2 0 1 1
A n n u Al
R e p oRt
Making a Difference, One custOMer at a tiMe
Chairman’s Letter to the Shareholders
Several years ago, the theme for our annual
report to shareholders was titled “The Test
of Time.” I couldn’t help but be reminded of
that theme recently when the Comptroller
of the Currency presented Kish Bank with a
large embossed certificate on the occasion of
the 100th anniversary of the Bank’s national
charter. Kish’s charter was originally granted
to the Farmers National Bank of Belleville
in 1912. Over the years, it is a charter that
has stood the test of challenging economic
periods and difficult regulatory conditions,
perhaps never more so than the past few
years. Today, we can say with pride that
this milepost, like all those before it, was
made possible by a sustained focus on
the fundamentals of our business and a
tradition of delivering on our promises to our
customers and communities. So that now,
as we review the results for Kish Bancorp
in 2011, we can do so with a deep sense
of pride in the tradition of performance that
has brought Kish to this point in our history;
a tradition of “Making a Difference, One
Customer at a Time.”
A discussion of Kish Bancorp’s performance
in 2011 begins with an acknowledgement
of the political, economic and regulatory
climate that provided the backdrop for the
year. A famous politician once said, “All
politics is local.” That statement is true for
banking as well. Sooner or later, the forces at
work on the national stage, from which we
often feel removed, come home to impact us
locally. That was the case for Kish in 2011.
The Dodd-Frank Act, which had passed in
2010 with the stated intent of addressing
the excesses that caused the financial crisis,
had already rewritten the rules under which
banks operate. Bank bashing remained in
vogue in Washington, despite the fact that
few banks, and certainly few community
banks, had contributed to the crisis.
The economic recovery that many were
predicting and hoping for failed to gain much
traction; therefore, headwinds facing many
of our small business borrowers continued.
The challenging regulatory climate and
heightened scrutiny of community banks,
previously focused on other regions of the
country, began to impact Pennsylvania’s
community banks as well. In February of
2011, Kish Bank voluntarily entered into
an agreement with its primary regulator to
address certain concerns arising from a 2009
examination regarding criticized loans and
IT infrastructure. Despite this unexpected
development, we maintained our focus on
serving our customers and communities
while moving swiftly to address these
regulatory issues. Although the resources
dedicated to addressing this situation were
significant, Kish Bank remained profitable,
well capitalized and growing. We continued
to add new customers and new members to
the team. We also remained supportive of our
existing borrowers, most of whom had been
customers for years and had never stopped
performing or paying as agreed. Today we
can point with pride to the metrics of loan
quality and financial performance that were
sustained at high levels throughout 2011.
We can also report that the actions necessary
to address the agreement are essentially
completed, except for the period of time
required to validate our capacity to sustain
this performance.
As you review our results for 2011, I would
also ask you to bear in mind that the
financial and internal resources committed
to responding to the environment, while
considerable, in reality represent the
commitment of resources necessary to
build the platform for the future. Our 2011
performance continued to advance Kish’s
strategic vision of “Building to a Billion”
William P. Hayes,
Chairman, President, and
Chief Executive Officer
contents
Chairman’s Letter
to the Shareholders
Financial Highlights
1-4
5-7
Making a Difference,
One Customer at a Time 8-10
Report of Independent
Auditors
11
Financial Statements
12-15
Notes to Consolidated
Financial Statements 16-47
The People of Kish
Bancorp, Inc.
48-49
www.KishBank.com
in assets. The balance sheet was
strengthened. We invested in internal
processes, systems, and infrastructure.
Kish Bank expanded its market share
in the region and our capacity to
manage growth was fortified by a
number of key additions to the Kish
team. We are better positioned to
pursue the growth opportunities that
we are confident await us as the
economic recovery begins to take
hold. It is this solid foundation, built
on the discipline of performance and
team commitment, that permits us to
proudly present this Annual Report.
Net income for 2011 grew to
$3.631 million, an increase of 2.1
percent over 2010. Earnings per
share, at $6.74, also exceeded 2010
performance. Return on average
shareholder’s equity remained
strong at 9.82 percent, significantly
exceeding the current industry
average. It was this critical measure of
shareholder performance that ranked
Kish Bancorp among the top 200
Community Banks in the U.S.
in 2011 for the third consecutive
year, based on a ranking by
U.S. Banker magazine.
The key driver of the growth in net
income was a stable net interest
margin coupled with growth in
earning assets. Most importantly,
the core banking business remained
strong. Kish achieved a 1.5 percent
increase in net interest income
compared to 2010, despite weak
market demand for commercial loans
that contributed to a nominal decline
of 1 percent in the loan portfolio. Net
interest income during 2011 was
$17.243 million, an increase of $255
thousand compared to 2010.
Earnings were also aided during 2011
by strengthening loan quality metrics.
There was a $1.05 million decrease
in the contribution to the reserve
for loan losses, as $800 thousand
was set aside in 2011 compared to
$1.850 million in 2010. Because of
a significant decline in actual losses,
the reserve for loan losses, the Bank’s
buffer against possible future loan
charge-offs, increased 12.8 percent to
$7.043 million at December 31, 2011
from $6.245 million at December
31, 2010. While the Corporation’s
provision expenses declined, the
reserve ratio increased substantially
to 1.91 percent of total loans as
of December 31, 2011 from 1.67
percent at December 31, 2010.
As noted above, loan quality
indicators began the year on positive
footing and grew stronger as 2011
progressed. The increased stability of
our loan portfolio reflected continued
efforts to work with our borrowers to
resolve loan problems. Most notably,
net loan losses were near zero during
2011, loan delinquencies were near
historic lows, and criticized assets
had begun to decrease substantially.
When compared to our national peer
group of banks between $300 million
and $1 billion in assets at year end,
Kish Bank’s ratio of loan losses to total
loans ranked in the top 3 percent of
those banks; our earnings coverage of
net losses ranked in the top 1 percent,
and loans on non-accrual as a
percentage of loans ranked in the top
60 percent. Over the past five years,
and in stark contrast to our national
peer group, the sustained quality of
these metrics have been important
contributors to Kish Bancorp’s overall
performance. They also reflect our
capacity to support local borrowers
who have endured this very difficult
economic period.
Noninterest income increased
$1.574 million, or 24.6 percent, to
$7.982 million for 2011 from $6.408
million in 2010. This includes full-
year business property income from
a foreclosed business loan on the
property, which was sold during
the fourth quarter. Offsetting this
$1.9 million increase in noninterest
revenues was a decline in investment
securities gains, as well as lower
gains on sales of residential
mortgage loans originated for
the secondary market.
Noninterest expense was $20.355
million during 2011, an increase
of $2.835 million, or 16.2 percent,
over the same period in 2010. This
was driven in large part by the costs
related to operating the business
property discussed above. Excluding
the impact of these expenses,
core noninterest expenses grew
by $1.288 million, or 7.5 percent,
in 2011 due to increases in FDIC
insurance premiums, consulting
fees, and salaries and benefits.
Although a number of these expenses
were nonrecurring, the rising cost
of regulatory compliance in this
environment must be a concern and
underscores the need for prudent
and profitable growth if we are
to continue to achieve historical
performance thresholds.
2
In addition to our sustained earnings
performance, 2011 also witnessed the
improvement of other key indicators
of financial strength and durability.
Capital ratios were continuously
bolstered during the past year
through retained earnings and a
private offering of common stock of
just over $3 million. These activities
served to augment Kish Bancorp’s
already strong capital base and equip
the Corporation for the next period
of expansion. Capital ratios at the
holding company for December 31,
2011 versus the previous year were
as follows: Tier 1 Leverage – 8.26
percent up from 7.24 percent; and
Total Risk Based Capital – 13.85
percent up from 11.67 percent.
We were pleased with the ready
acceptance given to the private
offering during what is still a difficult
environment for banks in the capital
markets. We were also gratified that
the issuance had little impact on the
market value of Kish Bancorp stock.
As was true with previous forms of
government provided capital (TARP),
Kish did not raise capital through
the U.S. Treasury’s Small Business
Lending Fund.
During 2011, the Bank implemented
further enhancements to information
security protocols, technology
infrastructure, and information
management systems that, along with
other actions, have improved external
and internal service capabilities
across the organization. We will
continue to place a high priority
on investing in systems that protect
information and deliver the most
efficient service possible to
our customers.
To further strengthen our Build to a
Billion initiatives and sharpen our
focus on service to our customers,
Kish also realigned the executive
management team and made
a number of strategic hires and
appointments that are worthy of note
in this report. In that process, we
have strengthened our overall
management focus, our sales focus
and our sales teams.
In recognition of his leadership and
strong performance since joining
the Kish organization in 2009, Brad
Scovill was promoted to the position
of Senior Executive Vice President
and Chief Operating Officer. In that
capacity, he assumed full day-to-
day operating responsibility for the
Bank. He previously served in the
dual role as Chief Operating Officer
and CFO. Brad is also continuing his
responsibilities as Chief Risk Officer
for the Corporation.
There were also important additions
to the Kish team this past year.
• John Arrington joined Kish early
in 2011 as Regional Market
Manager, Centre County, and
was subsequently promoted
to Executive Vice President for
Sales and Retail Banking. John
is passionate about community
banking and customer service
and, in addition to directing
the sales efforts across all
regions, is leading the Bank’s
efforts in product and service
improvement.
3
• Carol Herrmann, a noted
State College business leader,
joined Kish as Vice President
for Administration to provide
executive-level direction,
support and administrative
oversight of such key functions
as strategic planning, corporate
communications, investor
relations and marketing. She
also facilitates the governance
activities of the Bank and
Corporation Boards of Directors
and Regional Boards.
• Sangeeta Kishore, a seasoned
bank financial executive, joined
Kish Bank as Executive Vice
President and Chief Financial
Officer. She brought an extensive
background and expertise in
reporting requirements for
banks above the $1 billion asset
threshold that will be invaluable
as Kish continues to grow.
• Other key additions and
appointments include Matt
Raptosh, who joined the Bank
as Assistant Vice President,
Commercial Relationship
Manager in Centre County, and
John Keeler, as a Commercial
Relationship Manager in Mifflin
County. Several seasoned Kish
bankers were promoted to new
roles. In Mifflin County, John
Cunningham was promoted to
Regional Market Manager, Mifflin
County and Allana Hartung was
promoted to VP, Commercial
Relationship Manager. Marsha
Kuhns was appointed as VP
of Branch Administration,
In reviewing the Corporation’s
achievements for 2011, we gratefully
acknowledge the continued support
and encouragement of you, our
shareholders. You have supported
Kish’s special mission in the
marketplace and its ambitious goals
for the future. The Corporation has
been fortunate to welcome a strong
and local group of new investors
this year. We extend to you a warm
welcome to the Kish organization,
one uniquely committed to making a
difference in our community— one
customer at a time.
As always, we encourage your
inquiries regarding the Corporation’s
performance noted herein and
throughout the coming year.
Sincerely,
William P. Hayes
Chairman, President, and
Chief Executive Officer
and Kayelene Sunderland
was promoted to AVP and
Trust Manager.
These enhancements to the team,
among others, were part of an overall
reorganization that aligned executive
efforts in a number of key areas
including sales, retail and business
banking, finance, operations, and
enterprise risk management.
An important component of Kish’s
Build to a Billion strategy is to
develop the professional governance
capabilities necessary to represent
the interests of our shareholders,
oversee and direct our activities,
and set the strategic direction of
the Company. Board members of
Kish Bank and Kish Bancorp are
charged with understanding the
banking and diverse financial needs
of our businesses and customers and
possessing the technical and financial
acumen important to the governance
of the Bank and its various business
units. They are also accountable for
Kish’s adherence to the regulatory
structure under which we operate.
Together, our Board members further
strengthen the capacity of the
Corporation to achieve its long-term
goals and objectives. We are grateful
for their extraordinary commitment
to Kish and our mission of driving
sustained shareholder value through
an unwavering focus on service to our
customers and communities.
In that regard, we were pleased to
welcome Mr. Delmont R. Sunderland
of Huntingdon to the Kish Bancorp
Board in 2011. Recently, we were
also pleased to announce the
appointment of William S. Lake to the
Kish Bank and Kish Bancorp Boards
of Directors. Mr. Lake is a long-time
resident of Mifflin County and is
the owner of the Lake Automobile
Dealerships in Lewistown. He is
respected for his community support
and business acumen and brings an
in-depth knowledge of the markets in
which we operate. He will stand for
election by the shareholders at the
upcoming annual meeting in May.
We also want to acknowledge with
gratitude the departure of a valued
member of our Boards following the
upcoming shareholders meeting in
May. Alison B. Kurtz of State College
has decided to conclude her service
as a director of Kish Bank and Kish
Bancorp at the end of her term. The
demands imposed on our directors
have increased dramatically in recent
years and we are grateful to Alison for
her contributions, commitment, and
dedication during a challenging and
demanding time.
In summary, Kish’s sustained positive
financial performance, strengthened
balance sheet, loan quality,
realignment of the management
structure, additions to our governance
teams, and focus on building a
winning team, in combination
with strategic investments in our
technology infrastructure, focus on
risk management, improvement in our
internal processes, and refinements to
our product development and support
processes, reinforce Kish’s ability to
continue to advance the Corporation’s
long-term goals in the years ahead.
Financial Highlights
Five Year Summary
for the year
Net Income
2011
$3,631,298
2010
$3,556,124
2009
$3,216,423
2008
$3,937,791
2007
$3,933,582
Net Income Before Taxes
4,070,114
4,026,669
3,586,370
4,817,481
4,826,174
Total Dividends Declared
1,760,493
1,739,714
1,721,575
1,713,474
1,629,120
at year end (in 000’s)
Total Assets
Total Loans (Net)
Total Deposits
Stockholders’ Equity
Loan Loss Reserve
Net Loan Losses (Recoveries)
ratio analysis
Return on Average Assets
Return on Average Equity
Dividend Declared/Net Income
Loan/Deposits
Primary Capital/Total Assets
Total Capital/Risk Weighted Assets
Loan Loss Reserve/Loans
Net Loan Losses to Total Loans (Net)
per share data
Basic Earnings
Fully Diluted Earnings
Dividends Paid
Equity (Book Value)
Equity Plus Loan Loss Reserve
$560,069
$556,623
$527,396
$476,263
$454,092
362,163
454,660
43,517
7,043
3
0.65%
9.82%
48.48%
79.66%
9.03%
13.85%
1.91%
0.00%
$6.74
6.72
3.24
72.95
84.75
367,306
446,002
35,729
6,245
1,001
0.65%
10.31%
48.92%
82.36%
7.54%
11.67%
1.67%
0.27%
$6.72
6.68
3.24
66.54
78.17
367,824
407,721
34,062
5,397
252
0.64%
9.73%
53.57%
90.21%
7.48%
11.26%
1.44%
0.07%
$6.08
6.07
3.24
63.61
73.69
333,434
352,729
31,302
3,305
(5)
0.84%
12.75%
43.51%
94.53%
7.27%
10.40%
0.98%
0.00%
$7.47
7.47
3.24
59.04
65.27
305,729
331,688
30,323
3,001
140
0.92%
13.32%
41.42%
92.17%
7.34%
10.41%
0.97%
0.05%
$7.37
7.35
3.03
57.50
63.19
Average Shares Outstanding (#)
538,735
529,343
528,125
527,044
534,916
4
5
Financial Highlights
Net Income (in millions)
Basic Earnings Per Share
Total Assets (in millions)
Total Capital/
Risk Weighted Assets
Return on Average Equity
Dividends Per Share
Loan Loss Reserve/Loans
Net Loan Losses to
Total Loans (Net)
* Source – SNL Financial, median values
* Source – SNL Financial, median values
6
7
Making a
Difference –
one Customer
at a time
Ed Bridgens
Owner, Eastgate Feed & Grain
Kish Banking, Insurance, and Travel Customer
Suzy Glenn
Owner, Best Event Rental
Kish Bank Customer
Mark Mazur and Christina Calkins-Mazur
Owners, Calkins Automotive
Kish Bank Customers
Art DeCamp
Kish Insurance Customer
Paula Seguin
Owner, Boxer’s Café
Kish Bank Customer
At Kish Bancorp, we never get confused about our
Most importantly of course, by touching so many
With the long retail hours and financial complexities,
seemed a lot more interested in passing his questions
reason for being in business. We’re here to serve our
aspects of our customers’ lives with an expanding range
running a successful car dealership doesn’t allow for
along to assistants, instead of working with him directly.
customers by meeting their needs and helping them
of products and services, we make a difference in our
much down time. So it’s important for Mark Mazur
That’s why Art has found that his experience with
accomplish their goals, realize their dreams, and build
community by helping to fuel business innovation and
and Christina Calkins-Mazur to be able to ensure the
Kish Insurance makes such a difference. It has been
brighter futures. To the extent we are successful in
expansion, capital formation, and wealth generation.
achievement of their personal financial goals without a
like a breath of fresh air to have an insurance partner
achieving that objective, then we can also focus on
our goal of delivering long term performance and
value to our shareholders and our communities.
All of this makes an investment in Kish a winning
proposition on multiple levels. It’s an investment
not only in an organization committed to achieving
Of course, the critical element of delivering value
outstanding financial results, but also dedicated to
is strong financial performance. But it extends
having a positive impact on the quality of life in our
beyond that. By producing consistently strong
community. An investment in Kish is an investment that
financial performance, we not only achieve results
makes a difference.
for shareholders, we are also able to invest in our
franchise, our employees and the organizations
that serve our communities. As we reinvest in the
infrastructure of the company, we strengthen our
capacity to perform and compete. The same is true
for our workforce. Investing in our people is the only
means to elevate the professional capacity of our
people and deliver great service. Solid profitability also
enhances our ability to provide financial support to the
organizations that help the most vulnerable and needy
in our communities.
So, one of the best ways to see how Kish makes a
difference is to look first-hand at the experiences of our
customers. Behind every Kish customer relationship is
an individual story. As a community-based institution
built on personal relationships, Kish has a unique
opportunity to see our customers’ stories unfold on a
direct and personal level. The stories you will see in
these pages provide just a few of many examples of
how Kish makes a difference—one customer at a time.
lot of hands-on administrative involvement. That’s why
who takes the time to truly understand his needs and
they choose Kish Bank for their personal banking needs
personally attend to the smallest details.
as well as their business banking. The peace of mind
that comes with knowing that Kish is navigating their
personal financial ship in the right direction makes
a difference in their lives; plus it gives them more
opportunities to enjoy life with their growing young
family, including leisure time at the shore.
Ed Bridgens has experienced all facets of financial
services delivery through his relationship with Kish:
his business banking needs as a small business owner,
personal banking, as well as his personal and business
insurance and investment management needs have
all been provided at levels that have helped him meet
Art DeCamp has a variety of specialized relationships
his financial goals; all while maintaining a quality of
with the financial services team at Kish. From
life in the local community that makes his hard work
banking, to investment management to insurance,
worthwhile. So when it comes to leisure time, Ed turns
his experience is that Kish delivers customized and
to a trusted source for managing his vacation trips as
highly personalized solutions. He likes to discuss his
well. There are many options, online and offline, for
insurance needs—some of which he wasn’t even fully
planning a vacation. Finding competitive prices on
aware of before he met his Kish Insurance agent—
fares and lodging can be time consuming and often
as an example of how Kish differentiates itself.
challenging. It’s even more daunting to try to make
Previously, he had repeatedly experienced the
sure you don’t run into the unexpected hassles and
frustration of working with insurance agents who
unpleasant surprises that can make a pleasure trip
8
9
“ Kish caters to me.”
– John Pannizzo
Owner, Downtown OIP and Grille
Kish Financial Solutions Customer
much less pleasurable. If you lead the busy lifestyle of
more—giving him more time to lace up the sneakers
a business owner like Ed Bridgens, finding the time it
and make tracks.
takes to plan a vacation on your own can be difficult.
That’s why Ed trusts the experts at Kish Travel, who
make a difference in his leisure life by devoting the
time and personal attention it takes to take care of
the details and ensure that every trip, from a weekend
getaway to a long, leisurely vacation package, is an
exceptional and memorable experience.
We think these customer stories speak volumes.
Since our management team and associates share our
communities with our customers and shareholders,
we can see the positive difference that our
performance, products and services make in our
neighbors’ lives: from helping their personal and
business finances thrive… to helping them provide
The restaurant business is fast-paced—that’s a given.
for their children’s education and attaining financial
But that doesn’t bother John Pannizzo, who you’re
security for retirement; from providing peace of mind
likely to see out for a run if he’s not at his restaurant
with insurance products to protecting what matters
multi-tasking to make sure everything, from the kitchen
most to them… to enhancing their ability to enjoy
to the dining room to the restrooms, is running in a way
downtime with unique travel and leisure experiences.
that ensures his customers an experience that meets
his high standards. John also has high standards when
it comes to choosing a financial services partner. With
a life outside of work that’s often just as fast-paced as
his business, he doesn’t want to spend a lot of time
managing the details of keeping his long-term financial
goals on track. So it makes a big difference for John
that he can trust Kish Financial Solutions to manage the
details of retirement, children’s college funding, and
The Kish Experience is a story about our customers’
success. It is a sum of the stories of all of our customers.
It is what makes our alignment with our customers so
strong and our shareholders’ investment so important
to the health and well-being of our communities.
Report of Independent Auditors
Kish Bancorp, Inc.
Consolidated Audited Financial Statements
December 31, 2011
Report of Independent Auditors
Board of Directors and Stockholders,
Kish Bancorp, Inc.
Page Number
We have audited the accompanying consolidated
Report of Independent Auditors ............................11
Financial Statements
Consolidated Balance Sheet ...............................12
balance sheet of Kish Bancorp, Inc. and subsidiaries
as of December 31, 2011 and 2010, and the related
consolidated statements of income, changes in
stockholders’ equity, and cash flows for the years then
Consolidated Statement of Income ...................13
ended. These financial statements are the responsibility
Consolidated Statement of Changes in
Stockholders’ Equity .........................................14
of the Company’s management. Our responsibility is to
express an opinion on these financial statements based
Consolidated Statement of Cash Flows ............15
on our audits.
Notes to Consolidated Financial Statements ..16–47
Market and Dividend Information for 2011
During 2011, Kish Bancorp, Inc. paid four quarterly
dividends totaling $3.24. $0.81 per share was paid on January
31, April 30, July 31 and October 31. These dividends were
paid to shareholders of record as of January 1, April 1, July 1
and October 1.
Stock in Kish Bancorp, Inc. is not actively traded on a
national securities exchange. During 2011, trades occurred
in the over the counter (OTC) market. To management’s
knowledge, sale prices ranged from $63.00 to $56.00 per
share. At year-end, an average bid price of $58.00 was posted.
On December 31, 2011, there were 438 shareholders
of record. The following firms are market makers in the
Corporation’s stock:
Boenning & Scattergood, Inc.
4 Tower Bridge, 200 Barr Harbor Drive, Suite 300
West Conshohocken, PA 19428
(610) 862-5368
Raymond James and Associates, Inc.
222 South Riverside Plaza, 7th Floor
Chicago, IL 60606
(312) 655-2975
Registrar and Transfer Company serves as the Corporation’s
transfer agent and record keeper. Founded in 1899,
Registrar and Transfer Company is the nation’s oldest, most
widely respected specialist in the stock transfer business.
Thousands of banks and public companies, trading on
all U.S. exchanges, utilize R&T to provide efficient and
comprehensive shareholder services.
Their contact information is as follows:
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016
(800) 368-5948
info@rtco.com
We conducted our audits in accordance with U.S.
generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the overall
financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Kish Bancorp, Inc. and
subsidiaries as of December 31, 2011 and 2010, and
the results of their operations and their cash flows for
the years then ended, in conformity with U.S. generally
accepted accounting principles.
Wexford, Pennsylvania
March 14, 2012
10
11
Consolidated Balance Sheet
KISH BANCORP, INC.
CONSOLIDATED BALANCE SHEET
KISH BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
Consolidated Statement of Income
ASSETS
Cash and due from banks
Interest-bearing deposits with other institutions
Cash and cash equivalents
Certificates of deposit in other financial institutions
Investment securities available for sale
Loans held for sale
Loans
Less allowance for loan losses
Net loans
Premises and equipment
Goodwill
Regulatory stock
Bank-owned life insurance
Accrued interest and other assets
TOTAL ASSETS
LIABILITIES
Deposits:
Noninterest-bearing
Interest-bearing demand
Savings
Money market
Time
Total deposits
Short-term borrowings
Other borrowings
Accrued interest and other liabilities
TOTAL LIABILITIES
STOCKHOLDERS' EQUITY
December 31,
2011
2010
$
$
9,592,946
31,588,825
41,181,771
9,338,767
10,544,564
19,883,331
1,619,833
114,170,492
2,734,094
120,862,285
1,401,376
918,342
369,205,842
7,042,911
362,162,931
14,211,627
1,668,699
4,042,400
12,097,673
7,512,072
373,551,450
6,245,441
367,306,009
13,633,292
1,668,699
4,161,800
11,684,697
13,770,102
$
560,068,874
$
556,622,651
$
$
54,985,004
8,021,861
40,358,678
177,667,176
173,627,594
454,660,313
5,696,162
52,049,918
4,145,495
516,551,888
45,225,548
8,233,339
36,303,525
177,084,834
179,154,740
446,001,986
7,608,645
62,871,140
4,411,628
520,893,399
Preferred stock, $.50 par value; 500,000 shares authorized,
no shares issued and outstanding
Common stock, $.50 par value; 2,000,000 shares authorized,
663,791 and 610,000 shares issued
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost (67,237 and 73,046 shares)
TOTAL STOCKHOLDERS' EQUITY
-
-
331,896
2,979,269
43,654,117
2,466,659
(5,914,955)
43,516,986
305,000
114,999
41,783,312
24,409
(6,498,468)
35,729,252
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
560,068,874
$
556,622,651
See accompanying notes to consolidated financial statements.
2
12
Year Ended December 31,
2011
2010
$
19,773,794
1,030,427
$
20,716,935
1,087,627
1,832,161
1,336,001
83,224
63,870
24,119,477
4,266,998
203,640
2,406,192
6,876,830
1,891,681
1,322,196
108,819
88,104
25,215,362
4,861,254
121,890
3,244,235
8,227,379
17,242,647
800,000
16,987,983
1,850,000
16,442,647
15,137,983
1,483,286
840,576
(8,728)
797,914
416,069
886,733
236,580
2,059,377
1,270,226
7,982,033
9,969,960
2,847,007
1,574,312
356,458
436,651
1,074,877
-
353,018
3,742,283
20,354,566
4,070,114
438,816
1,423,464
1,050,999
(28,167)
1,045,435
399,688
852,732
230,688
168,008
1,265,390
6,408,237
8,751,543
2,207,718
1,537,774
254,195
377,299
646,016
548,896
-
3,196,110
17,519,551
4,026,669
470,545
$
$
3,631,298 $
3,556,124
6.74
6.72
$
6.72
6.68
INTEREST AND DIVIDEND INCOME
Interest and fees on loans:
Taxable
Exempt from federal income tax
Interest and dividends on investment securities:
Taxable
Exempt from federal income tax
Interest-bearing deposits with other institutions
Other dividend income
Total interest and dividend income
INTEREST EXPENSE
Deposits
Short-term borrowings
Other borrowings
Total interest expense
NET INTEREST INCOME
Provision for loan losses
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES
NONINTEREST INCOME
Service fees on deposit accounts
Investment securities gains, net
Investment securities impairment loss
Gain on sale of loans, net
Earnings on bank-owned life insurance
Insurance commissions
Travel agency commissions
Business property income
Other
Total noninterest income
NONINTEREST EXPENSE
Salaries and employee benefits
Occupancy and equipment
Data processing
Professional fees
Advertising
Federal deposit insurance
Prepayment penalty on extinguishment of debt
Loss on sale of other assets
Other
Total noninterest expense
Income before income taxes
Income taxes
NET INCOME
EARNINGS PER SHARE
Basic
Diluted
See accompanying notes to the consolidated financial statements.
3
13
Consolidated Statement of Changes In Stockholders’ Equity
KISH BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Consolidated Statement of Cash Flows
e
v
i
s
n
e
h
e
r
p
m
o
C
)
s
s
o
L
(
e
m
o
c
n
I
'
s
r
e
d
l
o
h
k
c
o
t
S
y
t
i
u
q
E
y
r
u
s
a
e
r
T
k
c
o
t
S
l
a
t
o
T
d
e
t
a
l
u
m
u
c
c
A
r
e
h
t
O
e
v
i
s
n
e
h
e
r
p
m
o
C
)
s
s
o
L
(
e
m
o
c
n
I
d
e
n
i
a
t
e
R
s
g
n
i
n
r
a
E
l
a
n
o
i
t
i
d
d
A
n
i
-
d
i
a
P
l
a
t
i
p
a
C
n
o
m
m
o
C
k
c
o
t
S
.
C
N
I
,
P
R
O
C
N
A
B
H
S
I
K
Y
T
I
U
Q
E
'
S
R
E
D
L
O
H
K
C
O
T
S
N
I
S
E
G
N
A
H
C
F
O
T
N
E
M
E
T
A
T
S
D
E
T
A
D
I
L
O
S
N
O
C
4
2
1
,
6
5
5
,
3
$
4
2
1
,
6
5
5
,
3
4
2
1
,
6
5
5
3
,
)
3
7
1
,
2
2
2
(
1
5
9
,
3
3
3
,
3
$
)
3
7
1
,
2
2
2
(
,
)
3
7
1
2
2
2
(
-
-
6
7
6
,
9
2
6
8
8
,
5
8
6
9
8
,
4
5
1
)
0
5
1
,
7
9
1
(
)
4
1
7
,
9
3
7
,
1
(
)
8
2
3
,
7
1
(
0
2
1
,
0
2
3
)
0
5
1
,
7
9
1
(
9
7
3
,
6
2
1
)
4
1
7
,
9
3
7
1
(
,
.
)
3
9
4
,
0
4
(
6
7
6
,
9
2
)
0
2
1
,
0
2
3
(
8
2
3
,
7
1
6
9
8
4
5
1
,
3
5
4
,
4
1
1
$
f
o
t
i
f
e
n
e
b
x
a
t
f
o
t
e
n
,
t
n
e
m
t
s
u
j
d
a
)
s
e
r
a
h
s
3
7
9
,
2
(
k
c
o
t
s
y
r
u
s
a
e
r
t
f
o
e
s
a
h
c
r
u
P
)
s
e
r
a
h
s
1
4
3
,
1
(
k
c
o
t
s
y
r
u
s
a
e
r
t
f
o
e
l
a
S
s
e
r
a
h
s
P
S
R
d
e
n
r
a
e
n
u
f
o
n
o
i
t
a
z
i
t
r
o
m
A
)
e
r
a
h
s
r
e
p
4
2
.
3
$
(
s
d
n
e
d
i
v
i
d
h
s
a
C
e
s
n
e
p
x
e
n
o
i
t
a
s
n
e
p
m
o
c
n
o
i
t
p
o
k
c
o
t
S
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
C
P
S
R
y
b
s
e
r
a
h
s
f
o
e
r
u
t
i
e
f
r
o
F
P
S
R
y
b
s
e
r
a
h
s
f
o
e
s
a
h
c
r
u
P
n
o
i
t
a
c
i
f
i
s
s
a
l
c
e
r
f
o
t
e
n
,
s
e
i
t
i
r
u
c
e
s
e
l
a
s
-
r
o
f
-
e
l
b
a
l
i
a
v
a
n
o
s
s
o
l
d
e
z
i
l
a
e
r
n
U
:
s
s
o
l
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
e
m
o
c
n
i
t
e
N
2
5
2
,
9
2
7
,
5
3
)
8
6
4
,
8
9
4
,
6
(
9
0
4
4
2
,
2
1
3
,
3
8
7
,
1
4
9
9
9
,
4
1
1
0
0
0
5
0
3
,
0
1
0
2
,
1
3
r
e
b
m
e
c
e
D
,
e
c
n
a
l
a
B
7
0
7
,
1
6
0
,
4
3
$
)
9
8
4
,
0
3
7
,
6
(
$
2
8
5
6
4
2
,
$
2
0
9
,
6
6
9
,
9
3
$
2
1
7
,
3
7
2
$
0
0
0
5
0
3
,
$
9
0
0
2
,
1
3
r
e
b
m
e
c
e
D
,
e
c
n
a
l
a
B
0
5
2
,
2
4
4
,
2
8
4
5
,
3
7
0
,
6
$
0
5
2
,
2
4
4
,
2
0
5
2
,
2
4
4
2
,
8
9
2
,
1
3
6
,
3
$
8
9
2
,
1
3
6
,
3
8
9
2
,
1
3
6
3
,
-
-
0
0
1
,
2
4
)
7
2
2
,
3
2
(
0
9
5
,
5
8
9
1
3
,
3
9
1
)
3
9
4
,
0
6
7
,
1
(
7
9
8
,
6
7
1
,
3
)
5
0
4
,
7
2
(
1
1
9
,
8
9
4
)
7
2
2
,
3
2
(
4
3
2
,
5
3
1
)
3
9
4
,
0
6
7
1
(
,
0
0
1
,
2
4
)
1
1
9
,
8
9
4
(
5
0
4
,
7
2
9
1
3
3
9
1
,
6
0
7
,
0
7
2
,
1
$
f
o
s
e
x
a
t
f
o
t
e
n
,
t
n
e
m
t
s
u
j
d
a
e
s
n
e
p
x
e
n
o
i
t
a
s
n
e
p
m
o
c
n
o
i
t
p
o
k
c
o
t
S
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
C
n
o
i
t
a
c
i
f
i
s
s
a
l
c
e
r
f
o
t
e
n
,
s
e
i
t
i
r
u
c
e
s
e
l
a
s
-
r
o
f
-
e
l
b
a
l
i
a
v
a
n
o
n
i
a
g
d
e
z
i
l
a
e
r
n
U
:
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
s
e
r
a
h
s
P
S
R
d
e
n
r
a
e
n
u
f
o
n
o
i
t
a
z
i
t
r
o
m
A
)
e
r
a
h
s
r
e
p
4
2
.
3
$
(
s
d
n
e
d
i
v
i
d
h
s
a
C
P
S
R
y
b
s
e
r
a
h
s
f
o
e
r
u
t
i
e
f
r
o
F
P
S
R
y
b
s
e
r
a
h
s
f
o
e
s
a
h
c
r
u
P
e
m
o
c
n
i
t
e
N
14
6
8
9
,
6
1
5
,
3
4
$
)
5
5
9
,
4
1
9
,
5
(
$
9
5
6
,
6
6
4
,
2
$
7
1
1
4
5
6
,
,
3
4
$
9
6
2
9
7
9
,
,
2
$
6
9
8
,
1
3
3
$
1
1
0
2
,
1
3
r
e
b
m
e
c
e
D
,
e
c
n
a
l
a
B
0
1
0
2
1
1
0
2
6
9
8
,
2
5
4
$
0
7
2
,
1
9
9
,
2
$
0
9
5
,
8
1
0
6
7
,
5
)
9
5
6
,
3
9
6
(
)
0
8
7
,
4
5
5
(
)
3
7
1
,
2
2
2
(
$
0
5
2
,
2
4
4
,
2
$
t
i
f
e
n
e
b
x
a
t
f
o
t
e
n
,
e
m
o
c
n
i
t
e
n
n
i
d
e
d
u
l
c
n
i
s
e
s
s
o
l
t
n
e
m
r
i
a
p
m
I
7
7
5
,
9
$
d
n
a
8
6
9
,
2
$
f
o
:
)
s
s
o
l
(
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
o
f
o
s
t
n
e
n
o
p
m
o
C
,
e
m
o
c
n
i
t
e
n
n
i
d
e
d
u
l
c
n
i
s
n
i
a
g
d
e
z
i
l
a
e
R
0
4
3
,
7
5
3
$
d
n
a
6
9
7
,
5
8
2
$
f
o
x
a
t
f
o
t
e
n
e
l
a
s
r
o
f
e
l
b
a
l
i
a
v
a
s
t
n
e
m
t
s
e
v
n
i
n
o
n
i
a
g
d
e
z
i
l
a
e
r
n
u
t
e
n
n
i
e
g
n
a
h
C
.
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
i
f
d
e
t
a
d
i
l
o
s
n
o
c
o
t
s
e
t
o
n
g
n
i
y
n
a
p
m
o
c
c
a
e
e
S
l
a
t
o
T
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses
Investment securities gains, net
Investment securities impairment loss
Proceeds from sale of loans held for sale
Origination of loans held for sale
Gain on sales of loans, net
Depreciation, amortization and accretion
Deferred income taxes
Increase (decrease) in accrued interest receivable
Decrease in accrued interest payable
Earnings on bank-owned life insurance
Decrease in prepaid federal deposit insurance
Loss on sale of other assets
Other, net
Net cash provided by operating activities
INVESTING ACTIVITIES
Maturities of certificates of deposit
Purchase of certificates of deposit
Investment securities available for sale:
Proceeds from sale of investments
Proceeds from repayments and maturities
Purchases
Decrease (increase) in loans, net
Purchase of regulatory stock
Redemption of regulatory stock
Purchase of premises and equipment
Proceeds from sale of premises and equipment
Purchase of bank-owned life insurance ("BOLI")
Proceeds from sale of other real estate owned
Proceeds from sale of other assets
Net cash provided by (used for) investing activities
FINANCING ACTIVITIES
Increase in deposits, net
Increase (decrease) in short-term borrowings, net
Proceeds from other borrowings
Repayments of other borrowings
Proceeds from sale of common stock
Purchases of treasury stock
Proceeds from sale of treasury stock
Cash dividends
Net cash provided by (used for) financing activities
Increase (decrease) in cash and cash equivalents
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest on deposits and borrowings
Income taxes
SUPPLEMENTAL DISCLOSURE OF NON-CASH CASH FLOW INFORMATION
Real estate acquired in settlement of loans
See accompanying notes to consolidated financial statements.
5
15
Year Ended December 31,
2010
2011
$
3,631,298
$
3,556,124
800,000
(840,576)
8,728
24,715,642
(24,400,762)
(797,914)
1,557,325
(104,051)
167,919
(101,444)
(416,069)
1,035,498
353,018
143,275
5,751,887
1,850,000
(1,050,999)
28,167
36,312,273
(35,611,190)
(1,045,435)
2,696,173
(428,312)
(163,160)
(118,311)
(399,688)
597,013
-
(180,986)
6,041,669
1,114,261
-
2,642,275
(1,818,165)
53,533,950
21,467,880
(64,388,175)
7,038,702
(213,000)
332,400
(1,516,320)
-
(16,000)
43,127
746,339
18,143,164
8,658,327
(1,912,483)
2,712,000
(13,533,222)
3,176,897
(23,227)
85,590
(1,760,493)
(2,596,611)
21,298,440
19,883,331
45,120,669
16,851,299
(105,916,061)
(5,070,085)
(17,500)
-
(1,144,384)
67,966
-
570,135
-
(48,713,851)
38,280,949
2,980,743
10,050,000
(24,102,662)
-
(197,150)
85,886
(1,739,714)
25,358,052
(17,314,130)
37,197,461
$
$
$
41,181,771
$
19,883,331
6,978,272
482,000
$
8,345,690
1,050,000
54,841
$
3,737,599
1
0
0
,
0
5
1
3
,
6
9
8
,
6
2
)
s
e
r
a
h
s
1
9
7
,
3
5
(
k
c
o
t
s
n
o
m
m
o
c
e
u
s
s
i
w
e
n
f
o
e
l
a
S
)
4
4
6
,
9
4
(
)
s
e
r
a
h
s
3
8
3
(
k
c
o
t
s
y
r
u
s
a
e
r
t
f
o
e
s
a
h
c
r
u
P
)
s
e
r
a
h
s
1
1
4
,
1
(
k
c
o
t
s
y
r
u
s
a
e
r
t
f
o
e
l
a
S
Notes to Consolidated Financial Statements
KISH BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A summary of the significant accounting and reporting policies applied in the presentation of the accompanying
consolidated financial statements follows:
Investment Securities (Continued)
Nature of Operations and Basis of Presentation
Kish Bancorp, Inc. (the “Company”) is a diversified financial services organization whose principal activity is the
ownership and management of its subsidiaries, Kishacoquillas Valley National Bank (the “Bank”), Kish Travel
Services, Inc., and the Bank’s subsidiaries, Kish Agency, Inc. and Tri Valley Properties, LLC. The Company
generates commercial and agricultural, commercial mortgage, residential real estate, and consumer loans and
deposit services to its customers located primarily in central Pennsylvania and the surrounding areas. The Bank
operates under a national bank charter and provides full banking services. Deposits are insured by the Federal
Deposit Insurance Corporation (“FDIC”) to the extent provided by law. Kish Agency, Inc. provides insurance
products and services. Kish Travel Services, Inc. is a Pennsylvania business established to provide travel services
to its customers. Tri Valley properties, LLC is a limited liability company established to hold and manage real
estate and other property acquired through debts previously contracted.
The consolidated financial statements include the accounts of Kish Bancorp, Inc., and its subsidiaries,
Kishacoquillas Valley National Bank and Kish Travel Services, Inc., after elimination of all intercompany
transactions.
The accounting principles followed by the Company and the methods of applying these principles conform to U.S.
generally accepted accounting principles (“GAAP”) and to general practice within the banking industry.
Management is required to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the Consolidated Balance Sheet date and revenues
and expenses for that period. Actual results could differ from those estimates.
Investment Securities
Investment securities are classified at the time of purchase, based on management’s intention and ability, as
securities held to maturity, available for sale, or trading. Debt securities acquired with the intent and ability to hold
to maturity are stated at cost, adjusted for amortization of premium and accretion of discount, which are computed
using the interest method and recognized as adjustments of interest income. Debt securities which are held
principally as a source of liquidity are classified as available for sale. Unrealized holding gains and losses for
available-for-sale securities are reported as a separate component of stockholders’ equity, net of tax, until realized.
Realized security gains and losses are computed using the specific identification method for debt securities and the
average cost method for marketable equity securities. Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as trading securities and reported at fair
value, with unrealized gains and losses included in current earnings. Realized securities gains and losses are
computed using the specific identification method. The Company does not have trading securities or securities
held to maturity as of December 31, 2011 and 2010. Interest and dividends on investment securities are recognized
as income when earned.
Securities are evaluated on at least a quarterly basis and more frequently when economic or market conditions
warrant such an evaluation to determine whether a decline in their value is other than temporary. For debt
securities, management considers whether the present value of cash flows expected to be collected are less than the
security’s amortized cost basis (the difference defined as the credit loss), the magnitude and duration of the decline,
the reasons underlying the decline and the Company’s intent to sell the security or whether it is more likely than
not that the Company would be required to sell the security before its anticipated recovery in market value, to
determine whether the loss in value is other than temporary. Once a decline in value is determined to be other than
temporary, if the investor does not intend to sell the security, and it is more likely than not that it will not be
required to sell the security before recovery of the security’s amortized cost basis, the charge to earnings is limited
to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference
6
16
defined as the non-credit portion) is recognized in other comprehensive income, net of applicable taxes.
Otherwise, the entire difference between fair value and amortized cost is charged to earnings.
Common stock of the Federal Home Loan Bank (“FHLB”) of Pittsburgh and Federal Reserve Bank represents
ownership in institutions that are wholly owned by other financial institutions. These equity securities are
accounted for at cost and are shown separately on the Consolidated Balance Sheet.
The Bank is a member of the FHLB and, as such, is required to maintain a minimum investment in stock of the
FHLB that varies with the level of advances outstanding with the FHLB. The stock is bought from and sold to the
FHLB based upon its $100 par value. The stock does not have a readily determinable fair value and, as such, is
classified as restricted stock, carried at cost and evaluated by management. The stock’s value is determined by the
ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of
whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) the
significance of the decline in net assets of the FHLB as compared with the capital stock amount and the length of
time this situation has persisted; (b) commitments by the FHLB to make payments required by law or regulation
and the level of such payments in relation to the operating performance; (c) the impact of legislative and regulatory
changes on the customer base of the FHLB; and (d) the liquidity position of the FHLB.
The FHLB had incurred losses in 2009 and for parts of 2010 due primarily to other-than-temporary impairment
credit losses on its private-label mortgage-backed securities portfolio. These securities were the most effected by
the extreme economic conditions in place during the previous several years. As a result, the FHLB had suspended
the payment of dividends and limited the amount of excess capital stock repurchases. The FHLB has reported net
income for both the fourth quarter and the year ended December 31, 2011, and has declared a .10 percent
annualized dividend to its shareholders effective February 23, 2012. While the FHLB has not committed to regular
dividend payments or future limited repurchases of excess capital stock, it will continue to monitor the overall
financial performance of the FHLB in order to determine the status of limited repurchases of excess capital stock or
dividends in the future. Management evaluated the stock and concluded that the stock was not impaired for the
periods presented herein. More consideration was given to the long-term prospects for the FHLB as opposed to the
recent stress caused by the extreme economic conditions the world is facing. Management also considered that the
FHLB maintains regulatory capital ratios in excess of all regulatory capital requirements, liquidity appears
adequate, new shares of FHLB stock continue to change hands at the $100 par value, and the resumption of
dividends.
Loans
Loans are reported at their principal amount net of the allowance for loan losses and deferred origination fees or
costs. Interest on loans is recognized as income when earned on the accrual method. Generally, the policy has
been to stop accruing interest on loans when it is determined that a reasonable doubt exists as to the collectibility of
additional interest. Interest previously accrued but deemed uncollectible is deducted from current interest income.
Payments received on nonaccrual loans are recorded as income or applied against principal according to
management’s judgment as to the collectibility of such principal. Nonaccrual loans will generally be put back on
accrual status after demonstrating six consecutive months of nondelinquency.
The allowance for loan losses is established through provisions for loan losses charged against income. Loans
deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are
credited to the allowance.
Loan origination fees and certain direct loan origination costs are being deferred and the net amount amortized is
accounted for as an adjustment of the related loan’s yield. Management is amortizing these amounts over the
contractual life of the related loans.
In general, fixed rate, permanent residential mortgage loans originated by the Bank are held for sale and are carried
in the aggregate at the lower of cost or market. The Bank sells these loans to various other financial institutions.
Currently, the Bank retains the servicing of those loans sold to the FHLB and releases the servicing of loans sold to
all other institutions.
7
17
Notes to Consolidated Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Loan Losses
Goodwill
The allowance for loan losses represents the amount that management estimates is adequate to provide for probable
losses inherent in its loan portfolio as of the Consolidated Balance Sheet date. The allowance method is used in
providing for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited
to it. The allowance for loan losses is established through a provision for loan losses charged to operations. The
provision for loan losses is based on management’s periodic evaluation of individual loans, economic factors, past
loan loss experience, changes in the composition and volume of the portfolio, and other relevant factors. The
estimates used in determining the adequacy of the allowance for loan losses, including the amounts and timing of
future cash flows expected on impaired loans, are particularly susceptible to change in the near term.
Impaired loans are commercial and industrial, agricultural, state and political subdivisions, and commercial real
estate loans for which it is probable the Company will not be able to collect all amounts due according to the
contractual terms of the loan agreement. The Company individually evaluates such loans for impairment and does
not aggregate loans by major risk classifications. The definition of “impaired loans” is not the same as the
definition of “nonaccrual loans,” although the two categories overlap. The Company may choose to place a loan
on nonaccrual status due to payment delinquency or uncertain collectibility while not classifying the loan as
impaired, provided the loan is not a commercial or commercial real estate classification. Factors considered by
management in determining impairment include payment status and collateral value. The amount of impairment
for these types of loans is determined by the difference between the present value of the expected cash flows
related to the loan using the original interest rate and its recorded value, or as a practical expedient in the case of
collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans.
When foreclosure is probable, impairment is measured based on the fair value of the collateral.
Mortgage loans secured by one-to-four family properties and all consumer loans are large groups of smaller-
balance homogenous loans and are measured for impairment collectively. Loans that experience insignificant
payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management
determines the significance of payment delays on a case-by-case basis taking into consideration all circumstances
concerning the loan, the creditworthiness and payment history of the borrower, the length of the payment delay,
and the amount of shortfall in relation to the principal and interest owed.
In addition to the allowance for loan losses, the Company also estimates probable losses related to unfunded
lending commitments, such as letters of credit, financial guarantees and unfunded loan commitments. Unfunded
lending commitments are subject to individual reviews and are analyzed and segregated by risk according to the
Company’s internal risk rating scale. These risk classifications, in conjunction with an analysis of historical loss
experience, current economic conditions, performance trends within specific portfolio segments and any other
pertinent information, result in the estimation of the reserve for unfunded lending commitments. Provision for
credit losses related to the loan portfolio and unfunded lending commitments are reported in the Consolidated
Statement of Income.
Premises and Equipment
Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation. Depreciation is
principally computed on the straight-line method over the estimated useful lives of the related assets, which range
from 3 to 7 years for furniture, fixtures, and equipment, and 31 to 39½ years for building premises and leasehold
improvements. Expenditures for maintenance and repairs are charged against income as incurred. Costs of major
additions and improvements are capitalized.
The Company accounts for goodwill using a two-step process for testing the impairment of goodwill on at least an
annual basis. This approach could cause more volatility in the Company’s reported net income because impairment
losses, if any, could occur irregularly and in varying amounts.
Bank-Owned Life Insurance (“BOLI”)
The Company purchased life insurance policies on certain key employees. BOLI is recorded at its cash surrender
value, or the amount that can be realized.
Real Estate Owned
Real estate acquired by foreclosure is included with other assets on the Consolidated Balance Sheet at the lower of
the recorded investment in the property or its fair value less estimated costs of sale. Prior to foreclosure, the value
of the underlying collateral is written down by a charge to the allowance for loan losses if necessary. Any
subsequent write-downs are charged against operating expenses. Operating expenses of such properties, net of
related income and losses on their disposition, are included in other expense.
Treasury Stock
Treasury stock is carried at cost. Sales are determined by the first-in, first-out method.
Advertising Costs
Advertising costs are expensed as the costs are incurred. Advertising expense amounted to $436,651 and $377,299
for 2011 and 2010, respectively.
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return. Deferred tax assets and liabilities
are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Earnings Per Share
The Company provides dual presentation of basic and diluted earnings per share. Basic earnings per share are
calculated utilizing net income as reported in the numerator and average shares outstanding in the denominator.
The computation of diluted earnings per share differs in that the dilutive effects of any stock options, warrants, and
convertible securities are adjusted in the denominator.
Stock Options
As of December 31, 2011 and 2010, the Company recorded compensation expense of $42,100 and $29,676 related
to share-based compensation awards. At December 31, 2011, there was approximately $49,018 in unrecognized
compensation cost related to unvested share-based compensation awards granted. That cost is expected to be
recognized over the next two years.
18
8
19
9
Notes to Consolidated Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.
EARNINGS PER SHARE
Stock Options (Continued)
For purposes of computing stock compensation expense, the Company estimated the fair values of stock options
using the Black-Scholes option-pricing model. The model requires the use of subjective assumptions that can
materially affect fair value estimates. The fair value of each option is amortized into compensation expense on a
straight-line basis between the grant date for the option and each vesting date. The fair value of each stock option
granted was estimated using the following weighted-average assumptions:
Grant
Year
2011
2010
2009
Expected
Dividend
Yield
5.79
4.75
6.20
%
%
%
Risk-Free
Interest Rate
3.27
3.89
2.31
%
%
%
Expected
Volatility
%
17.71
12.73
%
15.53 %
Expected
Life (in Years)
10.00
10.00
6.30
The weighted-average fair value of each stock option granted for 2011 and 2010 was $5.01 and $5.28, respectively.
There were no stock options exercised during the years ended December 31, 2011 and 2010.
Mortgage Servicing Rights (“MSRs”)
The Company has agreements for the express purpose of selling loans in the secondary market. The Company
retains servicing rights for certain loans. Originated MSRs are recorded by allocating total costs incurred between
the loan and servicing rights based on their relative fair values. MSRs are amortized in proportion to the estimated
servicing income over the estimated life of the servicing portfolio. The Company performs an impairment review
of the MSRs and recognizes impairment through a valuation account. MSRs are a component of accrued interest
and other assets on the Consolidated Balance Sheet. Gains and losses on sales of loans are recognized at settlement
dates and are determined by the difference between the sales proceeds and the carrying value of the loans. All
sales are made with limited recourse. For the years ended December 31, 2011 and 2010, the Company recorded
gross servicing rights of $319,725 and $324,141 with a reserve for impairment of $150,322 and $135,055,
respectively.
Transfer of 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 (free of conditions that constrain it from taking advantage of that 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.
Cash Flow Information
The Company has defined cash and cash equivalents as those amounts included in the balance sheet captions “Cash
and due from banks” and “Interest-bearing deposits with other institutions” that have original maturities of less
than 90 days.
Reclassification of Comparative Amounts
Certain items previously reported have been reclassified to conform to the current year’s format. Such
reclassifications did not affect net income or stockholders’ equity.
There are no convertible securities that would affect the numerator in calculating basic and diluted earnings per
share; therefore, net income as presented on the Consolidated Statement of Income will be used as the numerator.
The following table sets forth the composition of the weighted-average common shares (denominator) used in the
basic and diluted earnings per share computation.
Weighted-average common shares outstanding
Average treasury stock shares
Average unearned nonvested RSP shares
Weighted-average common shares and
common stock equivalents used to
calculate basic earnings per share
Additional common stock equivalents
(nonvested stock) used to calculate
diluted earnings per share
Additional common stock equivalents
(stock options) used to calculate
diluted earnings per share
Weighted-average common shares and
common stock equivalents used
to calculate diluted earnings per share
2011
2010
616,925
(69,675)
(8,515)
610,000
(73,233)
(7,424)
538,735
529,343
710
398
1,291
2,231
540,736
531,972
Options to purchase 48,620 and 65,760 shares of common stock at a price of $68.25 to $96.75, as of
December 31, 2011 and 2010, and 4,956 and 5,293 shares of restricted stock ranging in price from $59.50 to
$93.00, respectively, were not included in the computation of diluted earnings per share. To include these shares
would have been antidilutive.
3.
INVESTMENT SECURITIES AVAILABLE FOR SALE
The amortized cost and fair value of investment securities available for sale are as follows:
Amortized
Cost
2011
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
U.S. government agency
securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities
in government-sponsored
entities
Total debt securities
Equity securities in
financial institutions
$
23,682,923
$
688,742
$
(50)
$
24,371,615
51,204,454
3,365,045
3,054,779
-
(36,077)
(463,700)
54,223,156
2,901,345
31,861,904
110,114,326
451,776
4,195,297
(3,093)
(502,920)
32,310,587
113,806,703
318,800
56,725
(11,736)
363,789
Total
$
110,433,126
$
4,252,022
$
(514,656)
$
114,170,492
20
10
21
11
Notes to Consolidated Financial Statements
3.
INVESTMENT SECURITIES AVAILABLE FOR SALE (Continued)
3.
INVESTMENT SECURITIES AVAILABLE FOR SALE (Continued)
Amortized
Cost
2010
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
12,773,866
$
127,833
$
-
$
12,901,699
37,053,379
182,459
(493,846)
36,741,992
57,664,105
4,043,027
912,020
91,564
(634,554)
(374,811)
57,941,571
3,759,780
8,839,595
120,373,972
202,110
1,515,986
(37,592)
(1,540,803)
9,004,113
120,349,155
460,298
73,124
(20,292)
513,130
U.S. treasury securities
U.S. government agency
securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities
in government-sponsored
entities
Total debt securities
Equity securities in
financial institutions
Less than Twelve Months
2010
Twelve Months or Greater
Total
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
$ 22,169,080
$
(493,846)
$
-
$
-
$ 22,169,080
$
(493,846)
24,938,008
1,803,861
(604,970)
(21,666)
443,059
114,355
(29,584)
(353,145)
25,381,067
1,918,216
(634,554)
(374,811)
4,762,831
53,673,780
(37,592)
(1,158,074)
-
557,414
-
(382,729)
4,762,831
54,231,194
(37,592)
(1,540,803)
-
-
79,590
(20,292)
79,590
(20,292)
U.S. government agency
securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities
in government-sponsored
entities
Total debt securities
Equity securities in
financial institutions
Total
$
120,834,270
$
1,589,110
$
(1,561,095)
$
120,862,285
Total
$
53,673,780
$
(1,158,074)
$
637,004
$
(403,021)
$ 54,310,784
$
(1,561,095)
The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment
category and length of time that the individual securities have been in a continuous unrealized loss position, at
December 31, 2011 and 2010.
Less than Twelve Months
2011
Twelve Months or Greater
Total
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
$
999,950
$
(50)
$
-
$
-
$
999,950
$
(50)
321,942
2,315,813
(82)
(81,732)
436,796
585,532
(35,995)
(381,968)
758,738
2,901,345
(36,077)
(463,700)
6,745,746
10,383,451
(3,093)
(84,957)
-
1,022,328
-
(417,963)
6,745,746
11,405,779
(3,093)
(502,920)
167,456
(11,736)
-
-
167,456
(11,736)
U.S. government agency
securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities
in government-sponsored
entities
Total debt securities
Equity securities in
financial institutions
Total
$
10,550,907
$
(96,693)
$
1,022,328
$
(417,963)
$ 11,573,235
$
(514,656)
U.S. Government agency securities. The unrealized loss on one investment in U.S. government obligations and
direct obligations of U.S. government agencies was caused by interest rate increases. The contractual terms of
these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the
investments. Because the Company does not intend to sell the investments and it is not more likely than not that
the Company will be required to sell the investments before recovery of their amortized cost basis, which
may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at
December 31, 2011.
Obligations of states and political subdivisions. The Company’s unrealized losses on two municipal bonds relates
to investments within the governmental service sector. The unrealized losses are primarily caused by recent
decreases in profitability and profit forecasts, in general, by industry analysts. The contractual terms of these
investments do not permit the issuer to settle the security at a price less than the par value of the investment. The
Company currently does not believe it is probable that it will be unable to collect all amounts due according to the
contractual terms of the investments. Because the Company does not intend to sell the investments and it is not
more likely than not that the Company will be required to sell the investments before recovery of their par value,
which may be maturity, it does not consider these investments to be other-than-temporarily impaired at
December 31, 2011.
Corporate securities. The Company had unrealized losses on investments in seven different debt securities with an
aggregate fair value of $2,901,345 at December 31, 2011. The unrealized losses on these debt securities amounted
to $463,700 at December 31, 2011. Due to dislocations in the credit markets broadly, and the lack of trading and
new issuances, market price indications generally reflect the lack of liquidity in the market. Prices on debt
securities were calculated by a third-party valuation company. The valuation methodology is based on the premise
that the fair value of the security’s collateral should approximate the fair value of its liabilities. Based on cash flow
forecasts for the securities, the Company expects to recover the remaining amortized cost of these securities.
Furthermore, the Company does not intend to sell these securities and it is not more likely than not that the
Company will be required to sell these securities before recovery of their cost basis, which may be maturity.
Therefore, it does not consider these investments to be other-than-temporarily impaired at December 31, 2011.
22
12
23
13
Notes to Consolidated Financial Statements
3.
INVESTMENT SECURITIES AVAILABLE FOR SALE (Continued)
4.
LOANS
Mortgage-backed securities in government-sponsored entities. The unrealized losses on the Company’s
investment in three mortgage-backed securities were caused by interest rate increases. The Company purchased
those investments at a premium relative to their face amount, and the contractual cash flows of those investments
are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be
settled at a price less than the amortized cost basis of the Company’s investments. Because the decline in market
value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to
sell the investments and it is not more likely than not that the Company will be required to sell the investments
before recovery of their amortized cost basis, which may be maturity, the Company does not consider those
investments to be other-than-temporarily impaired at December 31, 2011.
Equity securities. The Company’s investments in four marketable equity securities consist primarily of common
stock of entities in the financial services industry. As of December 31, 2011, the Company recognized in earnings
impairment charges of $8,728 on one investment in common stock of a community bank, resulting from the
duration and extent to which the market value has been less than the cost and the performance of the financial
institution over the past two years. Based on the Company’s analysis, and because the Company has the ability
and intent to hold the investments until recovery of its cost basis, except for the investment mentioned above, the
Company does not consider the remaining assets to be other-than-temporarily impaired at December 31, 2011.
The amortized cost and fair value of debt securities at December 31, 2011, by contractual maturity, are shown
below. Expected maturities of mortgage-backed securities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
$
Available for Sale
Amortized
Cost
2,004,333
26,197,163
29,546,850
52,365,980
$
Fair
Value
2,016,193
27,189,504
30,997,445
53,603,561
$
110,114,326
$
113,806,703
Investment securities with a carrying value of $79,829,596 and $90,418,896 at December 31, 2011 and 2010,
respectively, were pledged to secure deposits and other purposes as required by law.
The following is a summary of proceeds received, gross gains, and gross losses realized on the sale of investment
securities available for sale for the years ended December 31:
Proceeds from sales
Gross gains
Gross losses
Other-than-temporary impairment loss
$
$
2011
53,533,950
939,368
98,792
8,728
2010
45,120,669
1,706,450
655,451
28,167
Major classifications of loans are summarized as follows:
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
Less allowance for loan losses
Net loans
$
2011
2010
$
120,270,997
79,754,672
19,294,360
25,125,149
45,026,255
79,734,409
369,205,842
7,042,911
126,325,616
88,126,648
19,126,593
23,936,034
44,439,561
71,596,998
373,551,450
6,245,441
$
362,162,931
$
367,306,009
Mortgage loans serviced by the Company for others amounted to $54,190,608 and $54,939,124 at December 31,
2011 and 2010, respectively.
The Company grants residential, commercial, and consumer loans to customers throughout its trade area, which is
concentrated in central Pennsylvania. Such loans are subject to, at origination, credit risk assessment by
management following the Company’s lending policy. Although the Company has a diversified loan portfolio at
December 31, 2011 and 2010, a substantial portion of its debtors’ ability to honor their loan agreements is
dependent upon the economic stability of its immediate trade area.
In the normal course of business, loans are extended to directors, executive officers, and their associates. A
summary of loan activity for those directors, executive officers, and their associates with loan balances in excess of
$60,000 for the year ended December 31, 2011 is as follows:
2010
Additions
Amounts
Collected
Change in
Executive
Officer Status
2011
$
7,576,927
$
4,944,438
$
5,622,172
$
(565,773)
$
6,333,420
5.
ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the years ended December 31 are as follows:
Balance, January 1
Add:
Provisions charged to operations
Recoveries
Less loans charged off
2011
2010
$
6,245,441
$
5,396,553
800,000
14,419
(16,949)
1,850,000
10,424
(1,011,536)
Balance, December 31
$
7,042,911
$
6,245,441
24
14
25
15
Notes to Consolidated Financial Statements
5.
ALLOWANCE FOR LOAN LOSSES (Continued)
5.
ALLOWANCE FOR LOAN LOSSES (Continued)
Management has an established methodology to determine the adequacy of the allowance for loan losses that
assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan
losses, the Company has segmented certain loans in the portfolio by product type. Loans are segmented into the
following pools: commercial real estate loans, commercial and industrial loans, agricultural loans, state and
political subdivision loans, consumer loans, and residential real estate loans. Historical loss percentages for each
risk category are calculated and used as the basis for calculating allowance allocations. These historical loss
percentages are calculated over a two-year period for all portfolio segments. Certain qualitative factors are then
added to the historical loss percentages to get the adjusted factor to be applied to nonclassified loans. The
following qualitative factors are analyzed to determine allocations for nonclassified loans for each portfolio
segment:
• Changes in lending policies and procedures
• Changes in economic and business conditions
• Changes in nature and volume of the loan portfolio
• Changes in lending staff experience and ability
• Changes in past-due loans, nonaccrual loans, and classified loans
• Changes in loan review
• Changes in underlying value of collateral-dependent loans
• Levels of credit concentrations
• Effects of external factors, such as legal and regulatory requirements
These qualitative factors are reviewed each quarter and adjusted based upon relevant changes within the Bank’s
operating environment. During 2011, the qualitative factors percentages for commercial real estate loans,
commercial and industrial loans, state and political subdivision loans, and consumer loans all increased, while the
qualitative factors for agricultural loans and residential real estate loans remained approximately the same.
Changes in lending staff experience and ability, changes in the loan review process, and the effect of external
factors all contributed to the increase in factor percentages for both commercial real estate loans and commercial
and industrial loans. Changes in the underlying value of collateral-dependent loans also contributed to the factor
percentage increase for commercial real estate loans. The increase in factor percentage for consumer loans was
attributable to changes in economic and business conditions, along with changes in the loan review process and
changes in external factors, while the increase in factor percentage for state and political subdivision loans was
attributable solely to changes in the lending staff’s experience and ability. The change in lending staff experience
and ability factor percentage increased because of the retirement of some key lending personnel in 2011 combined
with the addition of some new, less experienced lending personnel during the same time period. The changes in the
loan review process factor percentage increased because of ongoing changes in the credit risk management process,
while the effect of external factors’ percentage increased due to a number of reasons, including the enactment of
the Dodd-Frank Act. The changes in the underlying value of collateral-dependent loans increase in the commercial
real estate category are attributable to the ongoing decline in market value of commercial real estate within the
Bank’s primary market area, while the changes in economic and business conditions’ increase in the consumer loan
category are attributable to the continued stagnant unemployment numbers in the Bank’s market area.
We consider commercial real estate loans, commercial and industrial loans, agricultural loans and consumer loans
to be riskier than one-to-four family residential mortgage loans. Commercial real estate loans entail significant
additional credit risks compared to one-to-four family residential mortgage loans, as they involve large loan
balances concentrated with single borrowers or groups of related borrowers. In addition, the payment experience
on loans secured by income-producing properties typically depends on the successful operation of the related real
estate project and/or business operation of the borrower who is also the primary occupant, and thus may be subject
to a greater extent to adverse conditions in the real estate market and in the general economy. Commercial and
industrial loans, along with agricultural loans, involve a higher risk of default than residential mortgage loans of
like duration since their repayment is generally dependent on the successful operation of the borrower’s business
and the sufficiency of collateral, if any. The repayment of agricultural loans can also be impacted by commodity
prices going up and down. Although a customer’s ability to repay for both one-to-four family residential mortgage
loans and consumer loans is highly dependent on the local economy, especially employment levels, consumer
loans as a group generally present a higher degree of risk because of the nature of collateral, if any. State and
political subdivision loans carry approximately the same risk as residential real estate loans as most state and
16
26
political subdivision loans are either backed by the full taxing authority of a municipality or the revenue of a
municipal authority.
The following tables present, by portfolio segment, the changes in the allowance for loan losses and the recorded
investment in loans as of and for the years ended December 31:
Commercial
Real Estate
Commercial
and
Industrial
Agricultural
2011
State and
Political
Subdivisions
Consumer
Residential
Real Estate Unallocated
Total
Allowance for loan losses:
Beginning balance
Charge-offs
Recoveries
Provision
Ending balance
Ending balance
individually evaluated
for impairment
Ending balance
collectively evaluated
for impairment
Loans:
Individually evaluated
for impairment
Collectively evaluated
for impairment
$
$
$
$
$
$
$
$
3,023,441
-
-
587,464
3,610,905
$
1,854,554
(6,258)
9,738
224,651
2,082,685
255,190
-
1,402
(54,072)
202,520
105,893
-
-
(4,342)
101,551
403,463
(10,691)
3,279
(84,848)
311,203
455,083
-
-
(93,476)
361,607
147,817
-
-
224,623
372,440
$
$
$
$
$
$
$
6,245,441
(16,949)
14,419
800,000
7,042,911
$
495,725
$
272,299
$
-
$
-
$
29,000
$
59,840
$
-
$
856,864
$
3,115,180
$
1,810,386
$
202,520
$
101,551
$
282,203
$
301,767
$
372,440
$
6,186,047
$
4,476,570
$
1,252,246
$
90,993
$
-
$
104,289
$
269,806
$
-
$
6,193,904
115,794,427
78,502,426
19,203,367
25,125,149
44,921,966
79,464,603
-
363,011,938
Ending balance
$
120,270,997
$
79,754,672
$
19,294,360
$
25,125,149
$
45,026,255
$
79,734,409
$
-
$
369,205,842
Commercial
Real Estate
Commercial
and
Industrial
Agricultural
Consumer
Residential
Real Estate Unallocated
Total
$
$
$
$
$
$
$
2,837,773
(676,862)
-
862,530
3,023,441
1,242,249
(272,903)
4,729
880,479
1,854,554
240,231
-
1,955
13,004
255,190
478,002
(33,857)
3,740
(44,422)
403,463
342,768
-
-
112,315
455,083
255,531
-
-
(107,714)
147,817
5,396,554
(1,011,537)
10,424
1,850,000
6,245,441
$
$
$
$
$
$
$
2010
State and
Political
Subdivisions
$
-
(27,915)
-
133,808
105,893
$
$
97,347
$
-
$
-
$
-
$
-
$
-
$
-
$
97,347
$
2,926,094
$
1,854,554
$
255,190
$
105,893
$
403,463
$
455,083
$
147,817
$
6,148,094
$
2,626,582
$
1,422,441
$
-
$
-
$
-
$
-
$
-
$
4,049,023
123,699,034
86,704,207
19,126,593
23,936,034
44,439,561
71,596,998
-
369,502,427
Allowance for loan losses:
Beginning balance
Charge-offs
Recoveries
Provision
Ending balance
Ending balance
individually evaluated
for impairment
Ending balance
collectively evaluated
for impairment
Loans:
Individually evaluated for
impairment
Collectively evaluated for
impairment
Ending balance
$
126,325,616
$
88,126,648
$
19,126,593
$
23,936,034
$
44,439,561
$
71,596,998
$
-
$
373,551,450
17
27
Notes to Consolidated Financial Statements
5.
ALLOWANCE FOR LOAN LOSSES (Continued)
5.
ALLOWANCE FOR LOAN LOSSES (Continued)
Credit Quality Information
Credit Quality Information (Continued)
The following tables represent the commercial credit exposures by internally-assigned grades for the years ended
December 31, 2011 and 2010, respectively. The grading analysis estimates the capability of the borrower to repay
the contractual obligations under the loan agreements as scheduled or at all. The Company’s internal credit risk
grading system is based on experiences with similarly graded loans.
The Company’s internally-assigned grades are as follows:
Pass loans are loans which are protected by the current net worth and paying capacity of the obligor or by the value
of the underlying collateral. Special Mention loans are loans where a potential weakness or risk exists, which
could cause a more serious problem if not corrected. Substandard loans are loans that have a well-defined
weakness based on objective evidence and are characterized by the distinct possibility that the Company will
sustain some loss if the deficiencies are not corrected. Doubtful loans have all the weaknesses inherent in a
substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and
improbable, based on existing circumstances. Finally, loans classified as Loss are considered uncollectible, or of
such value that continuance as an asset is not warranted.
Commercial
Real Estate
$
90,581,881
9,447,786
17,856,862
2,384,468
-
Commercial
and
Industrial
$
63,974,717
5,523,313
9,731,488
525,154
-
2011
Agricultural
$
17,650,944
598,908
1,044,508
-
-
State and
Political
Subdivisions
$
24,912,457
212,692
-
-
-
Total
$
197,119,999
15,782,699
28,632,858
2,909,622
-
$
120,270,997
$
79,754,672
$
19,294,360
$
25,125,149
$
244,445,178
Commercial
Real Estate
$
93,555,529
15,409,637
14,733,868
2,626,582
-
Commercial
and
Industrial
$
69,502,061
7,870,482
10,709,323
44,782
-
2010
Agricultural
$
16,828,267
1,054,163
1,244,163
-
-
State and
Political
Subdivisions
$
23,936,034
-
-
-
-
Total
$
203,821,891
24,334,282
26,687,354
2,671,364
-
$
126,325,616
$
88,126,648
$
19,126,593
$
23,936,034
$
257,514,891
Pass
Special Mention
Substandard
Doubtful
Loss
Total
Pass
Special Mention
Substandard
Doubtful
Loss
Total
For consumer loans, the Company evaluates credit quality based on whether the loan is considered performing or
nonperforming. The following table presents the balances of consumer loans by classes of loan portfolio based on
payment performance as of December 31:
Performing
Nonperforming
Total
Performing
Nonperforming
Total
Consumer
$
$
44,872,546
153,709
45,026,255
Consumer
$
$
44,268,145
171,416
44,439,561
2011
Residential
Real Estate
$
$
79,066,061
668,348
79,734,409
2010
Residential
Real Estate
$
$
71,289,516
307,482
71,596,998
Total
$
$
123,938,607
822,057
124,760,664
Total
$
$
115,557,661
478,898
116,036,559
Age Analysis of Past-Due Loans by Class
The following are tables which show the aging analysis of past-due loans as of December 31:
2011
30-59 Days 60-89 Days
Past Due
Past Due
90 Days or
Greater
Past Due
Total
Past Due
Current
Total
Loans
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
Total
$
954,872
480,256
257,928
118,908
189,895
138,046
2,139,905
$
$
1,194,157
-
-
-
45,219
-
2,783,066
729,903
90,993
-
153,709
668,348
4,426,019
4,932,095
1,210,159
348,921
118,908
388,823
806,394
7,805,300
115,338,902
78,544,513
18,945,439
25,006,241
44,637,432
78,928,015
361,400,542
$
120,270,997
79,754,672
19,294,360
25,125,149
45,026,255
79,734,409
369,205,842
$
$
1,239,376
$
$
$
$
$
$
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
Total
30-59 Days 60-89 Days
Past Due
Past Due
$
-
631,679
-
-
113,404
392,191
1,137,274
$
$
-
96,955
-
-
64,365
28,206
189,526
$
2010
90 Days or
Greater
Past Due
Total
Past Due
Current
Total
Loans
$
$
$
650,042
20,503
-
-
171,416
279,276
1,121,237
650,042
749,137
-
-
349,185
699,673
2,448,037
125,675,574
87,377,511
19,126,593
23,936,034
44,090,376
70,897,325
371,103,413
$
126,325,616
88,126,648
19,126,593
23,936,034
44,439,561
71,596,998
373,551,450
$
$
$
$
Recorded
Investment
90 Days
and Accruing
-
$
-
-
-
49,420
398,542
447,962
$
Recorded
Investment
90 Days
and Accruing
$
-
-
-
-
171,416
279,276
450,692
$
28
18
29
19
Notes to Consolidated Financial Statements
5.
ALLOWANCE FOR LOAN LOSSES (Continued)
Impaired Loans
5.
ALLOWANCE FOR LOAN LOSSES (Continued)
Impaired Loans (Continued)
Management considers commercial real estate loans, commercial and industrial loans, agricultural loans, and state
and political subdivision loans which are 90 days or more past due to be impaired. After becoming 90 days or more
past due, these categories of loans are measured for impairment. These loans are analyzed to determine if it is
probable that all amounts will not be collected according to the contractual terms of the loan agreement. If
management determines that the fair value of the impaired loan is less than the recorded investment in the loan (net
of previous charge-offs, deferred loan fees or costs, and unamortized premium or discount), impairment is
recognized through a provision or through a charge to the allowance for loan losses.
The following tables include the recorded investment and unpaid principal balances for impaired loans with the
associated allowance amount as of December 31:
With no related allowance recorded:
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
With an allowance recorded:
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
Total:
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
Total
Recorded
Investment
Unpaid
Principal
Balance
2011
Related
Allowance
$
$
2,561,616
287,539
90,993
-
57,083
231,066
3,228,297
1,914,954
964,707
-
-
47,206
38,740
2,965,607
4,476,570
1,252,246
90,993
-
104,289
269,806
6,193,904
$
$
2,561,616
287,539
90,993
-
57,083
231,066
3,228,297
1,914,954
964,707
-
-
47,206
38,740
2,965,607
4,476,570
1,252,246
90,993
-
104,289
269,806
6,193,904
$
$
-
-
-
-
-
-
-
495,725
272,299
-
-
29,000
59,840
856,864
495,725
272,299
-
-
29,000
59,840
856,864
$
$
Average
Recorded
Investment
Interest
Income
Recognized
$
2,318,776
1,236,654
173,373
-
94,985
224,562
4,048,350
129,281
59,394
3,893
-
8,351
4,112
205,031
483,530
147,859
-
-
11,801
22,598
665,788
-
-
-
-
-
-
-
2,802,306
1,384,513
173,373
-
106,786
247,160
4,714,138
$
129,281
59,394
3,893
-
8,351
4,112
205,031
With no related allowance recorded:
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
With an allowance recorded:
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
Total:
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
Recorded
Investment
Unpaid
Principal
Balance
2010
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
$
2,158,115 $
1,422,441
2,158,115 $
1,422,441
-
-
-
-
-
-
-
-
3,580,556
3,580,556
$
-
-
-
-
-
-
-
2,186,997 $
739,670
271,564
-
-
-
3,198,231
145,898
16,817
21,016
-
-
-
183,731
468,467
-
-
-
-
-
468,467
468,467
-
-
-
-
-
468,467
2,626,582
1,422,441
2,626,582
1,422,441
-
-
-
-
-
-
-
-
97,347
-
-
-
-
-
97,347
97,347
-
-
-
-
-
4,261,352
142,320
-
-
-
-
4,403,672
6,448,349
881,990
271,564
-
-
-
-
-
-
-
-
-
-
145,898
16,817
21,016
-
-
-
183,731
Total
$
4,049,023 $
4,049,023 $
97,347 $
7,601,903 $
Nonaccrual Loans
Loans are considered nonaccrual upon reaching 90 days of delinquency even though the Company may be
receiving partial payments of interest and partial repayments of principal on such loans. When a loan is placed on
nonaccrual status, previously accrued but unpaid interest is deducted from interest income.
On the following table are the loan balances on nonaccrual status as of December 31:
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
Total
2011
2010
$
4,476,571
1,102,246
90,993
-
104,289
269,806
$
2,626,582
1,422,441
-
-
-
28,206
$
6,043,905
$
4,077,229
30
20
31
21
Notes to Consolidated Financial Statements
5.
ALLOWANCE FOR LOAN LOSSES (Continued)
Troubled Debt Restructuring
The Company’s loan portfolio also includes certain loans that have been modified in a troubled debt restructuring
(“TDR”), where economic concessions have been granted to borrowers who have experienced or are expected to
experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities
and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other
actions. At December 31, 2011, the Company had four commercial real estate loans totaling $2,134,564 that are
TDRs and are classified as nonperforming and one commercial and industrial loan totaling $48,802 that is a TDR
that is classified nonperforming. At December 31, 2010, the Company did not have any TDRs.
When the Company modifies a loan, management evaluates any possible impairment based on the present value of
expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when
the sole remaining source of repayment for the loan is the operation or liquidation of the collateral. In these cases,
management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If
management determines that the value of the modified loan is less than the recorded investment in the loan,
impairment is recognized by segment of class of loan, as applicable, through a charge-off to the allowance.
Segment and class status is determined by the loan’s classification at origination. As of December 31, 2011 no
specific reserves have been established against the TDRs. Also, as of December 31, 2011 no charge-offs for the
TDRs were required.
6.
PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as follows:
Land and land improvements
Building and leasehold improvements
Furniture, fixtures, and equipment
Less accumulated depreciation
Total
2011
2010
$
$
793,458
15,535,165
5,538,570
21,867,193
7,655,566
793,458
14,955,760
4,636,864
20,386,082
6,752,790
$
14,211,627
$
13,633,292
Depreciation and amortization charged to operations was $937,985 in 2011 and $850,118 in 2010.
7.
GOODWILL
As of each of the years ended December 31, 2011 and 2010, goodwill had a carrying amount of $1,668,699. The
gross carrying amount of goodwill was tested for impairment in the third quarter, after the annual forecasting
process. There was no impairment for the years ended December 31, 2011 and 2010.
Loan modifications that are considered “TDRs” completed during the year ending December 31, 2011 were as
follows:
8.
DEPOSITS
The scheduled maturities of time deposits approximate the following:
2011
Pre-Modification
Post-Modification
Number of Outstanding Recorded Outstanding Recorded
Contracts
Investment
Investment
Troubled debt restructurings:
Commercial real estate loans
Commercial and industrial
Agricultural
State and political subdivision
Consumer
Residential real estate
Total
4
1
-
-
-
-
5
$
2,148,060
50,299
-
-
-
-
$
2,148,060
50,299
-
-
-
-
$
2,198,359
$
2,198,359
As of December 31, 2011, none of the loan modifications classified as TDRs subsequently defaulted within one
year of modification.
Year Ending
December 31,
2012
2013
2014
2015
2016
Thereafter
Amount
89,285,908
30,400,711
19,237,752
10,855,847
4,314,089
19,533,287
173,627,594
$
$
The aggregate of all time deposit accounts of $100,000 or more amounted to $62,843,237 and $65,447,156 at
December 31, 2011 and 2010, respectively.
9.
SHORT-TERM BORROWINGS
Short-term borrowings include overnight repurchase agreements through the FHLB, Federal Funds Purchased, and
repurchase agreements with customers. Short-term borrowings also include a $5,000,000 unsecured line of credit
with a commercial bank for the years ended December 31, 2011 and 2010, respectively. The line of credit
agreement contains various covenants requiring the Company to maintain certain levels of financial performance.
At December 31, 2011 and 2010, the Company was in compliance with all of its covenants. The outstanding
balances and related information for short-term borrowings are summarized as follows:
Balance at year-end
Average balance outstanding
Maximum month-end balance
Weighted-average rate at year-end
Weighted-average rate during the year
$
2011
2010
$
5,696,162
10,577,428
16,028,082
1.56%
1.93%
7,608,645
8,699,070
14,254,009
2.66%
1.40%
32
34
33
23
Notes to Consolidated Financial Statements
10. OTHER BORROWINGS
10. OTHER BORROWINGS (Continued)
The following table sets forth information concerning other borrowings:
Description
Convertible
Fixed rate
Fixed rate amortizing
Mid-term repos
Subordinated capital notes
Note payable
Maturity Range
From
To
08/22/12
01/03/12
07/17/13
07/08/13
03/23/19
03/17/35
08/22/12
11/14/17
06/26/18
07/08/13
12/28/20
11/23/35
Weighted-
Average
Interest Rate
Stated Interest
Rate Range
From
To
4.44
3.58
3.43
1.53
7.83
4.33
% 4.44 % 4.44 % $
1.32
1.95
1.53
3.88
2.56
4.96
6.53
1.53
8.50
6.11
At December 31,
2011
2010
$
5,000,000
28,484,805
4,629,113
3,000,000
4,750,000
6,186,000
10,000,000
30,192,205
6,442,935
6,000,000
4,050,000
6,186,000
The Company issued $3,000,000 of fixed rate subordinated debt securities with stated maturities of
March 23, 2019 through June 26, 2019. These securities bear a fixed annual rate of 8.5 percent. The Company
may redeem them, in whole or in part, at face value on or after March 23, 2014. These borrowings are included in
the liabilities section of the Company’s Consolidated Balance Sheet.
The Company issued $1,700,000 of fixed rate subordinated debt securities with stated maturities of November 12,
2020 through February 10, 2021 and $50,000 of adjustable rate subordinated debt securities with a stated maturity
of March 2, 2021. The fixed securities bear an annual rate of 6.75 percent and the adjustable rate securities bear a
rate of three-month LIBOR plus 3.50 percent and adjust quarterly. The Company may redeem them, in whole or in
part, at face value on or after November 12, 2015. These borrowings are included in the liabilities section of the
Company’s Consolidated Balance Sheet.
Maturities of other borrowings at December 31, 2011 are summarized as follows:
The provision for federal income taxes consists of:
$
52,049,918
$
62,871,140
11.
INCOME TAXES
Year Ending
December 31,
2012
2013
2014
2015
2016
2017 and after
$
Amount
11,329,200
16,107,445
4,217,600
4,224,486
2,012,000
14,159,187
$
52,049,918
Weighted-
Average Rate
4.41 %
3.37
3.19
2.77
1.34
5.39
4.01 %
The terms of the convertible borrowings allow the FHLB to convert the interest rate to an adjustable rate based on
the three-month London Interbank Offered Rate (“LIBOR”) after two years from the original date of the advance.
The fixed rate amortizing borrowings require monthly payments of principal and interest.
Borrowing capacity consists of credit arrangements with the FHLB. FHLB borrowings are subject to annual
renewal, incur no service charges, and are secured by a blanket security agreement on certain investment and
mortgage-backed securities, outstanding residential mortgages, and the Bank’s investment in FHLB stock. As of
December 31, 2011, the Bank’s maximum borrowing capacity with the FHLB was approximately $146 million.
The Company formed a special purpose entity (“Entity”) to issue $3,093,000 of fixed/floating rate subordinated
debt securities with a stated maturity of March 17, 2035. The rate on these securities is determined quarterly and
floats based on three-month LIBOR plus 2.00 percent. The Entity may redeem them, in whole or in part, at face
value on or after March 17, 2010. The Company borrowed the proceeds from the Entity in the form of a
$3,093,000 note payable, which is included in the liabilities section of the Company’s Consolidated Balance Sheet.
The Company formed an additional special purpose entity to issue $3,093,000 of fixed/floating rate subordinated
debt securities with a stated maturity of November 23, 2035. These securities bear a fixed rate of 6.11 percent until
November 23, 2015, at which time the rate is determined quarterly and floats based on three-month LIBOR plus
1.50 percent. The Entity may redeem them, in whole or in part, at face value on or after November 23, 2010. The
Company borrowed the proceeds from the Entity in the form of a $3,093,000 note payable, which is included in the
liabilities section of the Company’s Consolidated Balance Sheet.
The Company’s minority interests in these entities were recorded at the initial investment amount and is included
in the accrued interest and other assets on the Consolidated Balance Sheet. These entities are not consolidated as
part of the Company’s consolidated financial statements.
Current
Deferred
Total provision
2011
2010
$
$
542,867
(104,051)
$
898,857
(428,312)
438,816
$
470,545
The tax effects of deductible and taxable temporary differences that give rise to significant portions of the deferred
tax assets and deferred tax liabilities are as follows:
Deferred tax assets:
Allowance for loan losses
Deferred compensation
Core deposit intangible assets
Alternative minimum tax carryforward
Asset valuation allowances
Employee compensation accruals
Nonaccrual interest receivable
Capital loss carryforward
Deferred tax assets
Deferred tax liabilities:
Premises and equipment
Goodwill
Deferred loan fees
Partnerships
Other
Unrealized gain on available-for-sale securities
Deferred tax liabilities
Net deferred tax assets
2011
2010
$
$
2,394,590
235,036
32,759
479,512
313,102
266,212
84,741
228,767
4,034,719
1,052,800
506,450
141,356
168,844
5,417
1,270,707
3,145,574
889,145
$
$
2,123,450
245,923
41,861
474,550
326,381
187,438
58,126
157,627
3,615,356
829,422
455,805
138,219
130,692
5,417
9,525
1,569,080
2,046,276
No valuation allowance was established at December 31, 2011 and 2010 in view of the Company’s ability to
carryback taxes paid in previous years and certain tax strategies, coupled with the anticipated future taxable income
as evidenced by the Company’s earnings potential.
34
24
35
25
Notes to Consolidated Financial Statements
11.
INCOME TAXES (Continued)
The reconciliation between the federal statutory rate and the Company’s effective consolidated income tax rate is
as follows:
12. EMPLOYEE BENEFITS (Continued)
Restricted Stock Plan
Provision at statutory rate
Tax-exempt interest
Life insurance income
Other
Actual tax expense
and effective rate
2011
2010
Amount
1,385,395
(804,586)
(99,776)
(42,217)
% of
Pretax
Income
% $
34.0
(19.7)
(2.5)
(1.0)
Amount
1,369,067
(819,340)
(87,822)
8,640
% of
Pretax
Income
%
34.0
(20.3)
(2.2)
0.2
438,816
10.8 % $
470,545
11.7 %
$
$
The Company prescribes a recognition threshold and a measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax
positions should be recognized in the financial statements only when it is more likely than not that the tax position
will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all
relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the
largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax
positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the
first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that
no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent
financial reporting period in which that threshold is no longer met.
There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company
recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income
taxes in the Consolidated Statement of Income. The Company’s federal and state income tax returns for taxable
years through 2007 have been closed for purposes of examination by the Internal Revenue Service and the
Pennsylvania Department of Revenue.
12. EMPLOYEE BENEFITS
Savings Plan
The Bank maintains a qualified 401(k) salary reduction and profit sharing plan that covers substantially all
employees. Under the plan, employees make voluntary, pretax contributions to their accounts, and the Bank
contributions to the plan are at the discretion of the Board of Directors. Contributions by the Bank charged to
operations were $214,295 and $204,465 for the years ended December 31, 2011 and 2010, respectively. The fair
value of plan assets includes $627,270 and $604,632 pertaining to the value of the Company’s common stock that
is held by the plans as of December 31, 2011 and 2010, respectively.
Deferred Compensation Plan
The Company has a nonqualified deferred compensation plan that allows directors to defer fees. Outstanding
balances under this arrangement for 2011 and 2010 were $691,282 and $723,302, respectively, and are reported as
“Other liabilities” on the Consolidated Balance Sheet. Expenses related to this plan were $1,616 and $40,534 for
December 31, 2011 and 2010, respectively.
The Company maintains a Restricted Stock Plan (the “Plan”). Employees and non-employee corporate directors
are eligible to receive awards of restricted stock based upon performance-related requirements. Awards granted
under the Plan are in the form of the Company’s common stock and are subject to certain vesting requirements
including continuous employment or service with the Company. The Company has authorized 12,000 shares of the
Company’s common stock. The Plan assists the Company in attracting, retaining and motivating employees and
non-employee directors to make substantial contributions to the success of the Company and to increase the
emphasis on the use of equity as a key component of compensation. Compensation expense recognized related to
the vesting of shares was $193,319 and $158,649 for the years ended December 31, 2011 and 2010, respectively.
The following is a summary of the status of the Company’s restricted stock as of December 31, 2011, and changes
therein during the year then ended:
Nonvested at January 1, 2011
Granted
Vested
Forfeited
Number of
Shares of
Restricted Stock
7,310
5,208
(2,714)
(282)
Weighted-
Average
Grant Date
Fair Value
$ 66.15
59.47
65.08
63.13
Nonvested at December 31, 2011
9,522
$ 62.89
Stock Option Plan
The Company has a fixed director and employee stock-based compensation plan. The plan has total options
available to grant of 190,000 shares of common stock. The exercise price for the purchase of shares subject to a
stock option may not be less than 100 percent of the fair market value of the shares covered by the option on the
date of the grant. The term of stock options will not exceed ten years from the date of grant. Options granted are
primarily vested evenly over a three-year period from the grant date.
The following table presents share data related to the outstanding options:
Outstanding, January 1, 2011
Granted
Exercised
Forfeited
Outstanding, December 31, 2011
Exercisable at year-end
Number of
Options
$
71,983
13,000
-
(6,746)
78,237
55,141
$
$
Weighted-
Average
Exercise
Price
80.21
59.52
-
77.18
77.04
83.74
36
26
37
27
Notes to Consolidated Financial Statements
12. EMPLOYEE BENEFITS (Continued)
Stock Option Plan (Continued)
The following table summarizes the characteristics of stock options at December 31, 2011:
Grant Date
01/24/02
02/21/02
02/27/03
09/02/03
12/29/03
03/16/04
05/26/04
06/30/04
01/05/05
02/03/05
02/09/05
02/10/05
02/24/05
03/29/05
04/26/05
07/08/05
12/08/05
12/10/05
12/16/05
12/22/05
01/25/07
02/23/07
01/31/08
03/26/09
10/27/09
04/01/10
04/28/11
10/11/11
12/22/11
$
Exercise
Price
90.00
91.00
90.00
90.00
91.25
91.25
94.00
96.75
93.00
93.00
93.00
95.00
96.00
96.00
96.00
96.00
95.00
95.25
95.00
95.00
88.00
90.00
76.35
51.00
70.00
68.25
59.50
62.00
56.00
Outstanding
Contractual
Average
Life
Average
Exercise
Price
0.06 $
0.14
0.15
0.67
2.00
2.20
2.40
2.49
3.01
3.09
3.11
3.11
3.15
3.24
3.32
3.52
3.93
3.94
3.96
3.97
5.07
5.15
5.08
7.23
7.82
8.25
9.24
9.77
9.98
90.00
91.00
90.00
90.00
91.25
91.25
94.00
96.75
93.00
93.00
93.00
95.00
96.00
96.00
96.00
96.00
95.00
95.25
95.00
95.00
88.00
90.00
76.35
51.00
70.00
68.25
59.50
62.00
56.00
Shares
5,012
8
4,059
2,222
3,168
3,450
734
2,618
8,127
380
26
100
42
3
441
333
1,401
3
150
4,440
545
525
6,750
9,800
1,000
10,300
11,800
500
300
78,237
Exercisable
Average
Exercise
Price
90.00
91.00
90.00
90.00
91.25
91.25
94.00
96.75
93.00
93.00
93.00
95.00
96.00
96.00
96.00
96.00
95.00
95.25
95.00
95.00
88.00
90.00
76.35
51.00
70.00
68.25
59.50
62.00
56.00
$
Shares
5,012
8
4,059
2,222
3,168
3,450
734
2,618
8,127
380
26
100
42
3
441
333
1,401
3
150
4,440
545
525
6,750
6,521
666
3,417
-
-
-
55,141
13. COMMITMENTS
In the normal course of business, there are outstanding commitments and contingent liabilities such as
commitments to extend credit, financial guarantees, and letters of credit that are not reflected in the accompanying
consolidated financial statements. The Company does not anticipate any losses as a result of these transactions.
These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount
recognized in the Consolidated Balance Sheet. The contract or notional amounts of those instruments reflect the
extent of involvement the Company has in the particular classes of financial instruments that consisted of the
following:
Commitments to extend credit
Standby letters of credit
Total
2011
2010
$
$
94,033,585
5,091,765
$
93,380,149
6,370,718
99,125,350
$
99,750,867
28
38
13. COMMITMENTS (Continued)
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other termination clauses and
may require 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.
Standby letters of credit represent conditional commitments issued by the Company to guarantee the performance
of a customer to a third party. These instruments are issued primarily to support bid or performance-related
contracts. The coverage period for these instruments is typically a one-year period with an annual renewal option
subject to prior approval by management. Fees earned from the issuance of these letters are recognized upon
expiration of the commitment period. For secured letters of credit, the collateral is typically Bank deposit
instruments or real estate.
The Bank has committed to various operating leases for their branch and office facilities. Some of these leases
include renewal options as well as specific provisions relating to rent increases. The minimum annual rental
commitments under these leases outstanding at December 31, 2011 are as follows:
2012
2013
2014
2015
2016
Thereafter
Total
Minimum
Lease Payment
274,972
272,992
269,032
269,032
235,363
3,833,643
5,155,034
$
$
Rent expense under leases for each of the years ended December 31, 2011 and 2010 was $285,923 and $277,449,
respectively.
Contingent Liabilities
The Company from time to time may be a party in various legal actions from the normal course of business
activities. Management believes the liability, if any, arising from such actions will not have a material adverse
effect on the Company’s financial position.
14. REGULATORY RESTRICTIONS
Restriction on Cash and Due From Banks
The Bank is required to maintain reserve funds in cash or on deposit with the Federal Reserve Bank. The required
reserve at December 31, 2011 and 2010, was $1,513,000 and $1,188,000, respectively.
Loans
Federal law prevents the Company from borrowing from the Bank unless the loans are secured by specific
obligations. Further, such secured loans are limited in amount to 10 percent of the Bank’s common stock and
capital surplus.
Dividends
The approval of the Comptroller of the Currency is required before a national bank can pay any dividends up to the
Company if the total of all dividends declared in any calendar year would exceed net profits, as defined for that
year, combined with its retained net profits for the two preceding calendar years less any required transfers to
surplus. Under this formula, the amount available for payment of dividends in 2012, without prior approval of the
Comptroller, is approximately $8.7 million plus net profits retained in 2012 up to the date of the dividend
declaration.
29
39
Notes to Consolidated Financial Statements
14. REGULATORY RESTRICTIONS (Continued)
Dividends (Continued)
In order to manage capital and support safety and soundness of the Company and the Bank, management has
decided to provide the banking regulators with written notice of any intention to pay dividends or make any capital
distributions.
15. REGULATORY CAPITAL
Federal regulations require the Company and the Bank to maintain minimum amounts of capital. Specifically, each
is required to maintain certain minimum dollar amounts and ratios of Total and Tier I capital to risk-weighted
assets and of Tier I capital to average total assets.
In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”)
established five capital categories ranging from “well capitalized” to “critically undercapitalized.” Should any
institution fail to meet the requirements to be considered “adequately capitalized,” it would become subject to a
series of increasingly restrictive regulatory actions.
As of December 31, 2011 and 2010, the FDIC categorized the Company and the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be classified as a well capitalized financial institution,
Total risk-based, Tier I risk-based, and Tier I leverage capital ratios must be at least 10 percent, 6 percent, and 5
percent, respectively.
The Company’s actual capital ratios are presented in the following table that shows the Company met all
regulatory capital requirements:
Total Capital
(to Risk-Weighted Assets)
Actual
For Capital Adequacy Purposes
To Be Well Capitalized
Tier I Capital
(to Risk-Weighted Assets)
Actual
For Capital Adequacy Purposes
To Be Well Capitalized
Tier I Capital
(to Average Assets)
Actual
For Capital Adequacy Purposes
To Be Well Capitalized
2011
2010
Amount
Ratio
Amount
Ratio
55,927,625
32,307,719
40,384,648
% $
13.85
8.00
10.00
50,167,757
34,386,299
1,004,609
%
11.67
8.00
10.00
45,912,913
16,153,859
24,230,789
% $
11.37
4.00
6.00
40,560,601
17,193,150
25,789,724
45,912,913
22,229,663
27,787,078
% $
8.26
4.00
5.00
40,560,601
43,516,985
28,016,617
%
9.44
4.00
6.00
%
7.24
4.00
5.00
$
$
$
15. REGULATORY CAPITAL (Continued)
The Bank’s actual capital ratios are presented in the following table which shows the Bank met all regulatory
capital requirements:
2011
2010
Amount
Ratio
Amount
Ratio
Total Capital
(to Risk-Weighted Assets)
Actual
For Capital Adequacy Purposes
To Be Well Capitalized
Tier I Capital
(to Risk-Weighted Assets)
Actual
For Capital Adequacy Purposes
To Be Well Capitalized
Tier I Capital
(to Average Assets)
Actual
For Capital Adequacy Purposes
To Be Well Capitalized
16.
FAIR VALUE MEASUREMENTS
$
$
$
54,533,683
32,179,644
40,224,655
% $
13.56
8.00
10.00
50,457,841
34,169,840
42,712,300
49,313,930
16,089,862
24,134,793
% $
12.26
4.00
6.00
44,953,926
17,084,920
25,627,380
49,313,930
22,135,707
27,669,634
% $
8.91
4.00
5.00
44,953,926
22,312,505
27,890,631
%
11.81
8.00
10.00
%
10.52
4.00
6.00
%
8.06
4.00
5.00
The following disclosures show the hierarchal disclosure framework associated with the level of pricing
observations utilized in measuring assets and liabilities at fair value. The three broad levels of pricing observations
are as follows:
Level I:
Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level II:
Pricing inputs are other than the quoted prices in active markets, which are either directly or
indirectly observable as of the reported date. The nature of these assets and liabilities includes items
for which quoted prices are available but traded less frequently and items that are fair-valued using
other financial instruments, the parameters of which can be directly observed.
Level III:
Valuations derived from valuation techniques in which one or more significant inputs or significant
value drivers are unobservable.
This hierarchy requires the use of observable market data when available.
40
30
41
31
Notes to Consolidated Financial Statements
16.
FAIR VALUE MEASUREMENTS (Continued)
16.
FAIR VALUE MEASUREMENTS (Continued)
The following tables present the assets reported on the Consolidated Balance Sheet at their fair value as of
December 31, 2011 and 2010, by level within the fair value hierarchy. Financial assets and liabilities are classified
in their entirety based on the lowest level of input that is significant to the fair value measurement.
Assets:
U.S. government agency
securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities
in government-sponsored
entities
Total debt securities
Equity securities
Total
Assets:
U.S. treasury securities
U.S. government agency
securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities
in government-sponsored
entities
Total debt securities
Equity securities
December 31, 2011
Level I
Level II
Level III
Total
$
$
$
-
-
-
$
24,371,615
$
-
$
24,371,615
54,223,156
2,801,028
-
100,317
54,223,156
2,901,345
-
-
363,789
32,310,587
113,706,386
-
-
100,317
-
32,310,587
113,806,703
363,789
363,789
$
113,706,386
$
100,317
$
114,170,492
December 31, 2010
Level I
Level II
Level III
Total
-
-
-
-
$
12,901,699
$
36,741,992
57,941,571
2,305,629
-
-
-
1,454,151
$
12,901,699
36,741,992
57,941,571
3,759,780
-
-
513,130
9,004,113
118,895,004
-
-
1,454,151
-
9,004,113
120,349,155
513,130
Total
$
513,130
$
118,895,004
$
1,454,151
$
120,862,285
Financial instruments are considered Level III when their values are determined using pricing models, discounted
cash flow methodologies or similar techniques, and at least one significant model assumption or input is
unobservable. In addition to these unobservable inputs, the valuation models for Level III financial instruments
typically also rely on a number of inputs that are readily observable either directly or indirectly. Level III financial
instruments also include those for which the determination of fair value requires significant management judgment
or estimation. The following table presents the changes in the Level III fair-value category for the years ended
December 31, 2011 and 2010.
Balance, January 1, 2010
Transfers to Level III
Net change on unrealized gain on investment
securities available for sale
Balance, January 1, 2011
Sales
Net change on unrealized gain on investment
securities available for sale
Balance, December 31, 2011
Corporate
Securities
$
1,198,313
267,165
(11,327)
1,454,151
(1,339,795)
(14,039)
$
100,317
The following tables present the assets measured on a nonrecurring basis on the Consolidated Balance Sheet at
their fair value as of December 31, 2011 and 2010, by level within the fair value hierarchy. Impaired loans that are
collateral dependent are written down to fair value through the establishment of specific reserves. Techniques used
to value the collateral that secure the impaired loans include: quoted market prices for identical assets classified as
Level I inputs and observable inputs employed by certified appraisers for similar assets classified as Level II
inputs. In cases where valuation techniques included inputs that are unobservable and are based on estimates and
assumptions developed by management based on the best information available under each circumstance, the asset
valuation is classified as Level III input. Other real estate owned is measured at fair value, less cost to sell at the
date of 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. The fair value for mortgage servicing rights is estimated by
discounting contractual cashflows and adjusting for prepayment estimates. Discount rates are based upon rates
generally charged for such loans with similar characteristics.
Assets:
Impaired loans
Other real estate owned
Mortgage servicing rights
Assets:
Impaired loans
Other real estate owned
Mortgage servicing rights
$
$
Level I
-
-
-
Level I
-
-
-
$
$
December 31, 2011
Level II
Level III
-
370,173
319,725
$
5,337,040
$
-
-
December 31, 2010
Level II
Level III
-
396,024
324,141
$
3,951,676
$
-
-
Total
5,337,040
370,173
319,725
Total
3,951,676
396,024
324,141
42
32
43
33
Notes to Consolidated Financial Statements
17.
FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
17. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (Continued)
The estimated fair values of the Company’s financial instruments at December 31 are as follows:
Investment Securities Available for Sale
2011
Carrying
Value
Fair
Value
2010
Carrying
Value
Fair
Value
The fair value of investment securities is equal to the available quoted market price. If no quoted market price is
available, fair value is estimated using the quoted market price for similar securities. Fair values for certain
corporate bonds were determined utilizing discounted cash flow models, due to the absence of a current market to
provide reliable market quotes for the instruments.
$
41,181,771
1,619,833
$
41,181,771
1,619,833
$
19,883,331
2,734,094
$
19,883,331
2,734,094
Loans
120,862,285
918,342
372,213,168
4,161,800
11,684,697
2,257,625
324,141
449,310,136
7,608,645
64,412,272
1,050,045
Financial assets:
Cash and cash equivalents
Certificates of deposit
Investment securities
available for sale
Loans held for sale
Net loans
Regulatory stock
Bank-owned life insurance
Accrued interest receivable
Mortgage servicing rights
Financial liabilities:
114,170,492
1,401,376
362,162,931
4,042,400
12,097,673
2,089,706
319,725
114,170,492
1,401,376
367,556,756
4,042,400
12,097,673
2,089,706
319,725
120,862,285
918,342
367,306,009
4,161,800
11,684,697
2,257,625
324,141
Deposits
Short-term borrowings
Other borrowings
Accrued interest payable
$
$
454,660,313
5,696,162
52,049,918
948,603
$
460,020,954
5,696,162
53,352,801
948,603
$
446,001,986
7,608,645
62,871,140
1,050,045
Financial instruments are defined as cash, evidence of ownership interest in an entity, or a contract which creates
an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on
potentially favorable or unfavorable terms.
Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction
between willing parties other than in a forced liquidation sale. If a quoted market price is available for a financial
instrument, the estimated fair value would be calculated based upon the market price per trading unit of the
instrument.
If no readily available market exists, the fair value estimates for financial instruments should be based upon
management’s judgment regarding current economic conditions, interest rate risk, expected cash flows, future
estimated losses, and other factors as determined through various option pricing formulas or simulation modeling.
As many of these assumptions result from judgments made by management based upon estimates, which are
inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of
a particular financial instrument. In addition, changes in assumptions on which the estimated fair values are based
may have a significant impact on the resulting estimated fair values.
As certain assets such as deferred tax assets and premises and equipment are not considered financial instruments,
the estimated fair value of financial instruments would not represent the full value of the Company.
The fair value is estimated by discounting future cash flows using current market inputs at which loans with similar
terms and qualities would be made to borrowers of similar credit quality. Where quoted market prices were
available, primarily for certain residential mortgage loans, such market rates were utilized as estimates for fair
value.
Bank-Owned Life Insurance
The fair value is equal to the cash surrender value of the life insurance policies.
Mortgage Servicing Rights
The fair value for mortgage servicing rights is estimated by discounting contractual cash flows and adjusting for
prepayment estimates. Discount rates are based upon rates generally charged for such loans with similar
characteristics.
Deposits
The fair values of certificates of deposit are based on the discounted value of contractual cash flows. The discount
rates are estimated using rates currently offered for similar instruments with similar remaining maturities.
Demand, savings, and money market deposit accounts are valued at the amount payable on demand as of year-end.
Other Borrowings
Fair values for other borrowings are estimated using a discounted cash flow calculation that applies contractual
costs currently being offered for similar borrowings.
Commitments to Extend Credit
These financial instruments are generally not subject to sale, and estimated fair values are not readily available.
The carrying value, represented by the net deferred fee arising from the unrecognized commitment or letter of
credit, and the fair value, determined by discounting the remaining contractual fee over the term of the
commitment using fees currently charged to enter into similar agreements with similar credit risk, are not
considered material for disclosure. The contractual amounts of unfunded commitments and letters of credit are
presented in Note 13.
The Company employed simulation modeling in determining the estimated fair value of financial instruments for
which quoted market prices were not available based upon the following assumptions:
18. SUBSEQUENT EVENTS
Cash and Cash Equivalents, Certificates of Deposit, Loans Held for Sale, Regulatory Stock, Accrued
Interest Receivable, Accrued Interest Payable, and Short-Term Borrowings
The fair value is equal to the current carrying value.
Management has reviewed events occurring through March 14, 2012, the date the financial statements were issued,
and no subsequent events occurred requiring accrual or disclosure.
44
34
45
35
Notes to Consolidated Financial Statements
19. PARENT COMPANY
Following are condensed financial statements for the Company:
CONDENSED BALANCE SHEET
ASSETS
Cash and due from banks
Investment securities
Investment in subsidiaries
Other assets
TOTAL ASSETS
LIABILITIES
Borrowings
Other liabilities
TOTAL LIABILITIES
STOCKHOLDERS' EQUITY
$
$
$
December 31,
2011
2010
$
1,004,609
363,789
53,317,012
1,651,431
1,489,049
433,540
46,537,422
1,918,170
56,336,841
$
50,378,181
12,686,000
133,855
$
14,236,000
412,929
12,819,855
14,648,929
43,516,986
35,729,252
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
56,336,841
$
50,378,181
CONDENSED STATEMENT OF INCOME
INCOME
Interest and dividend income
Investment securities gains (losses), net
Other income
Total income
EXPENSES
Interest expense
Other expenses
Total expenses
Loss before tax benefit and equity in undistributed
net income of subsidiaries
Income tax benefit
Equity in undistributed net income
of subsidiaries
Year ended December 31,
2011
2010
$
$
21,462
10,517
52,715
84,694
49,219
(352,493)
52,863
(250,411)
818,873
274,540
1,093,413
661,489
250,153
911,642
(1,008,719)
(341,246)
(1,162,053)
(402,194)
4,298,771
4,315,983
NET INCOME
$
3,631,298
$
3,556,124
19. PARENT COMPANY (Continued)
CONDENSED STATEMENT OF CASH FLOWS
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to
net cash used for operating activities:
Equity in undistributed net
income of subsidiaries
Investment securities losses (gains), net
Other
Net cash used for operating activities
INVESTING ACTIVITIES
Investment securities:
Proceeds from sales
Advance to subsidiaries
Net cash provided by investing activities
FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings
Proceeds from other borrowings
Repayments of other borrowings
Proceeds from sale of common stock
Purchases of treasury stock
Proceeds from sale of treasury stock
Cash dividends
Net cash provided by (used for) financing activities
Year ended December 31,
2010
2011
$
3,631,298
$
3,556,124
(4,298,771)
(10,517)
232,650
(445,340)
(4,315,983)
352,493
72,359
(335,007)
52,133
(20,000)
32,133
1,363,441
-
1,363,441
(2,250,000)
700,000
-
3,176,897
(23,227)
85,590
(1,760,493)
(71,233)
1,000,000
1,300,000
(120,464)
-
(197,150)
85,886
(1,739,714)
328,558
Increase (decrease) in cash and due from banks
(484,440)
1,356,992
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR
1,489,049
132,057
CASH AND DUE FROM BANKS AT END OF YEAR
$
1,004,609
$
1,489,049
46
36
47
37
The People of Kish Bank
BoARD oF DIRECToRS
oF KISH BANCoRP, INC.
Phyllis L. Palm, Member
John Pannizzo, Member
William P. Hayes, Chairman
James J. Lakso, Vice Chairman
William L. Dancy, Secretary
Richard L. Kalin, Member
Alison B. Kurtz, Member
Phyllis L. Palm, Member
Alan J. Metzler, Member
Delmont R. Sunderland,
Member
BoARD oF DIRECToRS
oF KISH BANK
William P. Hayes, Chairman
James J. Lakso, Vice Chairman
William L. Dancy, Secretary
Richard L. Kalin, Member
Alison B. Kurtz, Member
Phyllis L. Palm, Member
Alan J. Metzler, Member
CENTRE CoUNTY
REGIoNAL BoARD
Randall A. Bachman, Member
Thomas F. Brown, Member
Kristine S. Clark, Member
Spyros A. Degleris, Member
David Horner, Member
Richard L. Kalin, Member
Michael J. Krentzman, Member
Alison B. Kurtz, Member
Karen P. Shute, Member
Brandon M. Zlupko, Member
HUNTINGDoN
CoUNTY REGIoNAL
BoARD
Arthur J. DeCamp, Member
Wayne A. Hearn, Member
Steven Huston, Member
James J. Lakso, Member
Robert L. orr, Member
Pamela Prosser, Member
Burgess A. Smith, Member
Delmont R. Sunderland,
Member
MIFFLIN CoUNTY
REGIoNAL BoARD
Michael A. Buffington, Member
Christina Calkins-Mazur,
Member
Ronald M. Cowan, Member
William L. Dancy, Member
Eric K. Fowler, Member
Nichola A. Hidlay, Member
William S. Lake, Member
Harvard K. McCardle, Member
Alan J. Metzler, Member
Gary L. oden, Member
ExECUTIVE oFFICERS
William P. Hayes, President,
Chief Executive Officer
J. Bradley Scovill, Senior
Executive Vice President and
Chief Operating Officer
Michael F. Allen, Executive Vice
President, Chief Credit Officer
John E. Arrington, Executive
Vice President, Sales &
Retail Banking Manager
Sangeeta Kishore, Executive
Vice President, Chief Financial
Officer
Robert S. McMinn, Executive
Vice President, Financial
Services and General Counsel
James L. Shilling, Jr., Executive
Vice President, Senior Lending
Officer
SENIoR oFFICERS
Amy M. Muchler, Senior Vice
President, Operations and
Branch Support Manager
Gerhard Royer, Senior Vice
President, Commercial Lender
Ronald B. Beyer, CFA®, Vice
President, Profitability &
Investment Portfolio Manager
Kathleen M. Boop, Vice
President, Personal Lines
Insurance Manager
Larry E. Burger, Vice President,
Commercial Relationship
Manager
David A. Coble, Vice President,
Branch Service Manager
John P. Cunningham, II,
Vice President,
Regional Market Manager
Wade E. Curry, LUTCF, Vice
President, Investment Services
Ann K. Guss, Vice President,
Consumer Lender
Allana L. Hartung, Vice
President, Commercial
Relationship Manager
Gregory T. Hayes, Vice
President, Business Banker
and Branch Service Manager
Carol M. Herrmann, Vice
President for Administration
Christopher P. Kelly, Vice
President, Information
Technology Manager
Marsha K. Kuhns, Vice
President, Branch
Administration
John Q. Massie, Regional Vice
President, Agricultural Manager
Scott R. Reigle, Vice President,
Accounting and Controls
Manager
Melissa K. Royer, Vice President,
Operations Manager &
Security Officer
Cheryl E. Shope, Vice President,
Consumer Lender
Lana M. Walker, Vice President,
Commercial Relationship
Manager
Debra K. Weikel, Vice President,
Mortgage Underwriter
Suzanne M. White, Vice
President, Human Resource
Manager
Jeffrey D. Wilson, Vice
President, CEO, Kish Agency
William W. Yaudes, Vice
President, Regional Market
Manager
oFFICERS
Stanley N. Ayers, Assistant
Vice President, Credit
Administration Manager
Kimberly A. Bubb, Assistant
Vice President, Product
Development & Business
Service Support Manager
Terra L. Decker, BSA/Fraud
Manager
Lucinda K. Dell, Assistant Vice
President, Assistant Mortgage
Underwriter
Paul J. Fochler, Assistant Vice
President, Risk Analyst
Carol K. Kennedy, Consumer
Lending Officer
Jeremy G. Mattern, Assistant
Vice President, Senior Credit
Analyst
Peter K. ort, Branch Manager
Matthew Q. Raptosh, Assistant
Vice President, Commercial
Loan Officer
Stephanie L. Strickler, CFMP,
Assistant Vice President,
Marketing Manager
N. Robert Sunday, III, Assistant
Vice President, Compliance
and Loan Review Officer
Kayelene Sunderland, Assistant
Vice President, Wealth
Management/Trust
Administrator
D. Michael Whalen, General
Manager, Travel Agency
Penny L. Zesiger, Assistant Vice
President, Consumer Lender
KISH BANK EMPLoYEES
Natalie B. Allison, Business
Banking Specialist
Tammy S. Anna, Customer
Service Teller
Christina L. Bagrosky, Customer
Service Teller
Barry L. Bargo, Courier/Mail
Clerk
Katherine A. Bates, Personal
Banker
Douglas C. Baxter, Accounting
Specialist
Melissa D. Beale, Customer
Service Teller
Sara M. Bean, Marketing and
Communications Specialist
Stacy A. Boozel, Loan
Operations Specialist
Brittany A. Byler, Customer
Service Teller
Ruth H. Carper, Mortgage
Administration Specialist
Stephanie L. Chilcote, Customer
Service Teller
Ashley A. Clark, Personal Banker
Brenda Collins, Mortgage
Administration Specialist
Alisha D. Cooper, Regional
Personal Banker
Mary A. Cowher, Branch
Manager
Richard D. Crider, ALCO &
Reporting Manager
Jason M. Cunningham, Branch
Manager
Maxi E. Curry, Administrative
Assistant
Kati E. Deans, Credit
Administration Specialist
Peggy J. Dearing, Credit
Administration Specialist
oksana F. DeArment, Executive
Assistant to the CEO
Jannifer N. Diehl, Senior Credit
Administration Specialist
Mary S. Dietz, Collections
Manager
Megan D. Dietz, Investment
Services Assistant
Angela D. Drake, Personal
Banker
Brandi M. Dufford, Customer
Service Teller
Amanda S. Dutrow,
Administrative Assistant
Kathy D. Fisher, Branch Service
Support Specialist
Keatyn M. Fletcher, Credit
Administration Specialist
Alexis E. Fox, Regional Customer
Service Teller
Troy J. Frank, Network
Administrator
Jodie M. Gibboney, Personal
Banker
Karen S. Gilbert, Business
Banking Specialist
Gina K. Perrin, Personal Lines
Insurance Specialist
Tracy S. Powell, Personal
Lines CSR
Cindy J. Robinson,
Commercial Lines CSR
J. Anthony Willard,
Commercial Lines Insurance
Specialist
KISH TRAVEL
EMPLoYEES
Sandra K. Berardis, Travel
Officer
Jolene Byler, Assistant
Manager, Travel Consultant
Donna R. Feicke, Travel
Office Assistant
Sandra L. Hunley, Lead Travel
Agent
Beth N. Metz Gilmore,
Human Resources Assistant
Janice Y. Glick, Personal
Banking Specialist
Candee A. Gutshall, Branch
Operations Specialist
Sharon A. Hall, Personal
Banker
Lisa J. Hamler, Customer
Service Teller
Jeffrey T. Hayes, Financial
Advisor
Ashley L. Henry, Profitability
Specialist
R. Michael Henry, Technical
Support Specialst
Sallie M. Hicks, Branch
Operations Specialist
Donald F. Hindman, Courier/
Mail Clerk
Christina A. Hinkle, Business
Banking Specialist
Evan S. Hodes, Customer
Service Courier
Lara A. Hoffman, Regional
Assistant Branch Manager
Sandra D. Hummel, Mortgage
Administrative Assistant
Lauren M. Jeranka, Loan
Documentation Review
Manager
Karen M. Johnson, Trust
Operations Specialist
Paula J. Kauffman, Senior
Credit Administration
Specialist
Michael S. Kearns, Data
Analyst
John J. Keeler, Commercial
Relationship Manager
Lisa A. Kennedy, Training &
Development Manager
Brittany E. Kern, Business
Service Support Specialist
Darla S. King, Branch Service
Support Specialist
Abbey N. Knepp, Branch
Service Support Specialist
Chelcee L. Kyle, Customer
Service Teller
Carolyn M. Leacy, Customer
Service Teller
Lori A. Legradi, Customer
Service Teller
Michael J. Leidy, Personal
Banker
Heidi C. Leonard, Consumer
Lender
Carmella J. Long, Personal
Banker
Tina K. McCurdy, Branch
Operations Specialist
Kathryn A. McKnight,
Collections Assistant
Kristie R. McKnight, Business
Banker Trainee
Shelley V. Merrell, Customer
Service Teller
Mary A. Miller, Executive
Assistant
Joanna M. Minium, Credit
Administration Specialist
Jennifer A. Mitchell, Mortgage
Administration Specialist
Tina L. Nace, Senior Credit
Administration Specialist
Antonietta M. Naimo,
Personal Banker
Seth J. Napikoski, Credit
Analyst
Stephanie J. Neff, Branch
Service Support Specialist
Carol A. Noland, BSA
Specialist
Melissa A. Paladino,
Application Support
Specialist
Constance F. Palm, Branch
Manager
Anne E. Parks, Customer
Service Teller
Susan K. Peachey, Branch
Operations Specialist
Danielle A. Peck, Credit
Administration Specialist
Christine M. Petroski, Branch
Support Servive Specialist
Susan C. Rainey, Customer
Service Teller
Haley L. Ralston, Regional
Personal Banker
Jesse L. Reed, Branch
Operations Specialist
Amber N. Resto, Personal
Banker
Denise M. Rothrock, Branch
Operations Specialist
Billie A. Rupert, Investment
Services Assistant
Krista M. Rupert, Customer
Service Teller
Elise C. Santarelli, Credit
Analyst
Leslie J. Sauer, Accounting
Specialist
Clayton B. Scovill, Business
Banking Representative
Melissa A. Sellers, Business
Banking Specialist
April L. Shawver, Customer
Service Teller
Glenn E. Snyder, Jr., Facilities
Manager
Paula A. Stimeling, Mortgage
Administration Specialist
Wendy S. Strohecker, Branch
Service Support Manager
Crystal M. Sunderland,
Business Service Support
Specialist
Lisa M. Sunderland, Branch
Service Support Specialist
Angela E. Swartzentruber,
Personal Banker
Christopher E. Sweeney,
Financial Planner
Cynthia G. Swineford,
Customer Service Teller
Quinn L. Swineford, Branch
Service Support Specialist
Patricia A. Trinclisti, Customer
Service Teller
Donald L. Varner, Courier/
Maintenance Supervisor
Jeanne L. Wagner, Customer
Service Teller
Roy A. Wagner, Courier/
Mail Clerk
Rebecca M. Watt, Senior
Mortgage Administration
Specialist
Elaine S. Weller, Branch
Manager
Debra J. Wert, Business
Banking Specialist
Rick W. Wert, Information
Security Administrator
Crystal D. Yoder, Customer
Service Teller
Delores K. Yoder, Business
Banking Specialist
Judy A. Yoder, Customer
Service Teller
Roland G. Yoder, Courier/
Mail Clerk
Nancy A. Zimmerman,
Personal Banker
Scott G. Zimmerman, Branch
Operations Specialist
KISH INSURANCE
EMPLoYEES
Jennifer R. Beachel, Systems
and Operations Manager
Arlene M. Byler, Customer
Service Rep/Support
Assistant
Duane J. Coy, Commercial
Lines Insurance Specialist
Megan S. Diemert, Personal
Lines Insurance Specialist
Marlene K. Johnson, Personal
Lines CSR
Amber E. oborski, Personal
Lines CSR
48
49