$30,709
624,657
Totals
$407,987
$234,303
$13,076
$655,366
25
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
Detailed information regarding impaired loans by class of loan as of December 31 follows:
Recorded
Investment
Principal
Balance
Related
Allowance
Average
Investment
Interest
Recognized
2015
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
$4,608
7,162
1,428
5,628
0
92
$5,334
10,575
1,833
11,132
245
103
Totals
18,918
29,222
N/A
N/A
N/A
N/A
N/A
N/A
2,748
1,151
0
455
5
6
$5,323
9,287
1,840
12,316
259
120
29,145
9,929
3,948
0
691
37
16
$251
226
65
306
17
6
871
480
68
0
31
0
0
579
9,743
3,847
0
653
34
16
9,988
4,078
0
667
34
15
14,293
14,782
4,365
14,621
$33,211
$44,004
$4,365
$43,766
$1,450
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
Totals
Grand Totals
26
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
Recorded
Investment
Principal
Balance
2014
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
$4,518
3,335
602
3,060
356
50
$4,699
3,495
602
3,076
356
50
Total
11,921
12,278
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
13,141
3,997
0
1,552
41
57
13,142
4,195
0
1,581
41
58
N/A
N/A
N/A
N/A
N/A
N/A
2,713
1,376
0
975
18
23
$5,035
3,432
605
3,102
390
56
12,620
13,255
4,078
0
1,733
44
64
$192
91
11
115
21
3
433
539
114
0
70
0
4
727
18,788
19,017
5,105
19,174
$30,709
$31,295
$5,105
$31,793
$1,161
27
FORESIGHT 2015 Annual Report
(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
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.
28
FORESIGHT 2015 Annual Report
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:
Pass
Special
Mention
Substandard
Doubtful
Totals
2015
Real estate:
Commercial real estate
Residential real estate
Agricultural real estate
Commercial:
Commercial & industrial
Agricultural production
Consumer and other
$232,449
117,212
81,941
160,981
67,349
16,330
$2,148
1,059
6,433
1,218
6,143
25
$12,894
9,665
1,428
5,706
34
95
Total
$676,262
$17,026
$29,822
$247,491
127,936
89,803
167,905
73,526
16,451
$723,112
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
$216,722
105,426
85,839
160,600
73,703
13,076
$41
Total
$618,554
$11,431
$25,340
$41
$655,366
Loan aging information by class of loan at December 31 follows:
As of December 31, 2015
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
$342
2,267
60
2,111
69
25
$510
4,860
427
809
31
$852
7,127
487
2,920
69
55
Total
$4,874
$6,637
$11,510
29
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
As of December 31, 2015
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
$852
7,127
487
2,920
69
55
$246,639
120,809
89,316
$247,491
127,936
89,803
164,985
73,457
16,750
167,905
73,526
16,451
$42
554
9
1
$2,137
6,446
427
3,150
34
30
Total
$11,510
$711,956
$723,112
$606
$12,224
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
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
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.
30
FORESIGHT 2015 Annual Report
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
Residential real estate
Commercial:
Commercial & industrial
Consumer and other
Total
Real Estate:
Commercial real estate
Commercial:
Commercial & industrial
Total
Number of
Loans
Pre-Modification
Investment
Post-Modification
Investment
2015
2
1
1
1
5
$222
59
131
17
$428
2014
$222
58
131
17
$427
Number of
Loans
Pre-Modification
Investment
Post-Modification
Investment
3
2
5
$2,551
232
$2,783
$1,833
232
$2,065
The following table summarizes troubled debt restructurings that defaulted during the year, within 12 months
of their modification date:
Real Estate:
Commercial real estate
Residential real estate
Total
Real Estate:
Commercial real estate
Total
2015
Number of
Loans
Recorded
Investment
1
1
2
$206
34
$240
2014
Number of
Loans
Recorded
Investment
3
3
$7,576
$7,576
31
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(4) Loans (continued)
The Company has acquired purchased credit impaired (PCl) loans, which are loans that, at acquisition,
evidenced deterioration of credit quality since origination, and the Company determined it was probable, at the
acquisition date, all contractually required payments would not be collected. These loans are included in the
carrying amount of loans in the Company's Balance Sheet.
The outstanding balance and carrying amount of PCI loans for the year ended December 31 follows:
Outstanding balance:
Commercial
Residential Real Estate
Total outstanding balance
2015
$9,306
3,275
$12,581
The carrying value of the PCI loans was $3,970 at December 31, 2015.
No increases to the allowance for loan losses were done for PCI loans during 2015. No allowances for loan
losses was reversed during 2015.
A summary of the change in the accretable yield related to PCI loans during the year ended December 31
follows:
Beginning balance
Accretion
Ending Balance
PCI loans acquired during the year ended December 31 follows:
Contractually required payments receivable at acquisition:
Commercial
Residential Real Estate
Total contractually required payments receivable at acquisition
Cash flows expected to be collected at acquisition
Basis in acquired loans at acquisition
2015
$515
(239)
$276
2015
$9,392
4,477
$13,869
$5,198
$4,683
Some PCI loans are not accruing interest income because the Company cannot reasonable estimate the cash
flows expected to be collected. The carrying amount of nonaccruing PCI loans was $8,755 at December 31,
2015. The carrying amount of nonaccruing PCI loans acquired was $9,907 during 2015.
32
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(5) Loan Servicing
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(5) Loan Servicing
(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, 2015 and 2014, were approximately $349,121 and $316,755,
Loans serviced for others are not included in the accompanying consolidated balance sheets. Mortgage loans
respectively. Custodial escrow balances maintained in conjunction with serviced loans were approximately
serviced for others as of December 31, 2015 and 2014, were approximately $349,121 and $316,755,
$3,163 and $3,055 at December 31, 2015 and 2014, respectively.
Loans serviced for others are not included in the accompanying consolidated balance sheets. Mortgage loans
respectively. Custodial escrow balances maintained in conjunction with serviced loans were approximately
serviced for others as of December 31, 2015 and 2014, were approximately $349,121 and $316,755,
$3,163 and $3,055 at December 31, 2015 and 2014, respectively.
The following summarizes the activity pertaining to mortgage servicing rights for the years ended December
respectively. Custodial escrow balances maintained in conjunction with serviced loans were approximately
31:
$3,163 and $3,055 at December 31, 2015 and 2014, respectively.
The following summarizes the activity pertaining to mortgage servicing rights for the years ended December
31:
The following summarizes the activity pertaining to mortgage servicing rights for the years ended December
Balance at beginning of year
31:
Mortgage servicing rights capitalized
Balance at beginning of year
Mortgage servicing rights amortized
Mortgage servicing rights capitalized
Balance at beginning of year
Mortgage servicing rights amortized
Balance at end of year
Mortgage servicing rights capitalized
Mortgage servicing rights amortized
Balance at end of year
No impairment of mortgage servicing rights existed and no valuation allowance was recognized for 2015, 2014
and 2013.
Balance at end of year
No impairment of mortgage servicing rights existed and no valuation allowance was recognized for 2015, 2014
and 2013.
No impairment of mortgage servicing rights existed and no valuation allowance was recognized for 2015, 2014
and 2013.
2015
$1,451
457
2015
$1,451
(584)
457
$1,451
(584)
$1,324
457
(584)
$1,324
2013
$1,648
643
2013
$1,648
(676)
643
$1,648
(676)
$1,615
643
(676)
$1,615
2014
$1,615
404
2014
$1,615
(568)
404
$1,615
(568)
$1,451
404
(568)
$1,451
$1,451
$1,615
$1,324
2014
2013
2015
(6) Mortgage Banking Loan Commitments
(6) Mortgage Banking Loan Commitments
(6) Mortgage Banking Loan Commitments
The Company enters into commitments to fund residential mortgage loans (interest rate locks) at specified
times in the future, with the intention that these loans will be subsequently sold to third-party investors. A
The Company enters into commitments to fund residential mortgage loans (interest rate locks) at specified
mortgage loan commitment binds the Company to lend funds to a potential borrower at a specified interest
times in the future, with the intention that these loans will be subsequently sold to third-party investors. A
rate and within a specified period of time, generally up to 60-days after inception of the rate lock. It is the
The Company enters into commitments to fund residential mortgage loans (interest rate locks) at specified
mortgage loan commitment binds the Company to lend funds to a potential borrower at a specified interest
Company’s practice to enter into mandatory delivery forward commitments for the future delivery of residential
times in the future, with the intention that these loans will be subsequently sold to third-party investors. A
rate and within a specified period of time, generally up to 60-days after inception of the rate lock. It is the
mortgage loans to third-party investors when an interest rate lock commitment is granted. These mandatory
mortgage loan commitment binds the Company to lend funds to a potential borrower at a specified interest
Company’s practice to enter into mandatory delivery forward commitments for the future delivery of residential
delivery forward commitments bind the Company to deliver a residential mortgage loan to a third-party
rate and within a specified period of time, generally up to 60-days after inception of the rate lock. It is the
mortgage loans to third-party investors when an interest rate lock commitment is granted. These mandatory
investor even if the underlying loan never funds. As of December 31, 2015 and 2014, the Company had
Company’s practice to enter into mandatory delivery forward commitments for the future delivery of residential
delivery forward commitments bind the Company to deliver a residential mortgage loan to a third-party
approximately $1,895 and $1,221 in interest rate lock commitments outstanding. As of December 31, 2015 and
mortgage loans to third-party investors when an interest rate lock commitment is granted. These mandatory
investor even if the underlying loan never funds. As of December 31, 2015 and 2014, the Company had
2014, the Company had approximately $3,791 and $2,442 in mandatory delivery forward commitments
delivery forward commitments bind the Company to deliver a residential mortgage loan to a third-party
approximately $1,895 and $1,221 in interest rate lock commitments outstanding. As of December 31, 2015 and
outstanding. These outstanding mortgage loan commitments are considered to be derivatives. The
investor even if the underlying loan never funds. As of December 31, 2015 and 2014, the Company had
2014, the Company had approximately $3,791 and $2,442 in mandatory delivery forward commitments
approximate fair values associated with these derivatives were considered to be immaterial as of December 31,
approximately $1,895 and $1,221 in interest rate lock commitments outstanding. As of December 31, 2015 and
outstanding. These outstanding mortgage loan commitments are considered to be derivatives. The
2015 and 2014.
2014, the Company had approximately $3,791 and $2,442 in mandatory delivery forward commitments
approximate fair values associated with these derivatives were considered to be immaterial as of December 31,
outstanding. These outstanding mortgage loan commitments are considered to be derivatives. The
2015 and 2014.
approximate fair values associated with these derivatives were considered to be immaterial as of December 31,
(7) Foreclosed Assets
2015 and 2014.
(7) Foreclosed Assets
Foreclosed assets consist of the following at December 31:
(7) Foreclosed Assets
Foreclosed assets consist of the following at December 31:
2015
2014
Foreclosed assets consist of the following at December 31:
Residential real estate
Commercial real estate
Residential real estate
Non-farm non-residential properties
Commercial real estate
Construction, land development and other land
Residential real estate
Non-farm non-residential properties
Other repossessed assets
Commercial real estate
Construction, land development and other land
Non-farm non-residential properties
Other repossessed assets
Balance at end of year
Construction, land development and other land
Other repossessed assets
Balance at end of year
2015
$244
1,112
2015
$244
1,184
1,112
533
$244
1,184
33
1,112
533
1,184
33
$3,106
533
33
$3,106
2014
$44
0
2014
$44
1,309
0
269
$44
1,309
132
0
269
1,309
132
$1,754
269
132
$1,754
Balance at end of year
Residential real estate loans that are in process of foreclosure totaled $1,367 at December 31, 2015 and $687 at
December 31, 2014.
Residential real estate loans that are in process of foreclosure totaled $1,367 at December 31, 2015 and $687 at
December 31, 2014.
Residential real estate loans that are in process of foreclosure totaled $1,367 at December 31, 2015 and $687 at
December 31, 2014.
$1,754
$3,106
33
FORESIGHT 2015 Annual Report
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
2015
2014
$2,312
15,617
8,909
26,868
15,144
$11,694
$2,074
11,289
10,395
23,758
14,258
$9,500
Depreciation expense for the years ended December 31, 2015, 2014 and 2013 amounted to $886, $847 and
$935, respectively.
(9) Intangible Assets
The core deposit premium intangible asset had a gross carrying amount of $1,952 and accumulated
amortization of $105 at December 31, 2015.
The following table shows the estimated future amortization of the core deposit premium intangible asset for
the next five years. The projections of amortization expense are based on existing asset balances as of
December 31, 2015.
2016
2017
2018
2019
2020
(10) 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
Core deposit intangible
Other
$315
315
315
315
315
2015
2014
$9,018
5,551
1,324
7,411
1,847
2,475
$5,455
5,369
1,451
3,253
0
848
$27,626
$16,376
34
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(11) Time Deposits
The aggregate amount of time deposits with a minimum denomination of $250 was approximately $40,076 and
$37,745 at December 31, 2015 and 2014, respectively.
At December 31, 2015, the scheduled maturities of time deposits are as follows:
2016
2017
2018
2019
2020
2021
(12) Employee Benefit Plans
$183,965
86,651
58,918
31,077
20,123
154
$380,888
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 $257, $241, and $249, for 2015,
2014, and 2013, 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, Lena, and Herscher 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 $17,557 and $9,234 as of
December 31, 2015 and 2014, respectively (see Note 10 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 $905, $825, and $854 at December 31, 2015, 2014, and 2013, respectively. Salary-continuation expenses
were $49, $46, and $42 in 2015, 2014, and 2013, respectively.
The State Bank of Herscher sponsors a defined benefit pension plan that covers substantially all employees.
The plan calls for benefits to be paid to eligible employees at retirement based primarily upon years of service
with the Company and compensation rates. To be eligible, an employee must be employed by the Company
for a period of one year or more and be 21 years of age or older. Contributions to the plan reflect benefits
attributed to employees' services to date as well as services expected to be earned in the future. The plan is
funded in accordance with federal laws and regulations.
35
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(000s omitted except share data)
(12) Employee Benefit Plans (continued)
(12) Employee Benefit Plans (continued)
A summary of the weighted average asset allocations of plan assets by asset type as of December 31 are as
A summary of the weighted average asset allocations of plan assets by asset type as of December 31 are as
follows:
follows:
Fair values of plan assets
Fair values of plan assets
Equity securities
Equity securities
Debt securities
Debt securities
Total
Total
2015
2015
$1,643
$1,643
2015
2015
49.1%
49.1%
50.9%
50.9%
100%
100%
Equity securities include $806 (49.1% of plan assets) at December 31, 2015.
Equity securities include $806 (49.1% of plan assets) at December 31, 2015.
The fair values of the Company's pension plan assets by asset category at December 31, 2015 are as follows:
The fair values of the Company's pension plan assets by asset category at December 31, 2015 are as follows:
Fair Value Measurements Using
Fair Value Measurements Using
Quoted Prices
Quoted Prices
in Active
in Active
Markets
Markets
(Level 1)
(Level 1)
Observable
Observable
Inputs
Inputs
(Level 2)
(Level 2)
Significant
Significant
Unobservable
Unobservable
Inputs
Inputs
(Level 3)
(Level 3)
Plan assets:
Plan assets:
Interest-bearing cash
Interest-bearing cash
Corporate common stocks
Corporate common stocks
Treasury and corporate bonds
Treasury and corporate bonds
$255
$255
806
806
582
582
Total
Total
$255
$255
806
806
582
582
Total
Total
$1,643
$1,643
$1,643
$1,643
The investment policy includes various guidelines and procedures designed to ensure assets are invested in
The investment policy includes various guidelines and procedures designed to ensure assets are invested in
a manner necessary to meet expected guidelines consider a broad range of economic conditions. Central to
a manner necessary to meet expected guidelines consider a broad range of economic conditions. Central to
the policy are target allocation ranges by major asset categories.
the policy are target allocation ranges by major asset categories.
The objectives of the target allocations are to maintain investment portfolios that diversify risk through
The objectives of the target allocations are to maintain investment portfolios that diversify risk through
prudent asset allocation parameters, achieve asset returns that meet or exceed the plan's actuarial
prudent asset allocation parameters, achieve asset returns that meet or exceed the plan's actuarial
assumptions, and achieve asset returns that are competitive with like institutions employing similar
assumptions, and achieve asset returns that are competitive with like institutions employing similar
investment strategies.
investment strategies.
The investment policy is periodically reviewed by the Company and a designated third-party fiduciary for
The investment policy is periodically reviewed by the Company and a designated third-party fiduciary for
investment matters. The policy is established and administered in a manner that is compliant at all times
investment matters. The policy is established and administered in a manner that is compliant at all times
with applicable government regulations.
with applicable government regulations.
The Company acquired the defined benefit pension plan in the State Bank of Herscher business
The Company acquired the defined benefit pension plan in the State Bank of Herscher business
combination. Prior to the acquisition, the benefits of the plan were frozen with the investment plan
combination. Prior to the acquisition, the benefits of the plan were frozen with the investment plan
objectives modified as the assets were transferred to more liquid and less volatile investment types. In
objectives modified as the assets were transferred to more liquid and less volatile investment types. In
February 2016, the State Bank of Herscher’s Board of Directors formally voted for plan termination with
February 2016, the State Bank of Herscher’s Board of Directors formally voted for plan termination with
a projected liquidation date of November 30, 2016.
a projected liquidation date of November 30, 2016.
36
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(12) Employee Benefit Plans (continued)
Because of the imminent liquidation of the plan, the Company did not perform a computation of the
benefit plan obligation at December 31, 2015; instead a range of estimates of the obligation for liquidation
was computed. Management does not believe the pension benefit obligation at December 31, 2015
materially differs from the liquidation obligation estimates. As there is no certainty on the financial impact
of liquidation due to various factors, including plan participant liquidation elections, the range is $1,595 to
$2,511. It is estimated the most likely scenario would result in an estimated payout of approximately
$1,791 based on a combination of lump sum and annuities. The Company has accrued a liability for the
pension benefit liability in excess of plan assets of $168 at December 31, 2015. This includes the accrual
for costs associated with plan termination totaling $44 as of December 31, 2015.
(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
2015
$2,542
851
3,393
227
91
318
2014
2013
$2,302
1,042
3,344
(131)
232
101
$1,035
626
1,661
524
175
699
Total income tax expense
$3,711
$3,445
$2,360
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:
2015
2014
2013
% of
Pretax
Earnings
% of
Pretax
Earnings
% of
Pretax
Earnings
Amount
Amount
Amount
$4,847
34.0%
$3,980
34.0%
$3,127
34.0%
(1,270)
(80)
622
(385)
(23)
(9.5%)
(0.6%)
4.7%
(2.9%)
(0.2%)
(1,257)
(73)
(10.7%)
(0.6%)
(1,339)
(59)
(14.6%)
(0.6%)
841
0
(46)
7.2%
0.0%
(0.4%)
529
0
102
5.8%
0.0%
1.1%
Statutory federal tax
Increase (decrease) in taxes
resulting from:
Tax-exempt interest
Bank-owned life insurance
State taxes, net of
federal benefit
Bargain purchase gain
Other
Effective tax rates
$3,711
27.9%
$3,445
29.5%
$2,360
25.7%
37
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(13) Income Taxes (continued)
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, 2015 and 2014 are summarized as follows:
Deferred tax assets:
Allowance for loan losses
Allowance for losses on foreclosed assets
Alternative minimum tax
Deferred compensation and other
Purchase accounting adjustments
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
2015
2014
$5,805
1,011
0
546
3,146
10,508
168
1,906
799
224
3,097
$5,700
831
202
397
0
7,130
129
2,356
794
598
3,877
$7,411
$3,253
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.
(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 $18,933 and $21,560 at December 31, 2015 and 2014,
respectively. Activity for related party loans for the year ended December 31, 2015 is as follows:
Balance at beginning of year
New credits
Participated outside the Company
Repayments
Balance at end of year
2015
$21,560
14,108
(1,685)
(15,050)
$18,933
Deposit accounts from related parties totaled approximately $13,839 and $10,954 at December 31, 2015 and
2014, respectively.
38
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(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
2015
$232,231
571
758
$233,560
2014
$162,142
503
219
$162,864
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.
The Company participates in the FHLB Mortgage Partnership Finance Program (the "Program"). In addition
to entering into forward commitments to sell mortgage loans to a secondary market agency, the Company
enters into firm commitments to deliver loans to the FHLB through the Program. Under the Program, loans
are funded by the FHLB, and the Company receives an agency fee reported as a component of gain on sale of
loans. The Company had no firm commitments outstanding to deliver loans through the Program at December
31, 2015. Once delivered to the Program, the Company provides a contractually agreed-upon credit
enhancement and performs servicing of the loans. Under the credit enhancement, the Company is liable for
losses on loans delivered to the Program after application of any mortgage insurance and a contractually
agreed-upon credit enhancement provided by the Program subject to an agreed-upon maximum. The fee the
Company received for this credit enhancement was $2,859 as of December 31, 2015. The Company does not
anticipate that any credit losses will be incurred in excess of anticipated credit enhancement fees.
39
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(15) Financial Instruments with Off-Balance-Sheet Risk and Concentrations (continued)
Concentration of credit risk:
The Company and its subsidiary banks provide several types of loans to customers including real estate,
agricultural, commercial, and installment loans. The largest component of loans is secured by residential real
estate, commercial real estate, or other interest in real property. Lending activities are conducted with
customers in a wide variety of industries as well as with individuals with a wide variety of credit requirements.
The Company does not have a concentration of loans in any specific industry. Credit risk, as it relates to the
Company’s business activities, tends to be geographically concentrated in that the majority of the customer base
lies within the surrounding communities served by its subsidiary banks.
(16) Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase amounted to $23,600 and $23,506 at December 31, 2015 and
2014, respectively, and are collateralized by investment securities with fair values of approximately $30,570 and
$38,997. The weighted-average interest rates on these agreements were 0.35% and 0.27% at December 31,
2015 and 2014, respectively. Securities sold under agreements to repurchase mature on a daily basis.
(17) Federal Home Loan Bank (FHLB), Federal Reserve Advances and Other Borrowings
Fixed-rate advances with rates ranging from .33% to 2.64% and .15% to
2.64% and weighted average rates of 1.11% and .86% as of December
31, 2015 and 2014, respectively. Interest is payable monthly with
principal due at maturity.
2015
2014
$13,500
$23,100
Advances are collateralized by 1-4 family mortgage loans, other qualifying loans and securities. The total
amounts of collateral securing FHLB advances were approximately $75,909 and $83,973 as of December 31,
2015 and 2014, respectively. FHLB advances are subject to a prepayment penalty if they are repaid prior to
maturity. FHLB advances are also secured by $2,852 and $2,243 of FHLB stock owned by the Company at
December 31, 2015 and 2014, respectively.
The Banks participate in the Federal Reserve Bank of Chicago’s Discount Window Lending Program. Primary
advances generally mature daily and bear interest at a general approved rate in relation to the federal funds rate.
The primary advance interest rate at December 31, 2015 was 100-basis points. Outstanding advances were $0
at December 31, 2015 and 2014. Advances are collateralized by investment securities pledged totaling
approximately $10,943 and $10,622 at December 31, 2015 and 2014, respectively, to the Federal Reserve Bank.
On July 2, 2015, the Company entered into a $7,000 note with Bankers’ Bank for the purchase of the State
Bank of Herscher. The noted is a fixed rate at 4% due July 2, 2020 and is secured by common stock of
Company subsidiaries. The balance was $6,858 at December 31, 2015 with payments of $214, consisting of
principal and interest, due quarterly.
Other borrowings totaled $488 at December 31, 2015 and are due on demand.
40
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(17) Federal Home Loan Bank (FHLB), Federal Reserve Advances and Other Borrowings (continued)
At December 31, the scheduled maturities of Federal Home Loan Bank advances and other borrowings are as
follows:
2015
2016
2017
2018
2019
2020 and thereafter
(18) Subordinated Debentures
2015
$0
8,038
3,950
1,250
750
6,858
$20,846
2014
$12,100
6,300
3,200
1,000
500
0
$23,100
The Company issued $10,000 of Subordinated Debentures in the fiscal year ended 2012 that qualify as Tier 2
regulatory capital (with certain limitations applicable) for the Company. The Company issued the Subordinated
Debentures for capital raising purposes primarily for the redemption of preferred stock as part of the Troubled
Asset Relief Program. The Debentures mature on August 30, 2019 and the Company may redeem some or all
of the Subordinated Debentures at any time after the third anniversary of their issuance in accordance with the
contract price limitations. The redemption may be subject to approval by the Federal Reserve and must be on a
pro rata basis amongst all holders. The terms call for interest payments to be made quarterly in arrears on the
last day of March, June, September and December. The annual rate of interest on the Subordinated
Debentures is 6.00%. The interest payments can be deferred for so long as the Company or a specific Bank
remains subject to any regulatory order limiting or prohibiting the payment of dividends or interest on
indebtedness of the Company, including the Debentures. If interest payments are deferred, the interest will
accrue until paid. The agreement contains certain restrictive covenants that are effective if the Company is in
default on the debentures.
41
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(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
participants on the measurement date. The standard describes three levels of inputs that may be used to
measure fair value:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has
the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets
or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be
corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions
that market participants would use in pricing an asset or liability.
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.
42
FORESIGHT 2015 Annual Report
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, 2015
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
$277,300
$277,300
$9,928
$3,106
$9,928
$3,106
Collateral-dependent impaired loans, which are measured for impairment using the fair value of collateral, had a
carrying value of $14,293 with specific reserves of $4,365 as of December 31, 2015.
Foreclosed assets, which are measured at the lower of carrying or fair value less costs to sell, were carried at
their fair value of $3,106, which is comprised of the outstanding balance of $5,630, net of an allowance for
losses of $2,524 as of December 31, 2015.
As of December 31, 2014
Assets measured at fair value
on a recurring basis:
Assets:
Securities available-for-sale
Fair Value Measurements at
Reporting Date Using
(Level 2)
(Level 3)
(Level 1)
Total
$214,393
$214,393
Assets measured at fair value
on a non-recurring basis:
Assets:
Collateral-dependent impaired loans
Foreclosed assets
$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.
43
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(000s omitted except share data)
(19) Fair Value Measurements (continued)
(19) Fair Value Measurements (continued)
(19) Fair Value Measurements (continued)
The following table presents quantitative information about level 3 fair value measurements for financial
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, 2015:
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, 2015:
instruments measured at fair value on a non-recurring basis at December 31, 2015:
Collateral dependent impaired loans,
Collateral dependent impaired loans,
net of specific reserves
Collateral dependent impaired loans,
net of specific reserves
net of specific reserves
Foreclosed assets
Foreclosed assets
Foreclosed assets
Valuation
Valuation
Technique
Valuation
Technique
Technique
Sales comparison
Sales comparison
approach
Sales comparison
approach
Sales comparison
approach
Sales comparison
approach
Sales comparison
approach
approach
Unobservable
Unobservable
Input
Unobservable
Input
Input
Appraised values
Appraised values
Appraised values
Appraised values
Appraised values
Appraised values
Range
Range
Range
10% - 20%
10% - 20%
10% - 20%
10% - 20%
10% - 20%
10% - 20%
FASB guidance requires disclosure of fair value information about financial instruments, whether or not
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
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.
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
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
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
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
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.
nonfinancial instruments from its disclosure requirements. These fair value disclosures may not represent the
fair value of the Company.
fair value of the Company.
The following methods and assumptions were used to estimate the fair value of each class of financial
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:
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:
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).
Cash and cash equivalents: The carrying amounts are reasonable estimates of fair value (Level 1).
Cash and cash equivalents: The carrying amounts are reasonable estimates of fair value (Level 1).
Interest-bearing deposits in other banks – term deposits: The carrying amounts are reasonable estimates of fair
Interest-bearing deposits in other banks – term deposits: The carrying amounts are reasonable estimates of fair
Interest-bearing deposits in other banks – term deposits: The carrying amounts are reasonable estimates of fair
value (Level 1).
value (Level 1).
value (Level 1).
Securities: See previous description in this footnote for securities available-for-sale. The fair values of the
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
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
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
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).
for specific securities, but rather by relying on the securities’ relationship to other benchmark quoted
securities (Level 2).
securities (Level 2).
Non-marketable equity securities: No ready market exists for the equity securities as they have no quoted
Non-marketable equity securities: No ready market exists for the equity securities as they have no quoted
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).
market value. The carrying amount of equity securities approximates its fair value (Level 3).
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
Loans held for sale: The fair values of loans held for sale are based on commitments on hand from investors
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).
or prevailing market prices (Level 2).
or prevailing market prices (Level 2).
Loans: For variable-rate loans that re-price frequently and with no significant change in credit risk, fair
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
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
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
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).
credit quality. For fair value estimates for collateral-dependent impaired loans, see previous description in
this footnote (Level 3).
this footnote (Level 3).
Cash surrender value of life insurance: The fair value is based on reported values by insurers (Level 1).
Cash surrender value of life insurance: The fair value is based on reported values by insurers (Level 1).
Cash surrender value of life insurance: The fair value is based on reported values by insurers (Level 1).
Deposits: The fair values disclosed for demand deposits, savings accounts, and certain money market
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 (Level 1). Fair
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 (Level 1). Fair
values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest
deposits are, by definition, equal to the amount payable on demand at the reporting date (Level 1). 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
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).
rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on
time deposits (Level 3).
time deposits (Level 3).
44
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(19)
Fair Value Measurements (continued)
(19)
Fair Value Measurements (continued)
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).
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 and other borrowings: 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
FHLB advances and other borrowings: The fair value of FHLB advances was estimated using discounted cash
arrangements (Level 3).
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
Subordinated debentures: The fair value of subordinated debentures approximates their fair value based on
(Level 3).
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 1).
Accrued interest: The carrying amounts of accrued interest approximate their fair value (Level 1).
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).
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:
The estimated fair values of the Company’s financial instruments as of December 31 are as follows:
December 31, 2015
Fair
December 31, 2015
Value
Fair
Value
Carrying
Amount
Carrying
Amount
December 31, 2014
December 31, 2014
Carrying
Amount
Carrying
Amount
Fair
Value
Fair
Value
$27,906
$27,906
13,878
278,168
13,878
2,243
278,168
3,050
2,243
708,271
3,050
5,551
708,271
5,551
9,018
9,018
$532,211
381,039
$532,211
503
381,039
503
23,600
20,846
23,600
10,000
20,846
672
10,000
672
$27,906
$27,906
13,878
278,216
13,878
2,243
278,216
3,050
2,243
709,587
3,050
5,551
709,587
5,551
9,018
9,018
$532,211
384,334
$532,211
503
384,334
503
23,600
20,848
23,600
10,000
20,848
672
10,000
672
$29,992
$29,992
5,197
215,789
5,197
2,243
215,789
1,439
2,243
640,795
1,439
5,369
640,795
5,369
5,455
5,455
$396,456
368,880
$396,456
3,036
368,880
3,036
23,506
23,100
23,506
10,000
23,100
670
10,000
670
$29,992
$29,992
5,197
215,848
5,197
2,243
215,848
1,439
2,243
642,671
1,439
5,369
642,671
5,369
5,455
5,455
$396,456
373,134
$396,456
3,036
373,134
3,036
23,506
23,140
23,506
10,000
23,140
670
10,000
670
Financial assets:
Cash and cash equivalents
Financial assets:
Interest-bearing deposits in other banks-
Cash and cash equivalents
term deposits
Interest-bearing deposits in other banks-
Securities
term deposits
Non-marketable equity securities
Securities
Loans held for sale
Non-marketable equity securities
Loans, net of allowance
Loans held for sale
Accrued interest receivable
Loans, net of allowance
Cash surrender value of bank-owned life
Accrued interest receivable
insurance
Cash surrender value of bank-owned life
Financial liabilities:
insurance
Demand and saving deposits
Financial liabilities:
Certificates of deposits
Demand and saving deposits
Federal funds purchased
Certificates of deposits
Securities sold under
Federal funds purchased
agreements to repurchase
Securities sold under
FHLB advances and other borrowings
agreements to repurchase
Subordinated Debentures
FHLB advances and other borrowings
Accrued interest payable
Subordinated Debentures
Accrued interest payable
(20) Stock-Compensation Plans
(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
The fair value of each option award is estimated on the date of grant using a closed form option valuation
historical volatilities of the Company’s common stock. The Company uses historical data to estimate option
model (Black-Scholes) based on the assumptions noted in the table below. Expected volatilities are based on
exercise and post-vesting termination behavior. The expected term of options granted is based on historical
historical volatilities of the Company’s common stock. The Company uses historical data to estimate option
data and represents the period of time that options granted are expected to be outstanding, which takes into
exercise and post-vesting termination behavior. The expected term of options granted is based on historical
account that the options are not transferable. The risk-free interest rate for the expected term of the option is
data and represents the period of time that options granted are expected to be outstanding, which takes into
based on the U.S. Treasury yield in effect at the time of the grant.
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.
45
.
.
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(20) Stock-Compensation Plans (continued)
No options were granted for the year ended December 31, 2015 and 2013.
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
2015
2014
2013
N/A
N/A
N/A
N/A
1.64%
10
29.71%
1.05%
N/A
N/A
N/A
N/A
For the years ended December 31, 2015, 2014 and 2013, the Company recognized $75, $109 and $95 in
compensation expense for stock options, respectively. No tax benefits were recognized for the three year
period ended December 31, 2015. As of December 31, 2015, stock-based compensation expense not yet
recognized totaled $79, and is expected to be recognized over a weighted-average remaining period of
approximately three years. The intrinsic value of options exercised during the years ended December 31, 2015,
2014 and 2013 was $284, $168 and $99, respectively.
The following tables summarize the activity of options and non-vested shares granted, exercised, or forfeited
for the year ended December 31, 2015:
Shares under option, beginning of year
Granted during the year
Forfeited and expired during the year
Exercised during the year
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
$11.74
6.0
10.18
Options
147,173
0
0
(22,727)
Shares under option, end of year
124,416
$12.02
Options exercisable, end of year
104,416
$10.69
5.3
4.7
Shares available for grant, end of year
109,012
Aggregate
Intrinsic
Value
$1,363
0
0
284
$1,565
$1,452
Non-vested options, December 31, 2014
Granted during the year
Vested during the year, net
Forfeited or expired during the year
Non-vested options, December 31, 2015
46
Number of
Options
Weighted
Average
Fair Value
at Grant
50,516
0
(30,516)
0
20,000
$4.17
0
3.70
0
$4.88
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(20) Stock-Compensation Plans (continued)
The following table summarizes information about stock options outstanding at December 31, 2015:
Exercise Price
$10.00
$10.25
$10.50
$19.00
Number Outstanding
8,143
76,273
15,000
25,000
124,416
Remaining
Contractual Life
(Years)
2.0
4.8
4.6
8.2
Number Exercisable
8,143
76,273
15,000
5,000
104,416
During 2012, the Company approved an 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.
The following table summarizes information regarding unvested restricted stock and shares outstanding at
December 31, 2015:
Restricted stock, December 31, 2014
Granted during the year
Forfeited during the year
Restricted shares (net for taxes)
Vested during the year
Unvested
Shares
Weighted Average
Grant Value
8,262
8,503
(362)
(415)
(3,660)
$19.00
21.41
20.28
19.00
19.00
Restricted stock, December 31, 2015
12,328
$20.62
During 2015, total compensation expense of $142 (before tax benefits of $57) 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 $108 and $22 for years 2016 and 2017, respectively.
(21) Stock Repurchase Program
In October 2014 and October 2015, 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, 2015 and 2014, the Company had repurchased 20,000 and 63,962 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 as treasury stock.
47
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(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
2015
2014
2013
$10,544
0
0
$10,544
$8,260
0
0
$8,260
$6,838
0
0
$6,838
Average number of common shares outstanding
Effect of dilutive options
3,633,369
60,796
3,638,004
57,420
3,661,934
54,982
Average number of common shares outstanding used
to calculate diluted earnings per common share
3,694,165
3,695,424
3,716,916
(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.
Effective January 1, 2015, the Company and Banks are subject to new capital adequacy framework called Basel
III. Basel III includes several changes to the capital adequacy guidelines, including a new Common Equity Tier
1 capital requirement, increases in the minimum required Tier 1 risk-based capital ratios, and other changes to
the calculation of regulatory capital and risk-weighted assets.
Quantitative measures established by regulation to ensure capital adequacy require the Company and its
subsidiaries to maintain minimum regulatory capital amounts and ratios (set forth in the following table).
Management believes that as of December 31, 2015, that the Company and the Banks meet all capital-adequacy
requirements to which they are subject.
As of December 31, 2015, the most recent notifications from the Federal Deposit Insurance Corporation
(FDIC) categorized all six Banks as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, minimum capital 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.
48
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(23) Regulatory Matters (continued)
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
$114,995
26,369
21,867
15,574
24,319
9,663
17,128
$98,467
23,851
19,776
13,900
21,978
8,728
16,901
$98,467
23,851
19,776
13,900
21,978
8,728
16,901
$98,467
23,851
19,776
13,900
21,978
8,728
16,901
13.74%
13.17%
13.11%
11.68%
13.13%
13.04%
22.76%
11.76%
11.91%
11.85%
10.43%
11.87%
11.78%
11.98%
11.76%
11.91%
11.85%
10.43%
11.87%
11.78%
22.46%
9.04%
9.58%
9.15%
8.35%
9.80%
9.65%
11.98%
$66,966
16,022
13,347
10,663
14,818
5,927
6,019
$50,225
12,017
10,010
7,998
11,113
4,445
4,514
$37,669
9,013
7,508
5,998
8,335
3,334
3,386
$43,549
9,957
8,643
6,656
8,972
3,618
5,642
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
6.00%
6.00%
6.00%
6.00%
6.00%
6.00%
6.00%
4.50%
4.50%
4.50%
4.50%
4.50%
4.50%
4.50%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
4.00%
$83,708
20,028
16,684
13,329
18,522
7,409
7,524
$66,966
16,022
13,347
10,663
14,818
5,927
6,019
$54,410
13,018
10,845
8,664
12,039
4,816
4,891
$54,436
12,446
10,804
8,320
11,215
4,522
7,052
10.00%
10.00%
10.00%
10.00%
10.00%
10.00%
10.00%
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
8.00%
6.50%
6.50%
6.50%
6.50%
6.50%
6.50%
6.50%
5.00%
5.00%
5.00%
5.00%
5.00%
5.00%
5.00%
As of December 31, 2015:
Total Capital to Risk
Weighted Assets:
Company
Northwest
German
Davis
Freeport
Lena
Herscher
Tier-I Capital to Risk
Weighted Assets:
Company
Northwest
German
Davis
Freeport
Lena
Herscher
Common Equity Tier 1 Capital
to Risk Weighted Assets:
Company
Northwest
German
Davis
Freeport
Lena
Herscher
Tier-I Capital to
Average Assets:
Company
Northwest
German
Davis
Freeport
Lena
Herscher
49
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(23) Regulatory Matters (continued)
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
$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%
(24) 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.
(25) 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 2016 and is renewable up to three 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 $93 and $92 was recognized in 2015 and
2014, respectively.
In addition, there is an operating lease agreement for bank premises in Kankakee, Illinois. There is no formal
lease for the Kankakee location. The Bank is verbally agreeing to pay $7 for 2016.
The minimum lease commitments on all leases is $101 for 2016.
50
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(26) Subsequent Event
(26) Subsequent Event
On January 4, 2016, the Company purchased the facility housing the existing, leased German-Amercian State
Bank branch location in Winnebago, Illinois for $2,100.
On January 4, 2016, the Company purchased the facility housing the existing, leased German-Amercian State
Bank branch location in Winnebago, Illinois for $2,100.
(27) Qualified Affordable Housing Project Investments
(27) Qualified Affordable Housing Project Investments
The Company invests in qualified affordable housing projects. At December 31, 2015 and 2014, the balance
of the investment for qualified affordable housing projects was $1,292 and $0 These balances are reflected in
The Company invests in qualified affordable housing projects. At December 31, 2015 and 2014, the balance
the other assets line on the consolidated balance sheets. Total unfunded commitments related to the
of the investment for qualified affordable housing projects was $1,292 and $0 These balances are reflected in
investments in qualified affordable housing projects totaled $1,276 and $0 at December 31, 2015 and 2014.
the other assets line on the consolidated balance sheets. Total unfunded commitments related to the
The company expects to fulfill these commitments during the year ending 2016.
investments in qualified affordable housing projects totaled $1,276 and $0 at December 31, 2015 and 2014.
The company expects to fulfill these commitments during the year ending 2016.
(28) State Bank of Herscher Acquisition
(28) State Bank of Herscher Acquisition
On July 2, 2015, the Company purchased 100% of the outstanding common shares of the State Bank of
Herscher. As a result of the acquisition, the Company expects to offer its expanded line of bank products and
On July 2, 2015, the Company purchased 100% of the outstanding common shares of the State Bank of
services to State Bank of Herscher’s existing and prospective customers while reducing administrative costs
Herscher. As a result of the acquisition, the Company expects to offer its expanded line of bank products and
through economies of scale. The Company was able to purchase State Bank of Herscher at a bargain purchase
services to State Bank of Herscher’s existing and prospective customers while reducing administrative costs
price primarily because the credit quality of State Bank of Herscher’s loan portfolio shows significant
through economies of scale. The Company was able to purchase State Bank of Herscher at a bargain purchase
deterioration. A bargain purchase gain of $1,133 was recognized in other noninterest income on the
price primarily because the credit quality of State Bank of Herscher’s loan portfolio shows significant
consolidated statements of income for the year ended December 31, 2015. Consideration paid for the net
deterioration. A bargain purchase gain of $1,133 was recognized in other noninterest income on the
assets acquired included $1.00 of cash. Costs related to the acquisition are included in other noninterest
consolidated statements of income for the year ended December 31, 2015. Consideration paid for the net
expense on the consolidated statements of income and totaled $206 for the year ended December 31, 2015.
assets acquired included $1.00 of cash. Costs related to the acquisition are included in other noninterest
expense on the consolidated statements of income and totaled $206 for the year ended December 31, 2015.
Recognized amounts of identifiable assets acquired and liabilities assumed:
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents
Securities
Cash and cash equivalents
Loans
Securities
Premise and equipment
Loans
Core deposit intangibles
Premise and equipment
Foreclosed assets
Core deposit intangibles
Other assets
Foreclosed assets
Other assets
Total assets acquired
Total assets acquired
Deposits
Other liabilities
Deposits
Other liabilities
Total Liabilities assumed
Total Liabilities assumed
Bargain purchase gain
Bargain purchase gain
Total
2015
$23,756
2015
32,798
$23,756
56,810
32,798
2,033
56,810
1,952
2,033
2,635
1,952
8,232
2,635
8,232
$128,216
$128,216
124,748
2,335
124,748
2,335
127,083
127,083
1,133
1,133
$128,216
Total
The fair value of net assets includes fair value adjustments to certain receivables that were not considered
impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual
The fair value of net assets includes fair value adjustments to certain receivables that were not considered
cash flows. However, the Company believes that all contractual cash flows related to these financial
impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual
instruments will be collected. As such, these receivables were not considered impaired at the acquisition date
cash flows. However, the Company believes that all contractual cash flows related to these financial
and were not subject to the guidance relating to purchased credit impaired loans, which have shown evidence
instruments will be collected. As such, these receivables were not considered impaired at the acquisition date
of credit deterioration since origination.
and were not subject to the guidance relating to purchased credit impaired loans, which have shown evidence
of credit deterioration since origination.
$128,216
51
FORESIGHT 2015 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000s omitted except share data)
(28) State Bank of Herscher Acquisition (continued)
The following table presents pro forma information as if the acquisition had occurred at the beginning of
2014. The pro forma information includes adjustments for interest income on loans and securities acquired,
amortization of intangibles arising from the transaction, depreciation expense on property acquired, interest
expense on deposits acquired, and the related income tax effects. The pro forma financial information is not
necessarily indicative of the results of operations that would have occurred had the transactions been effected
on the assumed dates.
Net interest income
Net income
Basic earnings per share
Diluted earnings per share
2015
2014
$34,561
$34,747
$10,102
$5,795
$2.78
$2.73
$1.59
$1.57
52
FORESIGHT 2015 Annual Report
General Information
Foresight Financial Group, Inc.
3106 North Rockton Ave.
Rockford, IL 61103
815.847.7500 ph
815.968.7206 fx
Email: dcooke@ffgbank.net
Directors
Foresight Financial Group, Inc.
Rockford, IL
John Collman
John Jeschke
Charles B. Kullberg
Fred Kundert
Brent Myers
Carolyn Sluiter, D.V.M.
Robert W. Stenstrom
Judd Thruman, J.D.
Douglas Wagner
Northwest Bank of Rockford
Rockford, IL
Stephen G. Gaddis
Charles B. Kullberg
Stephen P. McKeever
John J. Morrissey, C.P.A.
Brent Myers
Amy M. Ott
Robert W. Stenstrom
Tom Walsh
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 OTC Pink Marketplace
under the trading symbol “FGFH”.
For more information, contact
Foresight Financial Group, Inc. at
the corporate address or visit our
website at www.foresightfg.com
State Bank
Freeport, IL
Douglas Cross, Director Emeritus
Mary Hartman
Bruce Johnson
Dr. Joe Kanosky
Fred Kundert
Christopher Schneiderman
Marilyn Smit
Brian Stewart
Ken Thompson
Douglas Wagner
State Bank of Herscher,
Herscher, IL
Randall Chaplinski
Wayne Koelling
Fred Kundert
Brent Myers
K. Denise Osadjan
Mike Scanlon
Lena State Bank
Lena, IL
Todd Bussian, O.D.
John Jeschke
James Moest, D.V.M.
Brent Myers
Steven Rothschadl
Judd Thruman, J.D.
German-American State Bank
German Valley, IL
Robert Borneman
John Collman
Guy Cunningham
Robert Ebbesmeyer, D.V.M.
Jack Janssen
Angela K. Larson
Michael Schirger, J.D.
Jeffrey M. Sterling
State Bank of Davis
Davis, IL
Dan Dietmeier
John Jeschke
Brent Myers
Thomas Olsen
Carolyn Sluiter, D.V.M.
Richard Stenzinger, C.P.A.
Judd Thruman, J.D.
53
FORESIGHT 2015 Annual Report
CONSOLIDATING SCHEDULE 1 - BALANCE SHEET
(000s omitted except share data)
December 31, 2015
A S S E T S
German-American
State Bank
State Bank
of Davis
Northwest
Bank
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
Core deposit intangible
Other assets
Investment in subsidiary banks
$2,540
16
0
2,985
0
61,097
534
0
143,243
198
1,234
0
4,072
0
$2,544
3,866
0
965
868
36,427
313
0
108,883
43
1,023
0
2,629
0
$8,485
2,013
0
3,210
0
41,397
695
3,050
180,899
419
4,398
0
5,156
0
Total assets
$215,919
$157,561
$249,722
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
$20,868
169,023
189,891
107
4,500
0
1,071
$13,207
121,295
134,502
0
8,062
0
0
378
$39,147
177,711
216,858
0
2,789
4,500
0
1,213
Total liabilities
195,569
142,942
225,360
Stockholders’ equity:
Preferred stock
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive income
Total stockholders’ equity
0
400
2,821
16,555
0
574
20,350
0
100
1,596
12,204
0
719
14,619
0
1,450
7,235
15,166
0
511
24,362
Total liabilities and stockholders’ equity
$215,919
$157,561
$249,722
54
FORESIGHT 2015 Annual Report State
Bank
Lena
State Bank
State Bank
of Herscher
Foresight Financial
Group, Inc.
Eliminations
Consolidated
Total
$3,993
18
185
1,991
0
49,621
448
0
161,663
0
1,725
0
2,480
0
$1,060
15
0
1,098
0
28,641
253
0
56,874
2
497
0
3,012
0
$2,845
380
862
4,729
0
60,117
609
0
56,530
2,237
2,013
1,847
7,840
0
$9,005
0
0
0
0
0
0
0
179
207
804
0
590
109,679
($9,011)
(910)
(1,100)
(109,679)
$21,461
$5,398
1,047
13,878
868
277,300
2,852
3,050
708,271
3,106
11,694
1,847
25,779
$222,124
$91,452
$140,009
$120,464
($120,700)
$1,076,551
$24,704
157,765
182,469
0
12,749
3,500
0
633
199,351
0
1,000
4,616
16,362
0
795
22,773
$5,501
74,954
80,455
396
0
1,000
0
510
82,361
0
500
3,701
4,527
0
363
9,091
$21,092
98,998
120,090
0
0
488
0
941
121,519
0
400
28,443
(7,877)
0
(2,476)
18,490
$0
0
$0
0
0
6,858
10,000
452
17,310
0
981
8,613
96,385
(5,787)
2,962
($2,236)
(8,779)
(11,015)
(11,015)
(3,850)
(48,412)
(56,937)
(486)
$122,283
790,967
913,250
503
23,600
20,846
10,000
5,198
973,397
0
981
8,613
96,385
(5,787)
2,962
103,154
(109,685)
103,154
$222,124
$91,452
$140,009
$120,464
($120,700)
$1,076,551
55
FORESIGHT 2015 Annual Report
For the year ended December 31, 2015
Interest and dividend income:
Loans, including fees
Securities:
Taxable
Tax-exempt
Interest-bearing deposits in banks and other
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
Gain on acquisition bargain purchase
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
German-American
State Bank
State Bank
of Davis
$6,982
$4,639
791
698
35
2
8,508
1,446
1
0
60
0
1,507
7,001
110
6,891
275
64
0
0
0
736
1,075
2,435
390
205
382
2
1,232
4,646
3,320
1,036
619
625
34
5
5,922
926
2
46
6
0
980
4,942
429
4,513
108
60
0
0
0
197
365
1,061
204
141
155
11
854
2,426
2,452
574
$2,284
$1,878
56
FORESIGHT 2015 Annual Report CONSOLIDATING SCHEDULE 2 - STATEMENT OF INCOME
(000s omitted except share data)
Northwest
Bank
State
Bank
Lena
State Bank
State Bank
of Herscher
Foresight Financial
Group, Inc.
Eliminations
Consolidated
Total
$8,643
$7,144
$2,343
$2,155
606
656
68
3
9,976
1,330
2
8
48
0
1,388
8,588
700
636
867
31
1
8,679
1,040
3
17
59
0
1,119
7,560
0
364
541
15
1
3,264
475
2
0
5
0
482
2,782
194
421
68
40
4
2,688
113
0
0
0
0
113
2,575
227
7,888
7,560
2,588
2,348
498
44
1,338
696
0
715
3,291
4,684
1,134
114
396
117
1,961
8,406
2,773
788
137
56
0
0
0
690
883
2,196
310
193
319
0
711
3,729
4,714
1,572
81
56
0
0
0
192
329
739
158
155
86
(83)
408
1,463
1,454
382
$1,985
$3,142
$1,072
66
146
0
44
0
318
574
1,017
175
102
126
542
700
2,662
260
57
$203
2
0
0
20
0
22
0
0
0
140
600
740
(718)
0
(718)
($20)
(20)
($20)
(20)
0
0
$10,564
($10,564)
1,133
1,586
13,283
2,007
256
24
12
420
2,719
9,846
(698)
(1,580)
(12,144)
(698)
(882)
(1,580)
(10,564)
$31,908
3,437
3,455
223
16
39,039
5,310
10
71
318
600
6,309
32,730
1,660
31,070
1,165
0
426
1,338
740
1,133
2,854
7,656
14,139
2,627
236
582
601
6,286
24,471
14,255
3,711
$10,544
($10,564)
$10,544
57
FORESIGHT 2015 Annual Report Notes
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58
FORESIGHT 2015 Annual Report Board of Directors
John Collman
John Jeschke,
Chairman
Fred Kundert
Charles B. Kullberg
Brent Myers
Carolyn Sluiter
Robert W. Stenstrom
Judd Thruman, J.D.
Douglas Wagner
59
FORESIGHT 2015 Annual Report 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”
.
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