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Board of Governors of the Federal Reserve System
FRY-6
OMB Number 71000297 Approval expires December 31 2015 Page 1 of2
Annual Report of Holding Companies-FR Y-6
Report at the close of business as of the end of fiscal year
This Report is required by law Section 5(c)(1 )(A) of the Bank Holding Company Act (12 USC sect 1844 (c)(1)(A)) Section B(a) of the International Banking Act (12 USC sect 3106(a)) Sections 11(a)(1) 25 and 25A of the Federal Reserve Act (12 USC sectsect 248(a)(1) 602 and 611a) Section 21113(c) of Regulation K (12 CFR sect 21113(c)) and Section 225S(b) of Regulation Y (12 CFR sect 225S(b)) and section 10(c)(2)(H) of the Home Owners Loan Act Return to the appropriate Federal Reserve Bank the original and the number of copies specified
NOTE The Annual Report of Holding Companies must be signed by one director of the top-tier holding company This individual should also be a senior official of the top-tier holding company In the event that the top-tier holding company does not have an individual who is a senior official and Is also a director the chairshyman of the board must sign the report
1 Harry P Schaller Name of the Holding Company Director and Official
President TIUe of the Holding Company Director and Official
attest that the Annual Report of Holding Companies (including the supporting attachments) for this report date has been preshypared In conformance with the Instructions issued by the Federal Reserve System and are true and correct to the best of my knowledge and belief
With respect to information regarding individuals contained in this report the Reporter certifies that it has the authority to provide this information to the Federal Reserve The Reporter also certifies that it has the authority on behalf of each individual to consent or object to public release of information regarding that individual The Federal Reserve may assume in the absence of a request for confidential treatment submitted in accordance with the Boards Rules Regarding Availability of Information 12 CFR Part 261 that the Reporter filKl individual consent to public release of all details in the rep_ ftconceming that individpdl
Dale of Signature
For holding companies lJQ registered with the SEC-Indicate status of Annual Report to Shareholders
8J is Included with the FR Y-6 report
D will be sent under separate cover
D Is not prepared
For Federal Reservank t7Jy )_ RSSDID _s d
CI
This report form is to be filed by all top-tier bank holding compashynies 13nd top-tier savings and loan holding companies organized under US law and by any foreign banking organization that does not meet the requirements of and is not treated as a qualifyshying foreign banking organization under Section 21123 of Regulation K (12 CFR sect 21123) (See page one of the general instructions for more detail of who must file) The Federal Reserve may not conduct or sponsor and an organization (or a person) is not required to respond to an information collection unless it displays a currently valid OMB control number
Date of Report (top-tier holding companys fiscal year-end)
December 31 2014 Month I Day I Year
none
Reporters Legal Entity ldenUOer (LEI) (20-Character LEI Code)
Reporters Name Street and Malling Address FNC INC Legal TIUe or Holding Company
PO Box 1227 (Malling Address or the Holdfng Company) Street I PO Box
Storm Lake IA City Slate
529 Lake Avenue Physlcal Location (ii different from maUing addre ss)
50588 Zip Code
Person to whom questions about this report should be directed Laurie Kenny Auditor Name
712-732-5440 Area Code I Phone Number I Extension
712-732-6167 Area Code I FAX Number
lkennycitizensfnbcom E-mail Address
wwwcitizensfnbcom
-nue
Address (URL) for lhe Holding Companys web page
Does the reporter request confidential treatment for any portlon of this
submission
D Yes Please identify the report items to which this request applies
l8J No
O In accordance with the Instructions on pages GEN-2 and 3 a letter justifying the request Is being provided
O The infomiation for which confidential treatment is sought is being submitted separately labeled Confidentialbull
Public repor1ln17 burden for thls lnformaUon col lecllon Is ebullllmaled lo vary from 13 lo 101 hours per response wllh an average of 525 hours per response Including Ume to gather and maintain data In the required form and lo review lnolrucllons end complele the lnformallon colloclion Send comments regarding lhls burden esUmale or any other aspect of this collection of Information Including suggestlons for reducing lhls burden 10 Secretary Board or Governors or lhe Federal Reserve System 201h and C Streets NW Washington DC 20551 end to the Office of Management and Budget Paperwot1lt Reduction Project (7100-0297) Washington DC 20503
102014
FORM FRY-6
FNC INC STORM LAKE A DECEMBER 31 2014
REPORT ITEM I ANNUAL REPORTS TO SHAREHOLDERS
bull ENCLOSED IS A COPY OF THE 123114 CONSOLIDATED FINANCIAL
STATEMENTS FOR DECEMBER 31 2014 AND 2013 PREPARED BY CLIFTON
LARSON ALLEN
REPORT ITEM 2 ORGANIZA Tl ON AL CHART amp BRANCH VERJFICA TON
bull ENCLOSED IS THE FNC INC ORGANIZA TONAL CHART bull ENCLOSED IS THE BRANCH VERIFICATION REPORT
(Submitted early via email on 3-10-2015)
REPORT ITEM 3 SECURITIES HOLDERS
bull A LIST OF PRINCIPAL SECURITIES HOLDERS IS ATTACHED
REPORT ITEM 4 INSIDERS
bull A LIST OF PRJNCIPAL SECURITIES HOLDERS DIRECTORS AND EXECUTIVE OFFICERS IS ATTACHED
FNC INC AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FNC INC AND SUBSIDIARIES TABLE OF CONTENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
INDEPENDENT ACCOUNTANTS REVIEW REPORT
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION
CONSOLIDATING BALANCE SHEET
CONSOLIDATING STATEMENT OF OPERATIONS
CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
1
2
3
4
5
7
9
3 2
34
36
Board of Directors FNC Inc Storm Lake Iowa
bull Cl iftonlarsonAllen
Independent Accountants Review Report
ClittonlarsonAllen LLP
CLAconnectcom
We have reviewed the accompanying consolidated balance sheets of FNC Inc and subsidiaries as of December 31 2014 and 2013 and the related consolidated statements of operations comprehensive income stockholders equity and cash flows for the years then ended A review includes primarily applying analytical procedures to managements financial data and making inquiries of company management A review is substantially less in scope than an audit the objective of which is the expression of an opinion regarding the consolidated financial statements as a whole Accordingly we do not express such an opinion
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and for designing implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements
Our responsibility is to conduct the reviews in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the consolidated financial statements We believe that the results of our procedures provide a reasonable basis for our report
Based on our reviews we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America
Our reviews were made for the purpose of expressing a conclusion that there are not material modifications that should be made to the consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America The supplementary information included in the accompanying schedules is presented only for purposes of additional analysis and is not a required part of the basic financial statements Such information has been subjected to the inquiry and analytical procedures applied in the reviews of the basic consolidated financial statements and we are not aware of any material modifications that should be made thereto
LL
West Des Moines Iowa March 23 2015
IS54m INT6RNA1 IClltAL
(1)
FNC INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 2014 AND 2013
ASSETS Cash and Cash Equivalents
Cash and Due from Banks Interest Bearing Deposits in Banks Federal Funds Sold
Total Cash and Cash Equivalents
Securities Available-for-Sale (Amortized Cost of $108390309 in 2014 and $110907265 in 2013)
Federal Reserve and Federal Home Loan Bank Stock at Cost Loans Net of Allowance for Loan Losses of $972853
in 2014 and $926270 in 2013 Bank Premises and Equipment Net Accrued Interest Receivable Other Assets
TOTAL ASSETS
LIABILITIES Deposits
Noninterest Bearing Interest Bearing
Total Deposits
Accrued Interest on Deposits Accounts Payable and Accrued Liabilities
Total Liabilities
STOCKHOLDERS EQUITY Class A Voting Common Stock No Par Value (Stated middot
Value $010) Authorized 10000000 Shares Issued and Outstanding 347412 and 347357 Shares in 2014 and 2013 Respectively
Class B Nonvoting Common Stock No Par Value (Stated Value $010) Authorized 50000000 Shares Issued and Outstanding 20635654 and 20630055 Shares in 2013 and 2014 Respectively
Capital Surplus Undivided Profits Accumulated Other Comprehensive Income
Total Stockholders Equity
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
See accompanying Notes to Consolidated Financial Statements_
(2)
2014
$ 12184064 2633829 1620000
16437893
108980 147 315810
121902831 945361
1835949 100609
$ 250518600
$ 29 187025 158410754 187597779
295563 46671
187940013
34741
2063566 16700966 43207356
571958 62578587
$ 250518600
2013
$ 7076935 3069245
302000 10448 180
112064580 322310
119411282 978 177
1837746 119502
$ 245181777
$ 26535556 157643830 184 179386
322838 54 109
184556333
34735
2063006 16685242 40723534
1 118927 60625444
$ 245181777
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
2014 2013 INTEREST INCOME
Loans $ 6070 162 $ 5747069 Securities
US Treasury 59817 21948 Other Taxable 355661 428342 Exempt from Federal Income Taxes 1312918 1528210
Federal Funds Sold 5080 3920 Total Interest Income 7803638 7729489
INTEREST EXPENSE Deposits
NOW 6374 6284 Savings and Money Market 61545 69406 Time 608390 683 155
Federal Funds Purchased 175 870 Total Interest Expense 676484 759715
Net Interest Income 7127154 6969774
PROVISION FOR LOAN LOSSES 32583 1477
Net Interest Income After Provision for Loan Losses 7094571 6968297
NONINTEREST INCOME Trust Department 582962 775189 Customer Service Fees 1065442 1101264 Net Gain on Sale of Securities 3 124 6260 Gain on Sale of Bank Premises and Equipment 200 Other 21249 57488
Total Noninterest I ncome 1672777 1940401
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 2967445 Net Occupancy Expense 114955 132784 Furniture and Equipment 155053 131450 Other 1317183 1376446
Total Noninterest Expense 4620105 4608125
Income Before Income Taxes 4 147243 4300573
INCOME TAX EXPENSE 152641 167927
NET INCOME $ 3994602 $ 4 132646
Net Income per Share $ 0 19 $ 020
Number of Class A and B Shares Used in Computation 20983066 20977412
See accompanying Notes to Consolidated Financial Statements
(3)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31 2014 AND 2013
2014
NET INCOME $ 3994602
other Comprehensive Loss Unrealized Losses on Available-for-Sale Securities (570601) Reclassification Adjustment for Gains
Realized in Income 3124 Income Tax Benefit 20508
Total Other Comprehensive Loss (546969)
Total Comprehensive Income $ 3447633
See accompanying Notes to Consolidated Financial Statements
(4)
2013
$ 41 32646
(1 066987)
6260 42944
( 1 017783)
$ 3114863
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31 2014 AND 201 3
Class A Common
Stock
BALANCE DECEMBER 31 2012 $ 34734
Net Income
Other Comprehensive Loss
Net Issuance of 13 shares of Class A Common Stock and 245 Shares of Class B Common Stock 1
Cash Dividends ($ 072 per Share)
BALANCE DECEMBER 31 201 3 34735
Net Income
Other Comprehensive Loss
Net Issuance of 55 Shares of Class A Common Stock and 5599 Shares of Class B Common Stock 6
Cash Dividends ($ 072 Per Share)
BALANCE DECEMBER 31 2014 $ 34741
See accompanying Notes to Consolidated Financial Sta tements
(5)
Class B Common
Stock
$ 2062981
25
2063006
560
$ 2063566
Accumulated Other Com-
Capital Undivided prehensive
Surplus Profits Income (Loss) Total
$ 16684566 $ 38101261 $ 2136710 $ 59020252
4132646 4132646
(1017783) (1017783)
676 702
(1510373) (1510373)
16685242 40723534 1118927 60625444
3994602 3994602
(546969) (546969)
15723 16289
(1510780) (1510780)
$ 16700965 $ 43207356 $ 571958 $ 62578586
(6)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 3 1 2 0 1 4 AND 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3994602 Adjustments to Reconcile Net I ncome to Net Cash
Provided by Operating Activities Depreciation 150789 Provision for Loan Losses 32583 Amortization of Investment Security Premiums Net 932405
Loans Originated for Sale (3731651) Proceeds on the Sale of Loans Held for Sale 3731651
Net Realized Gain on Sale of Securities (3124)
Gain on Sale of Bank Premises and Equipment Decrease in Accrued Interest Receivable 1797
Decrease in Other Assets 18893
Decrease in Accounts Payable and Accrued Liabilities (11453)
Net Cash Provided by Operating Activities 5116492
CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Loans (2524 132)
Purchases of Bank Premises and Equipment (117973)
Proceeds of Sale of Bank Premises and Equipment Sale (Purchase) of Federal Reserve Bank and
Federal Home Loan Bank Stock 6500
Securities Available-for-Sale Purchases (27222713)
Sales 3030650
Maturities and Calls 25776987
Net Cash Provided by (Used in) I nvesting Activities (1050681)
CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposits 3418393
Cash Dividends (1510780)
Proceeds from Issuance of Common Stock Net 16289
Net Cash Provided by (Used in) Financing Activities 1923902
See accompanying Notes to Consolidated Financial Statements
(7)
2013
$ 4132646
123086 1477
1090 163 (6215297) 6215297
(6260) (200)
30252 333688 (91122)
5613730
(6586814) (73236)
200
(16300)
(31529754) 14301010 27 137900
3233006
(4063 158) (1510373)
702 (5572829)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FORM FRY-6
FNC INC STORM LAKE A DECEMBER 31 2014
REPORT ITEM I ANNUAL REPORTS TO SHAREHOLDERS
bull ENCLOSED IS A COPY OF THE 123114 CONSOLIDATED FINANCIAL
STATEMENTS FOR DECEMBER 31 2014 AND 2013 PREPARED BY CLIFTON
LARSON ALLEN
REPORT ITEM 2 ORGANIZA Tl ON AL CHART amp BRANCH VERJFICA TON
bull ENCLOSED IS THE FNC INC ORGANIZA TONAL CHART bull ENCLOSED IS THE BRANCH VERIFICATION REPORT
(Submitted early via email on 3-10-2015)
REPORT ITEM 3 SECURITIES HOLDERS
bull A LIST OF PRINCIPAL SECURITIES HOLDERS IS ATTACHED
REPORT ITEM 4 INSIDERS
bull A LIST OF PRJNCIPAL SECURITIES HOLDERS DIRECTORS AND EXECUTIVE OFFICERS IS ATTACHED
FNC INC AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FNC INC AND SUBSIDIARIES TABLE OF CONTENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
INDEPENDENT ACCOUNTANTS REVIEW REPORT
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION
CONSOLIDATING BALANCE SHEET
CONSOLIDATING STATEMENT OF OPERATIONS
CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
1
2
3
4
5
7
9
3 2
34
36
Board of Directors FNC Inc Storm Lake Iowa
bull Cl iftonlarsonAllen
Independent Accountants Review Report
ClittonlarsonAllen LLP
CLAconnectcom
We have reviewed the accompanying consolidated balance sheets of FNC Inc and subsidiaries as of December 31 2014 and 2013 and the related consolidated statements of operations comprehensive income stockholders equity and cash flows for the years then ended A review includes primarily applying analytical procedures to managements financial data and making inquiries of company management A review is substantially less in scope than an audit the objective of which is the expression of an opinion regarding the consolidated financial statements as a whole Accordingly we do not express such an opinion
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and for designing implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements
Our responsibility is to conduct the reviews in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the consolidated financial statements We believe that the results of our procedures provide a reasonable basis for our report
Based on our reviews we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America
Our reviews were made for the purpose of expressing a conclusion that there are not material modifications that should be made to the consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America The supplementary information included in the accompanying schedules is presented only for purposes of additional analysis and is not a required part of the basic financial statements Such information has been subjected to the inquiry and analytical procedures applied in the reviews of the basic consolidated financial statements and we are not aware of any material modifications that should be made thereto
LL
West Des Moines Iowa March 23 2015
IS54m INT6RNA1 IClltAL
(1)
FNC INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 2014 AND 2013
ASSETS Cash and Cash Equivalents
Cash and Due from Banks Interest Bearing Deposits in Banks Federal Funds Sold
Total Cash and Cash Equivalents
Securities Available-for-Sale (Amortized Cost of $108390309 in 2014 and $110907265 in 2013)
Federal Reserve and Federal Home Loan Bank Stock at Cost Loans Net of Allowance for Loan Losses of $972853
in 2014 and $926270 in 2013 Bank Premises and Equipment Net Accrued Interest Receivable Other Assets
TOTAL ASSETS
LIABILITIES Deposits
Noninterest Bearing Interest Bearing
Total Deposits
Accrued Interest on Deposits Accounts Payable and Accrued Liabilities
Total Liabilities
STOCKHOLDERS EQUITY Class A Voting Common Stock No Par Value (Stated middot
Value $010) Authorized 10000000 Shares Issued and Outstanding 347412 and 347357 Shares in 2014 and 2013 Respectively
Class B Nonvoting Common Stock No Par Value (Stated Value $010) Authorized 50000000 Shares Issued and Outstanding 20635654 and 20630055 Shares in 2013 and 2014 Respectively
Capital Surplus Undivided Profits Accumulated Other Comprehensive Income
Total Stockholders Equity
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
See accompanying Notes to Consolidated Financial Statements_
(2)
2014
$ 12184064 2633829 1620000
16437893
108980 147 315810
121902831 945361
1835949 100609
$ 250518600
$ 29 187025 158410754 187597779
295563 46671
187940013
34741
2063566 16700966 43207356
571958 62578587
$ 250518600
2013
$ 7076935 3069245
302000 10448 180
112064580 322310
119411282 978 177
1837746 119502
$ 245181777
$ 26535556 157643830 184 179386
322838 54 109
184556333
34735
2063006 16685242 40723534
1 118927 60625444
$ 245181777
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
2014 2013 INTEREST INCOME
Loans $ 6070 162 $ 5747069 Securities
US Treasury 59817 21948 Other Taxable 355661 428342 Exempt from Federal Income Taxes 1312918 1528210
Federal Funds Sold 5080 3920 Total Interest Income 7803638 7729489
INTEREST EXPENSE Deposits
NOW 6374 6284 Savings and Money Market 61545 69406 Time 608390 683 155
Federal Funds Purchased 175 870 Total Interest Expense 676484 759715
Net Interest Income 7127154 6969774
PROVISION FOR LOAN LOSSES 32583 1477
Net Interest Income After Provision for Loan Losses 7094571 6968297
NONINTEREST INCOME Trust Department 582962 775189 Customer Service Fees 1065442 1101264 Net Gain on Sale of Securities 3 124 6260 Gain on Sale of Bank Premises and Equipment 200 Other 21249 57488
Total Noninterest I ncome 1672777 1940401
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 2967445 Net Occupancy Expense 114955 132784 Furniture and Equipment 155053 131450 Other 1317183 1376446
Total Noninterest Expense 4620105 4608125
Income Before Income Taxes 4 147243 4300573
INCOME TAX EXPENSE 152641 167927
NET INCOME $ 3994602 $ 4 132646
Net Income per Share $ 0 19 $ 020
Number of Class A and B Shares Used in Computation 20983066 20977412
See accompanying Notes to Consolidated Financial Statements
(3)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31 2014 AND 2013
2014
NET INCOME $ 3994602
other Comprehensive Loss Unrealized Losses on Available-for-Sale Securities (570601) Reclassification Adjustment for Gains
Realized in Income 3124 Income Tax Benefit 20508
Total Other Comprehensive Loss (546969)
Total Comprehensive Income $ 3447633
See accompanying Notes to Consolidated Financial Statements
(4)
2013
$ 41 32646
(1 066987)
6260 42944
( 1 017783)
$ 3114863
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31 2014 AND 201 3
Class A Common
Stock
BALANCE DECEMBER 31 2012 $ 34734
Net Income
Other Comprehensive Loss
Net Issuance of 13 shares of Class A Common Stock and 245 Shares of Class B Common Stock 1
Cash Dividends ($ 072 per Share)
BALANCE DECEMBER 31 201 3 34735
Net Income
Other Comprehensive Loss
Net Issuance of 55 Shares of Class A Common Stock and 5599 Shares of Class B Common Stock 6
Cash Dividends ($ 072 Per Share)
BALANCE DECEMBER 31 2014 $ 34741
See accompanying Notes to Consolidated Financial Sta tements
(5)
Class B Common
Stock
$ 2062981
25
2063006
560
$ 2063566
Accumulated Other Com-
Capital Undivided prehensive
Surplus Profits Income (Loss) Total
$ 16684566 $ 38101261 $ 2136710 $ 59020252
4132646 4132646
(1017783) (1017783)
676 702
(1510373) (1510373)
16685242 40723534 1118927 60625444
3994602 3994602
(546969) (546969)
15723 16289
(1510780) (1510780)
$ 16700965 $ 43207356 $ 571958 $ 62578586
(6)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 3 1 2 0 1 4 AND 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3994602 Adjustments to Reconcile Net I ncome to Net Cash
Provided by Operating Activities Depreciation 150789 Provision for Loan Losses 32583 Amortization of Investment Security Premiums Net 932405
Loans Originated for Sale (3731651) Proceeds on the Sale of Loans Held for Sale 3731651
Net Realized Gain on Sale of Securities (3124)
Gain on Sale of Bank Premises and Equipment Decrease in Accrued Interest Receivable 1797
Decrease in Other Assets 18893
Decrease in Accounts Payable and Accrued Liabilities (11453)
Net Cash Provided by Operating Activities 5116492
CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Loans (2524 132)
Purchases of Bank Premises and Equipment (117973)
Proceeds of Sale of Bank Premises and Equipment Sale (Purchase) of Federal Reserve Bank and
Federal Home Loan Bank Stock 6500
Securities Available-for-Sale Purchases (27222713)
Sales 3030650
Maturities and Calls 25776987
Net Cash Provided by (Used in) I nvesting Activities (1050681)
CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposits 3418393
Cash Dividends (1510780)
Proceeds from Issuance of Common Stock Net 16289
Net Cash Provided by (Used in) Financing Activities 1923902
See accompanying Notes to Consolidated Financial Statements
(7)
2013
$ 4132646
123086 1477
1090 163 (6215297) 6215297
(6260) (200)
30252 333688 (91122)
5613730
(6586814) (73236)
200
(16300)
(31529754) 14301010 27 137900
3233006
(4063 158) (1510373)
702 (5572829)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FNC INC AND SUBSIDIARIES TABLE OF CONTENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
INDEPENDENT ACCOUNTANTS REVIEW REPORT
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION
CONSOLIDATING BALANCE SHEET
CONSOLIDATING STATEMENT OF OPERATIONS
CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
1
2
3
4
5
7
9
3 2
34
36
Board of Directors FNC Inc Storm Lake Iowa
bull Cl iftonlarsonAllen
Independent Accountants Review Report
ClittonlarsonAllen LLP
CLAconnectcom
We have reviewed the accompanying consolidated balance sheets of FNC Inc and subsidiaries as of December 31 2014 and 2013 and the related consolidated statements of operations comprehensive income stockholders equity and cash flows for the years then ended A review includes primarily applying analytical procedures to managements financial data and making inquiries of company management A review is substantially less in scope than an audit the objective of which is the expression of an opinion regarding the consolidated financial statements as a whole Accordingly we do not express such an opinion
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and for designing implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements
Our responsibility is to conduct the reviews in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the consolidated financial statements We believe that the results of our procedures provide a reasonable basis for our report
Based on our reviews we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America
Our reviews were made for the purpose of expressing a conclusion that there are not material modifications that should be made to the consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America The supplementary information included in the accompanying schedules is presented only for purposes of additional analysis and is not a required part of the basic financial statements Such information has been subjected to the inquiry and analytical procedures applied in the reviews of the basic consolidated financial statements and we are not aware of any material modifications that should be made thereto
LL
West Des Moines Iowa March 23 2015
IS54m INT6RNA1 IClltAL
(1)
FNC INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 2014 AND 2013
ASSETS Cash and Cash Equivalents
Cash and Due from Banks Interest Bearing Deposits in Banks Federal Funds Sold
Total Cash and Cash Equivalents
Securities Available-for-Sale (Amortized Cost of $108390309 in 2014 and $110907265 in 2013)
Federal Reserve and Federal Home Loan Bank Stock at Cost Loans Net of Allowance for Loan Losses of $972853
in 2014 and $926270 in 2013 Bank Premises and Equipment Net Accrued Interest Receivable Other Assets
TOTAL ASSETS
LIABILITIES Deposits
Noninterest Bearing Interest Bearing
Total Deposits
Accrued Interest on Deposits Accounts Payable and Accrued Liabilities
Total Liabilities
STOCKHOLDERS EQUITY Class A Voting Common Stock No Par Value (Stated middot
Value $010) Authorized 10000000 Shares Issued and Outstanding 347412 and 347357 Shares in 2014 and 2013 Respectively
Class B Nonvoting Common Stock No Par Value (Stated Value $010) Authorized 50000000 Shares Issued and Outstanding 20635654 and 20630055 Shares in 2013 and 2014 Respectively
Capital Surplus Undivided Profits Accumulated Other Comprehensive Income
Total Stockholders Equity
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
See accompanying Notes to Consolidated Financial Statements_
(2)
2014
$ 12184064 2633829 1620000
16437893
108980 147 315810
121902831 945361
1835949 100609
$ 250518600
$ 29 187025 158410754 187597779
295563 46671
187940013
34741
2063566 16700966 43207356
571958 62578587
$ 250518600
2013
$ 7076935 3069245
302000 10448 180
112064580 322310
119411282 978 177
1837746 119502
$ 245181777
$ 26535556 157643830 184 179386
322838 54 109
184556333
34735
2063006 16685242 40723534
1 118927 60625444
$ 245181777
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
2014 2013 INTEREST INCOME
Loans $ 6070 162 $ 5747069 Securities
US Treasury 59817 21948 Other Taxable 355661 428342 Exempt from Federal Income Taxes 1312918 1528210
Federal Funds Sold 5080 3920 Total Interest Income 7803638 7729489
INTEREST EXPENSE Deposits
NOW 6374 6284 Savings and Money Market 61545 69406 Time 608390 683 155
Federal Funds Purchased 175 870 Total Interest Expense 676484 759715
Net Interest Income 7127154 6969774
PROVISION FOR LOAN LOSSES 32583 1477
Net Interest Income After Provision for Loan Losses 7094571 6968297
NONINTEREST INCOME Trust Department 582962 775189 Customer Service Fees 1065442 1101264 Net Gain on Sale of Securities 3 124 6260 Gain on Sale of Bank Premises and Equipment 200 Other 21249 57488
Total Noninterest I ncome 1672777 1940401
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 2967445 Net Occupancy Expense 114955 132784 Furniture and Equipment 155053 131450 Other 1317183 1376446
Total Noninterest Expense 4620105 4608125
Income Before Income Taxes 4 147243 4300573
INCOME TAX EXPENSE 152641 167927
NET INCOME $ 3994602 $ 4 132646
Net Income per Share $ 0 19 $ 020
Number of Class A and B Shares Used in Computation 20983066 20977412
See accompanying Notes to Consolidated Financial Statements
(3)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31 2014 AND 2013
2014
NET INCOME $ 3994602
other Comprehensive Loss Unrealized Losses on Available-for-Sale Securities (570601) Reclassification Adjustment for Gains
Realized in Income 3124 Income Tax Benefit 20508
Total Other Comprehensive Loss (546969)
Total Comprehensive Income $ 3447633
See accompanying Notes to Consolidated Financial Statements
(4)
2013
$ 41 32646
(1 066987)
6260 42944
( 1 017783)
$ 3114863
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31 2014 AND 201 3
Class A Common
Stock
BALANCE DECEMBER 31 2012 $ 34734
Net Income
Other Comprehensive Loss
Net Issuance of 13 shares of Class A Common Stock and 245 Shares of Class B Common Stock 1
Cash Dividends ($ 072 per Share)
BALANCE DECEMBER 31 201 3 34735
Net Income
Other Comprehensive Loss
Net Issuance of 55 Shares of Class A Common Stock and 5599 Shares of Class B Common Stock 6
Cash Dividends ($ 072 Per Share)
BALANCE DECEMBER 31 2014 $ 34741
See accompanying Notes to Consolidated Financial Sta tements
(5)
Class B Common
Stock
$ 2062981
25
2063006
560
$ 2063566
Accumulated Other Com-
Capital Undivided prehensive
Surplus Profits Income (Loss) Total
$ 16684566 $ 38101261 $ 2136710 $ 59020252
4132646 4132646
(1017783) (1017783)
676 702
(1510373) (1510373)
16685242 40723534 1118927 60625444
3994602 3994602
(546969) (546969)
15723 16289
(1510780) (1510780)
$ 16700965 $ 43207356 $ 571958 $ 62578586
(6)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 3 1 2 0 1 4 AND 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3994602 Adjustments to Reconcile Net I ncome to Net Cash
Provided by Operating Activities Depreciation 150789 Provision for Loan Losses 32583 Amortization of Investment Security Premiums Net 932405
Loans Originated for Sale (3731651) Proceeds on the Sale of Loans Held for Sale 3731651
Net Realized Gain on Sale of Securities (3124)
Gain on Sale of Bank Premises and Equipment Decrease in Accrued Interest Receivable 1797
Decrease in Other Assets 18893
Decrease in Accounts Payable and Accrued Liabilities (11453)
Net Cash Provided by Operating Activities 5116492
CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Loans (2524 132)
Purchases of Bank Premises and Equipment (117973)
Proceeds of Sale of Bank Premises and Equipment Sale (Purchase) of Federal Reserve Bank and
Federal Home Loan Bank Stock 6500
Securities Available-for-Sale Purchases (27222713)
Sales 3030650
Maturities and Calls 25776987
Net Cash Provided by (Used in) I nvesting Activities (1050681)
CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposits 3418393
Cash Dividends (1510780)
Proceeds from Issuance of Common Stock Net 16289
Net Cash Provided by (Used in) Financing Activities 1923902
See accompanying Notes to Consolidated Financial Statements
(7)
2013
$ 4132646
123086 1477
1090 163 (6215297) 6215297
(6260) (200)
30252 333688 (91122)
5613730
(6586814) (73236)
200
(16300)
(31529754) 14301010 27 137900
3233006
(4063 158) (1510373)
702 (5572829)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES TABLE OF CONTENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
INDEPENDENT ACCOUNTANTS REVIEW REPORT
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION
CONSOLIDATING BALANCE SHEET
CONSOLIDATING STATEMENT OF OPERATIONS
CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
1
2
3
4
5
7
9
3 2
34
36
Board of Directors FNC Inc Storm Lake Iowa
bull Cl iftonlarsonAllen
Independent Accountants Review Report
ClittonlarsonAllen LLP
CLAconnectcom
We have reviewed the accompanying consolidated balance sheets of FNC Inc and subsidiaries as of December 31 2014 and 2013 and the related consolidated statements of operations comprehensive income stockholders equity and cash flows for the years then ended A review includes primarily applying analytical procedures to managements financial data and making inquiries of company management A review is substantially less in scope than an audit the objective of which is the expression of an opinion regarding the consolidated financial statements as a whole Accordingly we do not express such an opinion
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and for designing implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements
Our responsibility is to conduct the reviews in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the consolidated financial statements We believe that the results of our procedures provide a reasonable basis for our report
Based on our reviews we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America
Our reviews were made for the purpose of expressing a conclusion that there are not material modifications that should be made to the consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America The supplementary information included in the accompanying schedules is presented only for purposes of additional analysis and is not a required part of the basic financial statements Such information has been subjected to the inquiry and analytical procedures applied in the reviews of the basic consolidated financial statements and we are not aware of any material modifications that should be made thereto
LL
West Des Moines Iowa March 23 2015
IS54m INT6RNA1 IClltAL
(1)
FNC INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 2014 AND 2013
ASSETS Cash and Cash Equivalents
Cash and Due from Banks Interest Bearing Deposits in Banks Federal Funds Sold
Total Cash and Cash Equivalents
Securities Available-for-Sale (Amortized Cost of $108390309 in 2014 and $110907265 in 2013)
Federal Reserve and Federal Home Loan Bank Stock at Cost Loans Net of Allowance for Loan Losses of $972853
in 2014 and $926270 in 2013 Bank Premises and Equipment Net Accrued Interest Receivable Other Assets
TOTAL ASSETS
LIABILITIES Deposits
Noninterest Bearing Interest Bearing
Total Deposits
Accrued Interest on Deposits Accounts Payable and Accrued Liabilities
Total Liabilities
STOCKHOLDERS EQUITY Class A Voting Common Stock No Par Value (Stated middot
Value $010) Authorized 10000000 Shares Issued and Outstanding 347412 and 347357 Shares in 2014 and 2013 Respectively
Class B Nonvoting Common Stock No Par Value (Stated Value $010) Authorized 50000000 Shares Issued and Outstanding 20635654 and 20630055 Shares in 2013 and 2014 Respectively
Capital Surplus Undivided Profits Accumulated Other Comprehensive Income
Total Stockholders Equity
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
See accompanying Notes to Consolidated Financial Statements_
(2)
2014
$ 12184064 2633829 1620000
16437893
108980 147 315810
121902831 945361
1835949 100609
$ 250518600
$ 29 187025 158410754 187597779
295563 46671
187940013
34741
2063566 16700966 43207356
571958 62578587
$ 250518600
2013
$ 7076935 3069245
302000 10448 180
112064580 322310
119411282 978 177
1837746 119502
$ 245181777
$ 26535556 157643830 184 179386
322838 54 109
184556333
34735
2063006 16685242 40723534
1 118927 60625444
$ 245181777
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
2014 2013 INTEREST INCOME
Loans $ 6070 162 $ 5747069 Securities
US Treasury 59817 21948 Other Taxable 355661 428342 Exempt from Federal Income Taxes 1312918 1528210
Federal Funds Sold 5080 3920 Total Interest Income 7803638 7729489
INTEREST EXPENSE Deposits
NOW 6374 6284 Savings and Money Market 61545 69406 Time 608390 683 155
Federal Funds Purchased 175 870 Total Interest Expense 676484 759715
Net Interest Income 7127154 6969774
PROVISION FOR LOAN LOSSES 32583 1477
Net Interest Income After Provision for Loan Losses 7094571 6968297
NONINTEREST INCOME Trust Department 582962 775189 Customer Service Fees 1065442 1101264 Net Gain on Sale of Securities 3 124 6260 Gain on Sale of Bank Premises and Equipment 200 Other 21249 57488
Total Noninterest I ncome 1672777 1940401
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 2967445 Net Occupancy Expense 114955 132784 Furniture and Equipment 155053 131450 Other 1317183 1376446
Total Noninterest Expense 4620105 4608125
Income Before Income Taxes 4 147243 4300573
INCOME TAX EXPENSE 152641 167927
NET INCOME $ 3994602 $ 4 132646
Net Income per Share $ 0 19 $ 020
Number of Class A and B Shares Used in Computation 20983066 20977412
See accompanying Notes to Consolidated Financial Statements
(3)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31 2014 AND 2013
2014
NET INCOME $ 3994602
other Comprehensive Loss Unrealized Losses on Available-for-Sale Securities (570601) Reclassification Adjustment for Gains
Realized in Income 3124 Income Tax Benefit 20508
Total Other Comprehensive Loss (546969)
Total Comprehensive Income $ 3447633
See accompanying Notes to Consolidated Financial Statements
(4)
2013
$ 41 32646
(1 066987)
6260 42944
( 1 017783)
$ 3114863
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31 2014 AND 201 3
Class A Common
Stock
BALANCE DECEMBER 31 2012 $ 34734
Net Income
Other Comprehensive Loss
Net Issuance of 13 shares of Class A Common Stock and 245 Shares of Class B Common Stock 1
Cash Dividends ($ 072 per Share)
BALANCE DECEMBER 31 201 3 34735
Net Income
Other Comprehensive Loss
Net Issuance of 55 Shares of Class A Common Stock and 5599 Shares of Class B Common Stock 6
Cash Dividends ($ 072 Per Share)
BALANCE DECEMBER 31 2014 $ 34741
See accompanying Notes to Consolidated Financial Sta tements
(5)
Class B Common
Stock
$ 2062981
25
2063006
560
$ 2063566
Accumulated Other Com-
Capital Undivided prehensive
Surplus Profits Income (Loss) Total
$ 16684566 $ 38101261 $ 2136710 $ 59020252
4132646 4132646
(1017783) (1017783)
676 702
(1510373) (1510373)
16685242 40723534 1118927 60625444
3994602 3994602
(546969) (546969)
15723 16289
(1510780) (1510780)
$ 16700965 $ 43207356 $ 571958 $ 62578586
(6)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 3 1 2 0 1 4 AND 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3994602 Adjustments to Reconcile Net I ncome to Net Cash
Provided by Operating Activities Depreciation 150789 Provision for Loan Losses 32583 Amortization of Investment Security Premiums Net 932405
Loans Originated for Sale (3731651) Proceeds on the Sale of Loans Held for Sale 3731651
Net Realized Gain on Sale of Securities (3124)
Gain on Sale of Bank Premises and Equipment Decrease in Accrued Interest Receivable 1797
Decrease in Other Assets 18893
Decrease in Accounts Payable and Accrued Liabilities (11453)
Net Cash Provided by Operating Activities 5116492
CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Loans (2524 132)
Purchases of Bank Premises and Equipment (117973)
Proceeds of Sale of Bank Premises and Equipment Sale (Purchase) of Federal Reserve Bank and
Federal Home Loan Bank Stock 6500
Securities Available-for-Sale Purchases (27222713)
Sales 3030650
Maturities and Calls 25776987
Net Cash Provided by (Used in) I nvesting Activities (1050681)
CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposits 3418393
Cash Dividends (1510780)
Proceeds from Issuance of Common Stock Net 16289
Net Cash Provided by (Used in) Financing Activities 1923902
See accompanying Notes to Consolidated Financial Statements
(7)
2013
$ 4132646
123086 1477
1090 163 (6215297) 6215297
(6260) (200)
30252 333688 (91122)
5613730
(6586814) (73236)
200
(16300)
(31529754) 14301010 27 137900
3233006
(4063 158) (1510373)
702 (5572829)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
Board of Directors FNC Inc Storm Lake Iowa
bull Cl iftonlarsonAllen
Independent Accountants Review Report
ClittonlarsonAllen LLP
CLAconnectcom
We have reviewed the accompanying consolidated balance sheets of FNC Inc and subsidiaries as of December 31 2014 and 2013 and the related consolidated statements of operations comprehensive income stockholders equity and cash flows for the years then ended A review includes primarily applying analytical procedures to managements financial data and making inquiries of company management A review is substantially less in scope than an audit the objective of which is the expression of an opinion regarding the consolidated financial statements as a whole Accordingly we do not express such an opinion
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and for designing implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements
Our responsibility is to conduct the reviews in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the consolidated financial statements We believe that the results of our procedures provide a reasonable basis for our report
Based on our reviews we are not aware of any material modifications that should be made to the accompanying consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America
Our reviews were made for the purpose of expressing a conclusion that there are not material modifications that should be made to the consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America The supplementary information included in the accompanying schedules is presented only for purposes of additional analysis and is not a required part of the basic financial statements Such information has been subjected to the inquiry and analytical procedures applied in the reviews of the basic consolidated financial statements and we are not aware of any material modifications that should be made thereto
LL
West Des Moines Iowa March 23 2015
IS54m INT6RNA1 IClltAL
(1)
FNC INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 2014 AND 2013
ASSETS Cash and Cash Equivalents
Cash and Due from Banks Interest Bearing Deposits in Banks Federal Funds Sold
Total Cash and Cash Equivalents
Securities Available-for-Sale (Amortized Cost of $108390309 in 2014 and $110907265 in 2013)
Federal Reserve and Federal Home Loan Bank Stock at Cost Loans Net of Allowance for Loan Losses of $972853
in 2014 and $926270 in 2013 Bank Premises and Equipment Net Accrued Interest Receivable Other Assets
TOTAL ASSETS
LIABILITIES Deposits
Noninterest Bearing Interest Bearing
Total Deposits
Accrued Interest on Deposits Accounts Payable and Accrued Liabilities
Total Liabilities
STOCKHOLDERS EQUITY Class A Voting Common Stock No Par Value (Stated middot
Value $010) Authorized 10000000 Shares Issued and Outstanding 347412 and 347357 Shares in 2014 and 2013 Respectively
Class B Nonvoting Common Stock No Par Value (Stated Value $010) Authorized 50000000 Shares Issued and Outstanding 20635654 and 20630055 Shares in 2013 and 2014 Respectively
Capital Surplus Undivided Profits Accumulated Other Comprehensive Income
Total Stockholders Equity
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
See accompanying Notes to Consolidated Financial Statements_
(2)
2014
$ 12184064 2633829 1620000
16437893
108980 147 315810
121902831 945361
1835949 100609
$ 250518600
$ 29 187025 158410754 187597779
295563 46671
187940013
34741
2063566 16700966 43207356
571958 62578587
$ 250518600
2013
$ 7076935 3069245
302000 10448 180
112064580 322310
119411282 978 177
1837746 119502
$ 245181777
$ 26535556 157643830 184 179386
322838 54 109
184556333
34735
2063006 16685242 40723534
1 118927 60625444
$ 245181777
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
2014 2013 INTEREST INCOME
Loans $ 6070 162 $ 5747069 Securities
US Treasury 59817 21948 Other Taxable 355661 428342 Exempt from Federal Income Taxes 1312918 1528210
Federal Funds Sold 5080 3920 Total Interest Income 7803638 7729489
INTEREST EXPENSE Deposits
NOW 6374 6284 Savings and Money Market 61545 69406 Time 608390 683 155
Federal Funds Purchased 175 870 Total Interest Expense 676484 759715
Net Interest Income 7127154 6969774
PROVISION FOR LOAN LOSSES 32583 1477
Net Interest Income After Provision for Loan Losses 7094571 6968297
NONINTEREST INCOME Trust Department 582962 775189 Customer Service Fees 1065442 1101264 Net Gain on Sale of Securities 3 124 6260 Gain on Sale of Bank Premises and Equipment 200 Other 21249 57488
Total Noninterest I ncome 1672777 1940401
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 2967445 Net Occupancy Expense 114955 132784 Furniture and Equipment 155053 131450 Other 1317183 1376446
Total Noninterest Expense 4620105 4608125
Income Before Income Taxes 4 147243 4300573
INCOME TAX EXPENSE 152641 167927
NET INCOME $ 3994602 $ 4 132646
Net Income per Share $ 0 19 $ 020
Number of Class A and B Shares Used in Computation 20983066 20977412
See accompanying Notes to Consolidated Financial Statements
(3)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31 2014 AND 2013
2014
NET INCOME $ 3994602
other Comprehensive Loss Unrealized Losses on Available-for-Sale Securities (570601) Reclassification Adjustment for Gains
Realized in Income 3124 Income Tax Benefit 20508
Total Other Comprehensive Loss (546969)
Total Comprehensive Income $ 3447633
See accompanying Notes to Consolidated Financial Statements
(4)
2013
$ 41 32646
(1 066987)
6260 42944
( 1 017783)
$ 3114863
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31 2014 AND 201 3
Class A Common
Stock
BALANCE DECEMBER 31 2012 $ 34734
Net Income
Other Comprehensive Loss
Net Issuance of 13 shares of Class A Common Stock and 245 Shares of Class B Common Stock 1
Cash Dividends ($ 072 per Share)
BALANCE DECEMBER 31 201 3 34735
Net Income
Other Comprehensive Loss
Net Issuance of 55 Shares of Class A Common Stock and 5599 Shares of Class B Common Stock 6
Cash Dividends ($ 072 Per Share)
BALANCE DECEMBER 31 2014 $ 34741
See accompanying Notes to Consolidated Financial Sta tements
(5)
Class B Common
Stock
$ 2062981
25
2063006
560
$ 2063566
Accumulated Other Com-
Capital Undivided prehensive
Surplus Profits Income (Loss) Total
$ 16684566 $ 38101261 $ 2136710 $ 59020252
4132646 4132646
(1017783) (1017783)
676 702
(1510373) (1510373)
16685242 40723534 1118927 60625444
3994602 3994602
(546969) (546969)
15723 16289
(1510780) (1510780)
$ 16700965 $ 43207356 $ 571958 $ 62578586
(6)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 3 1 2 0 1 4 AND 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3994602 Adjustments to Reconcile Net I ncome to Net Cash
Provided by Operating Activities Depreciation 150789 Provision for Loan Losses 32583 Amortization of Investment Security Premiums Net 932405
Loans Originated for Sale (3731651) Proceeds on the Sale of Loans Held for Sale 3731651
Net Realized Gain on Sale of Securities (3124)
Gain on Sale of Bank Premises and Equipment Decrease in Accrued Interest Receivable 1797
Decrease in Other Assets 18893
Decrease in Accounts Payable and Accrued Liabilities (11453)
Net Cash Provided by Operating Activities 5116492
CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Loans (2524 132)
Purchases of Bank Premises and Equipment (117973)
Proceeds of Sale of Bank Premises and Equipment Sale (Purchase) of Federal Reserve Bank and
Federal Home Loan Bank Stock 6500
Securities Available-for-Sale Purchases (27222713)
Sales 3030650
Maturities and Calls 25776987
Net Cash Provided by (Used in) I nvesting Activities (1050681)
CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposits 3418393
Cash Dividends (1510780)
Proceeds from Issuance of Common Stock Net 16289
Net Cash Provided by (Used in) Financing Activities 1923902
See accompanying Notes to Consolidated Financial Statements
(7)
2013
$ 4132646
123086 1477
1090 163 (6215297) 6215297
(6260) (200)
30252 333688 (91122)
5613730
(6586814) (73236)
200
(16300)
(31529754) 14301010 27 137900
3233006
(4063 158) (1510373)
702 (5572829)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 2014 AND 2013
ASSETS Cash and Cash Equivalents
Cash and Due from Banks Interest Bearing Deposits in Banks Federal Funds Sold
Total Cash and Cash Equivalents
Securities Available-for-Sale (Amortized Cost of $108390309 in 2014 and $110907265 in 2013)
Federal Reserve and Federal Home Loan Bank Stock at Cost Loans Net of Allowance for Loan Losses of $972853
in 2014 and $926270 in 2013 Bank Premises and Equipment Net Accrued Interest Receivable Other Assets
TOTAL ASSETS
LIABILITIES Deposits
Noninterest Bearing Interest Bearing
Total Deposits
Accrued Interest on Deposits Accounts Payable and Accrued Liabilities
Total Liabilities
STOCKHOLDERS EQUITY Class A Voting Common Stock No Par Value (Stated middot
Value $010) Authorized 10000000 Shares Issued and Outstanding 347412 and 347357 Shares in 2014 and 2013 Respectively
Class B Nonvoting Common Stock No Par Value (Stated Value $010) Authorized 50000000 Shares Issued and Outstanding 20635654 and 20630055 Shares in 2013 and 2014 Respectively
Capital Surplus Undivided Profits Accumulated Other Comprehensive Income
Total Stockholders Equity
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
See accompanying Notes to Consolidated Financial Statements_
(2)
2014
$ 12184064 2633829 1620000
16437893
108980 147 315810
121902831 945361
1835949 100609
$ 250518600
$ 29 187025 158410754 187597779
295563 46671
187940013
34741
2063566 16700966 43207356
571958 62578587
$ 250518600
2013
$ 7076935 3069245
302000 10448 180
112064580 322310
119411282 978 177
1837746 119502
$ 245181777
$ 26535556 157643830 184 179386
322838 54 109
184556333
34735
2063006 16685242 40723534
1 118927 60625444
$ 245181777
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
2014 2013 INTEREST INCOME
Loans $ 6070 162 $ 5747069 Securities
US Treasury 59817 21948 Other Taxable 355661 428342 Exempt from Federal Income Taxes 1312918 1528210
Federal Funds Sold 5080 3920 Total Interest Income 7803638 7729489
INTEREST EXPENSE Deposits
NOW 6374 6284 Savings and Money Market 61545 69406 Time 608390 683 155
Federal Funds Purchased 175 870 Total Interest Expense 676484 759715
Net Interest Income 7127154 6969774
PROVISION FOR LOAN LOSSES 32583 1477
Net Interest Income After Provision for Loan Losses 7094571 6968297
NONINTEREST INCOME Trust Department 582962 775189 Customer Service Fees 1065442 1101264 Net Gain on Sale of Securities 3 124 6260 Gain on Sale of Bank Premises and Equipment 200 Other 21249 57488
Total Noninterest I ncome 1672777 1940401
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 2967445 Net Occupancy Expense 114955 132784 Furniture and Equipment 155053 131450 Other 1317183 1376446
Total Noninterest Expense 4620105 4608125
Income Before Income Taxes 4 147243 4300573
INCOME TAX EXPENSE 152641 167927
NET INCOME $ 3994602 $ 4 132646
Net Income per Share $ 0 19 $ 020
Number of Class A and B Shares Used in Computation 20983066 20977412
See accompanying Notes to Consolidated Financial Statements
(3)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31 2014 AND 2013
2014
NET INCOME $ 3994602
other Comprehensive Loss Unrealized Losses on Available-for-Sale Securities (570601) Reclassification Adjustment for Gains
Realized in Income 3124 Income Tax Benefit 20508
Total Other Comprehensive Loss (546969)
Total Comprehensive Income $ 3447633
See accompanying Notes to Consolidated Financial Statements
(4)
2013
$ 41 32646
(1 066987)
6260 42944
( 1 017783)
$ 3114863
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31 2014 AND 201 3
Class A Common
Stock
BALANCE DECEMBER 31 2012 $ 34734
Net Income
Other Comprehensive Loss
Net Issuance of 13 shares of Class A Common Stock and 245 Shares of Class B Common Stock 1
Cash Dividends ($ 072 per Share)
BALANCE DECEMBER 31 201 3 34735
Net Income
Other Comprehensive Loss
Net Issuance of 55 Shares of Class A Common Stock and 5599 Shares of Class B Common Stock 6
Cash Dividends ($ 072 Per Share)
BALANCE DECEMBER 31 2014 $ 34741
See accompanying Notes to Consolidated Financial Sta tements
(5)
Class B Common
Stock
$ 2062981
25
2063006
560
$ 2063566
Accumulated Other Com-
Capital Undivided prehensive
Surplus Profits Income (Loss) Total
$ 16684566 $ 38101261 $ 2136710 $ 59020252
4132646 4132646
(1017783) (1017783)
676 702
(1510373) (1510373)
16685242 40723534 1118927 60625444
3994602 3994602
(546969) (546969)
15723 16289
(1510780) (1510780)
$ 16700965 $ 43207356 $ 571958 $ 62578586
(6)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 3 1 2 0 1 4 AND 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3994602 Adjustments to Reconcile Net I ncome to Net Cash
Provided by Operating Activities Depreciation 150789 Provision for Loan Losses 32583 Amortization of Investment Security Premiums Net 932405
Loans Originated for Sale (3731651) Proceeds on the Sale of Loans Held for Sale 3731651
Net Realized Gain on Sale of Securities (3124)
Gain on Sale of Bank Premises and Equipment Decrease in Accrued Interest Receivable 1797
Decrease in Other Assets 18893
Decrease in Accounts Payable and Accrued Liabilities (11453)
Net Cash Provided by Operating Activities 5116492
CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Loans (2524 132)
Purchases of Bank Premises and Equipment (117973)
Proceeds of Sale of Bank Premises and Equipment Sale (Purchase) of Federal Reserve Bank and
Federal Home Loan Bank Stock 6500
Securities Available-for-Sale Purchases (27222713)
Sales 3030650
Maturities and Calls 25776987
Net Cash Provided by (Used in) I nvesting Activities (1050681)
CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposits 3418393
Cash Dividends (1510780)
Proceeds from Issuance of Common Stock Net 16289
Net Cash Provided by (Used in) Financing Activities 1923902
See accompanying Notes to Consolidated Financial Statements
(7)
2013
$ 4132646
123086 1477
1090 163 (6215297) 6215297
(6260) (200)
30252 333688 (91122)
5613730
(6586814) (73236)
200
(16300)
(31529754) 14301010 27 137900
3233006
(4063 158) (1510373)
702 (5572829)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
2014 2013 INTEREST INCOME
Loans $ 6070 162 $ 5747069 Securities
US Treasury 59817 21948 Other Taxable 355661 428342 Exempt from Federal Income Taxes 1312918 1528210
Federal Funds Sold 5080 3920 Total Interest Income 7803638 7729489
INTEREST EXPENSE Deposits
NOW 6374 6284 Savings and Money Market 61545 69406 Time 608390 683 155
Federal Funds Purchased 175 870 Total Interest Expense 676484 759715
Net Interest Income 7127154 6969774
PROVISION FOR LOAN LOSSES 32583 1477
Net Interest Income After Provision for Loan Losses 7094571 6968297
NONINTEREST INCOME Trust Department 582962 775189 Customer Service Fees 1065442 1101264 Net Gain on Sale of Securities 3 124 6260 Gain on Sale of Bank Premises and Equipment 200 Other 21249 57488
Total Noninterest I ncome 1672777 1940401
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 2967445 Net Occupancy Expense 114955 132784 Furniture and Equipment 155053 131450 Other 1317183 1376446
Total Noninterest Expense 4620105 4608125
Income Before Income Taxes 4 147243 4300573
INCOME TAX EXPENSE 152641 167927
NET INCOME $ 3994602 $ 4 132646
Net Income per Share $ 0 19 $ 020
Number of Class A and B Shares Used in Computation 20983066 20977412
See accompanying Notes to Consolidated Financial Statements
(3)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31 2014 AND 2013
2014
NET INCOME $ 3994602
other Comprehensive Loss Unrealized Losses on Available-for-Sale Securities (570601) Reclassification Adjustment for Gains
Realized in Income 3124 Income Tax Benefit 20508
Total Other Comprehensive Loss (546969)
Total Comprehensive Income $ 3447633
See accompanying Notes to Consolidated Financial Statements
(4)
2013
$ 41 32646
(1 066987)
6260 42944
( 1 017783)
$ 3114863
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31 2014 AND 201 3
Class A Common
Stock
BALANCE DECEMBER 31 2012 $ 34734
Net Income
Other Comprehensive Loss
Net Issuance of 13 shares of Class A Common Stock and 245 Shares of Class B Common Stock 1
Cash Dividends ($ 072 per Share)
BALANCE DECEMBER 31 201 3 34735
Net Income
Other Comprehensive Loss
Net Issuance of 55 Shares of Class A Common Stock and 5599 Shares of Class B Common Stock 6
Cash Dividends ($ 072 Per Share)
BALANCE DECEMBER 31 2014 $ 34741
See accompanying Notes to Consolidated Financial Sta tements
(5)
Class B Common
Stock
$ 2062981
25
2063006
560
$ 2063566
Accumulated Other Com-
Capital Undivided prehensive
Surplus Profits Income (Loss) Total
$ 16684566 $ 38101261 $ 2136710 $ 59020252
4132646 4132646
(1017783) (1017783)
676 702
(1510373) (1510373)
16685242 40723534 1118927 60625444
3994602 3994602
(546969) (546969)
15723 16289
(1510780) (1510780)
$ 16700965 $ 43207356 $ 571958 $ 62578586
(6)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 3 1 2 0 1 4 AND 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3994602 Adjustments to Reconcile Net I ncome to Net Cash
Provided by Operating Activities Depreciation 150789 Provision for Loan Losses 32583 Amortization of Investment Security Premiums Net 932405
Loans Originated for Sale (3731651) Proceeds on the Sale of Loans Held for Sale 3731651
Net Realized Gain on Sale of Securities (3124)
Gain on Sale of Bank Premises and Equipment Decrease in Accrued Interest Receivable 1797
Decrease in Other Assets 18893
Decrease in Accounts Payable and Accrued Liabilities (11453)
Net Cash Provided by Operating Activities 5116492
CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Loans (2524 132)
Purchases of Bank Premises and Equipment (117973)
Proceeds of Sale of Bank Premises and Equipment Sale (Purchase) of Federal Reserve Bank and
Federal Home Loan Bank Stock 6500
Securities Available-for-Sale Purchases (27222713)
Sales 3030650
Maturities and Calls 25776987
Net Cash Provided by (Used in) I nvesting Activities (1050681)
CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposits 3418393
Cash Dividends (1510780)
Proceeds from Issuance of Common Stock Net 16289
Net Cash Provided by (Used in) Financing Activities 1923902
See accompanying Notes to Consolidated Financial Statements
(7)
2013
$ 4132646
123086 1477
1090 163 (6215297) 6215297
(6260) (200)
30252 333688 (91122)
5613730
(6586814) (73236)
200
(16300)
(31529754) 14301010 27 137900
3233006
(4063 158) (1510373)
702 (5572829)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31 2014 AND 2013
2014
NET INCOME $ 3994602
other Comprehensive Loss Unrealized Losses on Available-for-Sale Securities (570601) Reclassification Adjustment for Gains
Realized in Income 3124 Income Tax Benefit 20508
Total Other Comprehensive Loss (546969)
Total Comprehensive Income $ 3447633
See accompanying Notes to Consolidated Financial Statements
(4)
2013
$ 41 32646
(1 066987)
6260 42944
( 1 017783)
$ 3114863
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31 2014 AND 201 3
Class A Common
Stock
BALANCE DECEMBER 31 2012 $ 34734
Net Income
Other Comprehensive Loss
Net Issuance of 13 shares of Class A Common Stock and 245 Shares of Class B Common Stock 1
Cash Dividends ($ 072 per Share)
BALANCE DECEMBER 31 201 3 34735
Net Income
Other Comprehensive Loss
Net Issuance of 55 Shares of Class A Common Stock and 5599 Shares of Class B Common Stock 6
Cash Dividends ($ 072 Per Share)
BALANCE DECEMBER 31 2014 $ 34741
See accompanying Notes to Consolidated Financial Sta tements
(5)
Class B Common
Stock
$ 2062981
25
2063006
560
$ 2063566
Accumulated Other Com-
Capital Undivided prehensive
Surplus Profits Income (Loss) Total
$ 16684566 $ 38101261 $ 2136710 $ 59020252
4132646 4132646
(1017783) (1017783)
676 702
(1510373) (1510373)
16685242 40723534 1118927 60625444
3994602 3994602
(546969) (546969)
15723 16289
(1510780) (1510780)
$ 16700965 $ 43207356 $ 571958 $ 62578586
(6)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 3 1 2 0 1 4 AND 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3994602 Adjustments to Reconcile Net I ncome to Net Cash
Provided by Operating Activities Depreciation 150789 Provision for Loan Losses 32583 Amortization of Investment Security Premiums Net 932405
Loans Originated for Sale (3731651) Proceeds on the Sale of Loans Held for Sale 3731651
Net Realized Gain on Sale of Securities (3124)
Gain on Sale of Bank Premises and Equipment Decrease in Accrued Interest Receivable 1797
Decrease in Other Assets 18893
Decrease in Accounts Payable and Accrued Liabilities (11453)
Net Cash Provided by Operating Activities 5116492
CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Loans (2524 132)
Purchases of Bank Premises and Equipment (117973)
Proceeds of Sale of Bank Premises and Equipment Sale (Purchase) of Federal Reserve Bank and
Federal Home Loan Bank Stock 6500
Securities Available-for-Sale Purchases (27222713)
Sales 3030650
Maturities and Calls 25776987
Net Cash Provided by (Used in) I nvesting Activities (1050681)
CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposits 3418393
Cash Dividends (1510780)
Proceeds from Issuance of Common Stock Net 16289
Net Cash Provided by (Used in) Financing Activities 1923902
See accompanying Notes to Consolidated Financial Statements
(7)
2013
$ 4132646
123086 1477
1090 163 (6215297) 6215297
(6260) (200)
30252 333688 (91122)
5613730
(6586814) (73236)
200
(16300)
(31529754) 14301010 27 137900
3233006
(4063 158) (1510373)
702 (5572829)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31 2014 AND 201 3
Class A Common
Stock
BALANCE DECEMBER 31 2012 $ 34734
Net Income
Other Comprehensive Loss
Net Issuance of 13 shares of Class A Common Stock and 245 Shares of Class B Common Stock 1
Cash Dividends ($ 072 per Share)
BALANCE DECEMBER 31 201 3 34735
Net Income
Other Comprehensive Loss
Net Issuance of 55 Shares of Class A Common Stock and 5599 Shares of Class B Common Stock 6
Cash Dividends ($ 072 Per Share)
BALANCE DECEMBER 31 2014 $ 34741
See accompanying Notes to Consolidated Financial Sta tements
(5)
Class B Common
Stock
$ 2062981
25
2063006
560
$ 2063566
Accumulated Other Com-
Capital Undivided prehensive
Surplus Profits Income (Loss) Total
$ 16684566 $ 38101261 $ 2136710 $ 59020252
4132646 4132646
(1017783) (1017783)
676 702
(1510373) (1510373)
16685242 40723534 1118927 60625444
3994602 3994602
(546969) (546969)
15723 16289
(1510780) (1510780)
$ 16700965 $ 43207356 $ 571958 $ 62578586
(6)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 3 1 2 0 1 4 AND 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3994602 Adjustments to Reconcile Net I ncome to Net Cash
Provided by Operating Activities Depreciation 150789 Provision for Loan Losses 32583 Amortization of Investment Security Premiums Net 932405
Loans Originated for Sale (3731651) Proceeds on the Sale of Loans Held for Sale 3731651
Net Realized Gain on Sale of Securities (3124)
Gain on Sale of Bank Premises and Equipment Decrease in Accrued Interest Receivable 1797
Decrease in Other Assets 18893
Decrease in Accounts Payable and Accrued Liabilities (11453)
Net Cash Provided by Operating Activities 5116492
CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Loans (2524 132)
Purchases of Bank Premises and Equipment (117973)
Proceeds of Sale of Bank Premises and Equipment Sale (Purchase) of Federal Reserve Bank and
Federal Home Loan Bank Stock 6500
Securities Available-for-Sale Purchases (27222713)
Sales 3030650
Maturities and Calls 25776987
Net Cash Provided by (Used in) I nvesting Activities (1050681)
CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposits 3418393
Cash Dividends (1510780)
Proceeds from Issuance of Common Stock Net 16289
Net Cash Provided by (Used in) Financing Activities 1923902
See accompanying Notes to Consolidated Financial Statements
(7)
2013
$ 4132646
123086 1477
1090 163 (6215297) 6215297
(6260) (200)
30252 333688 (91122)
5613730
(6586814) (73236)
200
(16300)
(31529754) 14301010 27 137900
3233006
(4063 158) (1510373)
702 (5572829)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
Accumulated Other Com-
Capital Undivided prehensive
Surplus Profits Income (Loss) Total
$ 16684566 $ 38101261 $ 2136710 $ 59020252
4132646 4132646
(1017783) (1017783)
676 702
(1510373) (1510373)
16685242 40723534 1118927 60625444
3994602 3994602
(546969) (546969)
15723 16289
(1510780) (1510780)
$ 16700965 $ 43207356 $ 571958 $ 62578586
(6)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 3 1 2 0 1 4 AND 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3994602 Adjustments to Reconcile Net I ncome to Net Cash
Provided by Operating Activities Depreciation 150789 Provision for Loan Losses 32583 Amortization of Investment Security Premiums Net 932405
Loans Originated for Sale (3731651) Proceeds on the Sale of Loans Held for Sale 3731651
Net Realized Gain on Sale of Securities (3124)
Gain on Sale of Bank Premises and Equipment Decrease in Accrued Interest Receivable 1797
Decrease in Other Assets 18893
Decrease in Accounts Payable and Accrued Liabilities (11453)
Net Cash Provided by Operating Activities 5116492
CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Loans (2524 132)
Purchases of Bank Premises and Equipment (117973)
Proceeds of Sale of Bank Premises and Equipment Sale (Purchase) of Federal Reserve Bank and
Federal Home Loan Bank Stock 6500
Securities Available-for-Sale Purchases (27222713)
Sales 3030650
Maturities and Calls 25776987
Net Cash Provided by (Used in) I nvesting Activities (1050681)
CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposits 3418393
Cash Dividends (1510780)
Proceeds from Issuance of Common Stock Net 16289
Net Cash Provided by (Used in) Financing Activities 1923902
See accompanying Notes to Consolidated Financial Statements
(7)
2013
$ 4132646
123086 1477
1090 163 (6215297) 6215297
(6260) (200)
30252 333688 (91122)
5613730
(6586814) (73236)
200
(16300)
(31529754) 14301010 27 137900
3233006
(4063 158) (1510373)
702 (5572829)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 3 1 2 0 1 4 AND 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 3994602 Adjustments to Reconcile Net I ncome to Net Cash
Provided by Operating Activities Depreciation 150789 Provision for Loan Losses 32583 Amortization of Investment Security Premiums Net 932405
Loans Originated for Sale (3731651) Proceeds on the Sale of Loans Held for Sale 3731651
Net Realized Gain on Sale of Securities (3124)
Gain on Sale of Bank Premises and Equipment Decrease in Accrued Interest Receivable 1797
Decrease in Other Assets 18893
Decrease in Accounts Payable and Accrued Liabilities (11453)
Net Cash Provided by Operating Activities 5116492
CASH FLOWS FROM INVESTING ACTIVITIES Net Increase in Loans (2524 132)
Purchases of Bank Premises and Equipment (117973)
Proceeds of Sale of Bank Premises and Equipment Sale (Purchase) of Federal Reserve Bank and
Federal Home Loan Bank Stock 6500
Securities Available-for-Sale Purchases (27222713)
Sales 3030650
Maturities and Calls 25776987
Net Cash Provided by (Used in) I nvesting Activities (1050681)
CASH FLOWS FROM FINANCING ACTIVITIES Net Increase (Decrease) in Deposits 3418393
Cash Dividends (1510780)
Proceeds from Issuance of Common Stock Net 16289
Net Cash Provided by (Used in) Financing Activities 1923902
See accompanying Notes to Consolidated Financial Statements
(7)
2013
$ 4132646
123086 1477
1090 163 (6215297) 6215297
(6260) (200)
30252 333688 (91122)
5613730
(6586814) (73236)
200
(16300)
(31529754) 14301010 27 137900
3233006
(4063 158) (1510373)
702 (5572829)
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NET INCREASE IN CASH AND
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS
END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -CASH PAID FOR
Interest
Income Taxes
(8)
2014
$ 5989713
10448180
$ 16437893
$ 703759
166904
2013
$ 3273907
7174273
$ 10448 180
$ 802022
159721
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
FNC Inc headquartered in Storm Lake Iowa is a bank holding company (the parent company) comprised of a federally chartered bank with operating offices in northwest Iowa and a Texas investment company which invests in and manages investment securities
Principles of Consolidation
The consolidated financial statements include the accounts of FNC Inc and wholly owned subsidiaries FNT Inc Citizens First National Bank (the Bank) and its wholly owned subsidiary Citizens Credit Corporation (collectively the Company) Significant intercompany transactions and accounts have been eliminated in consolidation
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Material estimates that are particularly susceptible to significant change in the near term are the determination of the allowance for loan losses and the classification and valuation of securities available-for-sale
Concentrations of Credit Risk
The Company originates residential commercial and agricultural loans primarily in its northwest Iowa market area Although the Company has a diversified loan portfolio a substantial portion of its borrowers ability to repay their loans is dependent upon economic conditions in the Companys primary market areas
At December 3 1 2014 the Company has $1 6437893 of cash and cash equivalents most of which is in excess of federally insured limits at the various financial institutions In the opinion of management no material risk of loss exists due to the financial condition of the institutions
Cash and Cash Eguivalents
For purposes of reporting cash ftows the Company includes all short-term investments with original maturities of three months or less at date of purchase in cash and cash equivalents
Restrictions on Cash and Due from Banks
The Ban-Ilt is required to maintain reserve balances on hand and with the Federal Reserve Bank The total of these reserve balances was approximately $1 537000 and $ 1 628000 as of December 3 1 201 4 and 201 3 respectively
(9)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities
The Company classifies investments as held-to-maturity when management has the positive intent and ability to hold to maturity Securities held-to-maturity are carried at cost adjusted for amortization of premium and accretion of discount which are recognized in interest income using the interest method over their contractual lives The Company classified no securities as held-to-maturity at December 3 1 2014 and 201 3
Securities not classified as held-to-maturity are classified as available-for-sale and consist of debt securities Securities available-for-sale are carried at fair value with unrealized holding gains and losses on these securities reported as other comprehensive income and as accumulated comprehensive income net of taxes a separate component of stockholders equity For securities available-for-sale gains or losses are realized and included in noninterest income upon sale based on the amortized cost of the individual security sold All previous fair value adjustments included in the separate component of stockholders equity are reversed upon sale Gains and losses on the sale of securities are recorded on trade date and are determined on the specific identification method The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity
Declines in the fair value of securities available-for-sale below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses In estimating othershythan-temporary impairment losses management considers ( 1 ) the intent to sell the investment securities and the more likely than not requirement that the Company will be required to sell the investment securities prior to recovery (2) the length of time and the extent to which the fair value has been less than cost and (3) the financial condition and near-term prospects of the issuer In 2014 and 201 3 management determined that the Company had no impairment losses on securities available-for-sale
Federal Reserve and Federal Home Loan Bank (FHLB) Stock
The Bank is a member of the Federal Reserve and FHLB system Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest in additional amounts Stock is carried at cost and periodically evaluated for impairment Because these stocks are viewed as long term investments impairment is based on ultimate recovery at par value Both cash and stock dividends are reported as income
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate Net unrealized losses are recognized through a valuation allowance by charges to income Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan
( 10)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
Loans are stated at the unpaid principal amount net of the allowance for loan losses Interest on loans is accrued and credited to operations based on the principal amount outstanding
The accrual of interest income on any loan is discontinued when in the opinion of management (generally when a loan becomes ninety days delinquent) there is reasonable doubt as to the timely collection of interest or principal In all cases loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful When interest accruals are discontinued accrued interest receivable is charged to operations Subsequent interest income is not recognized on such loans until collected Past due status is based on the contractual terms of the loan Nonaccrual loans are returned to an accrual status when in the opinion of management the financial position of the borrower indicates there is no longer any reasonable doubt as to timely payment of principal or interest
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed Subsequent recoveries if any are credited to the allowance
The allowance for loan losses is maintained at amounts believed adequate by management to absorb potential losses in the loan portfolio Managements determination of the adequacy of the allowance is based on an evaluation of the portfolio past loan loss experience current economic conditions maturity and volume of the loan portfolio growth and composition of the loan portfolio estimated value of underlying collateral and other relevant factors This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision by regulatory authorities or as more information becomes available Due to potential changes in conditions it is at least reasonably possible that changes in estimates will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
The allowance consists of specific and general components The specific component relates to loans that are classified as either doubtful or substandard For such loans that are also classified as impaired an allowance is established when the discounted cash fiows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan or the underlying fair value of the collateral does not support the carrying value of the loan The general component covers remaining loans and is based on historical loss experience adjusted for qualitative factors The unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses including internal and external factors such as classified loan volume delinquency trends of the loan portfolios current state of overall collateral values and other economic or geographic factors The unallocated component of the allowance refiects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio
(11)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses (Continued)
Under the Companys credit policies all loans with interest more than ninety days in arrears and restructured loans are considered to meet the definition of impaired loans under GAAP Other factors considered by management in determining impairment include payment status collateral value and the probability of collecting scheduled principal and interest payments when due Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired Management determines the significance of payment delays and payment shortfalls on a case-by-case basis taking into consideration all of the circumstances surrounding the loan and the borrower including the length of the delay the reasons for the delay the borrowers prior payment record and the amount of the shortfall in relation to the principal and interest owed Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loans effective interest rate the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent
Under certain circumstances the Company will provide borrowers relief through loan restructurings A restructuring of debt constitutes a troubled debt restructuring (TOR) if the Company for economic or legal reasons related to the borrowers financial difficulties grants a concession to the borrower that it would not otherwise consider Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms Loans that are reported as TORs are considered impaired and measured for impairment as described above in the calendar year of the restructuring In subsequent years a restructured loan may cease being classified as impaired if the loan was modified at a market rate and is performing according to modified terms TOR concessions can include reduction of interest rates extension of maturity dates forgiveness of principal or interest due or acceptance of other assets in full or partial satisfaction of the debt Restructured loans can involve loans remaining on nonaccrual moving to nonaccrual or continuing on accrual status depending on the individual facts and circumstances of the borrower Nonaccrual restructured loans are included and treated with other nonaccrual loans
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment Accordingly the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement
Trust Department Assets
Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets as such items are not assets of the Bank
(12)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIG NIFICANT ACCOUNTING POLICIES (CONTfNUED)
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets which range from twenty to fifty years for buildings and five to ten years for equipment and building improvements
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset If such assets are considered to be impaired the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell
Income Taxes
The Company and its subsidiaries have elected to be taxed as an S corporation for federal income tax purposes as provided in Section 1 361 of the Internal Revenue Code As such the Companys income or loss and credits are passed to the stockholders and combined with personal income and deductions to determine personal taxable income The Company and nonbanking subsidiaries are also taxed as an S corporation for Iowa tax purposes The Bank however is subject to Iowa franchise tax which is included in the Companys income tax expense
Comprehensive Income
Comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale Other comprehensive income net of applicable taxes is recognized as accumulated other comprehensive income a separate component of stockholders equity
Per Share Amounts
Net income-per-share amounts are computed based on the weighted average number of both classes of shares outstanding during the year
Off-Balance-Sheet Financial Instruments
Financial instruments include off-balance-sheet credit related financial instruments such as commitments to make loans and letters of credit issued to meet customer-financing needs The Companys exposure to credit loss is represented by the contractual amount of these commitments before considering customer collateral or ability to repay Such financial instruments are recorded when they are funded
(13)
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transfers of Financial Assets and Participating Interests
Transfers of an entire financial assets or a participating interest in an entire financial asset 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
The transfer of a participating interest in an entire financial asset must also meet the definition of a participating interest A participating interest in a financial asset has all of the following characteristics ( 1 ) from the date of transfer it must represent a proportionate (pro-rata) ownership interest in the financial asset (2) from the date of transfer all cash flows received except any cash flows allocated as any compensation for servicing or other services performed must be divided proportionately among participating interest holders in the amount equal to their share ownership (3) the rights of each participating interest holder must have the same priority and (4) no party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to do so
Advertising Costs
Advertising costs are expensed as incurred
Fair value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully discussed in Notes 1 1 and 12 Fair value estimates involve uncertainties and matters of significant judgment Changes in assumptions or in market conditions could significantly affect the estimates
New Accounting Pronouncements
In 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No 2014-04 Receivables -Troubled Debt Restructuring by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure The update clarifies when an in substance foreclosure occurs that is when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan This is the point when the consumer mortgage loan should be derecognized and the real property recognized This update will be effective for the year ended December 3 1 2015 The adoption of this guidance will not have a material impact on the Companys consolidated financial statements
In 2014 the FASB issued ASU No 201 4- 11 Transfers and Servicing (Topic 860) Repurchase-to-Maturity Transactions Repurchase Financings and Disclosures The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements The amendments in the ASU also require expanded disclosures
(14)
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 1
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings The amendments in this ASU will be effective for the year ended December 31 20 1 5 Theadoption of this ASU may result in additional disclosures but is not expected to impact significantly the Companys consolidated financial statements
In 2014 the Company adopted Accounting Standards Update 201 3-02 Comprehensive Income (Topic 220) ASU 201 3-02 amended prior guidance to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component In addition an entity is required to present either on the face of the statement or in the notes significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required under US GAAP The adoption of this ASU did not impact the Companys financial position or results of operations
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale were as follows at December 3 1
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2014middot
US Treasury $ 8358083 $ 9817 $ (5869) $ 8362031 US Government Agencies 26566564 55573 (26061) 26596076 US Government Mortgage-
Backed Securities 97440 2379 99819 State and Political
Subdivisions 71 210926 693885 ( 1 59580) 71745231 Corporate Bonds 2 1 57296 1 9694 2 1 76990
Total $ 1 08390309 $ 781 348 $ ( 1 9 1 5 1 0) $ 1 08980147
Gross Gross Amortized Unrealized Unrealized
Cost Gains Losses Fair Value 2013
US Treasury $ 999605 $ 83 $ $ 999688 US Government Agencies 30864972 1 1 1 836 (221 84) 30954624 US Government Mortgage-
Backed Securities 1 24244 1788 (68) 1 25964 State and Political
Subdivisions 76751704 1 256757 (232394) 77776067 Corporate Bonds 2 166740 41 497 2208237
Total $ 1 1 0907265 $ 1 411961 $ (254646) $ 1 1 2064580
( 1 5)
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 2
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
Information pertaining to securities with gross unrealized losses at December 3 1 20 1 4 and 201 3 aggregated by investment category and length of time that individual securities have been in continuous loss position follows
Less than 12 Mmths 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2014middot
US Treasury 4373594 $ (5869) $ $ $ 4373594 (5869)
US Government
Agencies 10208792 (20506) 933135 (5555) 11201927 (26061)
State and Political
Subdivisions 14407 153 (89288) 7344793 (70292) 21751946 (159580)
Total 28989539 $ (115663) 8277928 $ (75847) 37327457 (191510)
Less than 12 Months 12 Months or More Total
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value losses Value Losses Value Losses
2013
US Government
Agencies $ 6561360 $ (22184) $ $ $ 6561360 $ (22184) US Government
Mortgage-Backed
Securities 7132 (68) 7 132 (68) State and Political
Subdivisions 13513137 166367 5356603 (66027 18869740 j232394)
Total 20074497 (188551) $ 5363735 $ (66095) 25438232 (254646)
At December 3 1 2014 securities available-for-sale have an unrealized loss with aggregate depreciation of less than one percent of the Companys amortized cost basis for all securities available-for-sale These unrealized losses are a result of expected fluctuations in the bond market In analyzing an issuers financial condition management considers whether the securities are issued by the federal government or its agencies whether downgrades by bond rating agencies have occurred and industry analysts reports The decline in value of these securities is deemed to be temporary Due to potential changes in conditions it is at least reasonable possible that changes in fair values and managements assessments will occur in the near term and that such changes could materially affect the amounts reported in the Companys financial statements
(16)
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 2
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31 2014 AND 2013
SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The scheduled maturities of securities available-for-sale at December 31 2014 are shown below Actual maturities may differ from scheduled maturities because issuers may have the right to call or prepay obligations
Due in One Year or Less Due After One Year through Five Years
Due After Five Years through Ten Years
Total
Amortized Cost
$ 19881616 83685624
4823069
$ 108390309
Estimated Fair Value
$ 20036575 84155972
4787600
$ 108980147
Proceeds from the sale of securities available-for-sale were $3030650 and $14 3010 1 0 for the years ended December 3 1 201 4 and 201 3 respectively Gross realized gains of $3294 and $25688 were recognized in 2014 and 201 3 respectively Gross realized losses of $170 and $1 9428 were recognized in 2014 and 201 3
Securities carried at approximately $5511000 and $5500000 at December 31 2014 and 201 3 respectively were pledged to secure public and trust deposits and for other purposes as required or permitted by law
LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts of loans are summarized as follows
2014 2013 1-4 Family Residential Real Estate $ 8314753 $ 8562443 Commercial and Agricultural 102249415 100005400 Consumer and Other 12311516 11769709
Total Gross Loans 122875684 120337552
Less Allowance for Loan Losses 972853 926270
Loans Net $ 121902831 $ 119411282
(17)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company originates 1 -4 family real estate and consumer (home equity) loans utilizing credit reports to supplement the underwriting process The Companys manual underwriting standards for 1-4 family loans are generally in accordance with FHLMC and FNMA manual underwriting guidelines Properties securing 1 -4 family real estate loans are appraised by either staff appraisers or fee appraisers both of which are independent of the loan origination function The loan-to-value ratios normally do not exceed 80 without credit enhancements such as mortgage insurance The Company will lend up to 95 of the lesser of the appraised value or purchase price for conventional 1 -4 family real estate loans provided private mortgage insurance is obtained The underwriting standards for consumer loans include a determination of the applicants payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan To monitor and manage loan risk policies and procedures are developed and modified as needed by management This activity coupled with smaller loan amounts that are spread across many individual borrowers minimizes risk Additionally market conditions are reviewed by management on a regular basis The Companys 1 -4 family real estate are secured primarily by properties located in its primary market area
Commercial and agricultural loans include operating and real estate categories Commercial and agricultural operating loans are underwritten based on the Companys examination of current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed This underwriting includes as appropriate the evaluation of cash flows of the borrower underlying collateral if applicable and the borrowers ability to manage its business activities The cash flows of borrowers and the collateral securing these loans may fluctuate in value after the initial evaluation A first priority lien on the general assets of the business normally secures these types of loans Loan-to-value limits vary and are dependent upon the nature and type of the underlying collateral and the financial strength of the borrower Crop and hail insurance is required for higher risk agricultural borrowers Loans are generally guaranteed by the principal(s) The Companys commercial and agricultural operating lending is primarily in its primary market area
Commercial and agricultural real estate loans are subject to underwriting standards and processes similar to commercial and agricultural operating loans in addition to those unique to real estate loans These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate Commercial and agricultural real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan Loan-to-value is generally 75 of the cost or value of the assets Appraisals on properties securing these loans are performed by fee appraisers evaluations are performed by officers who are independent of the transaction Because payments on commercial and agricultural real estate loans are often dependent on the successful operation or management of the properties repayment of such loans may be subject to adverse conditions in the real estate market or the economy Management monitors local real estate markets and responds to economic changes accordingly including adjusting individual credit risk ratings The Company may require guarantees on these loans The Companys commercial and agricultural real estate loans are secured primarily by properties located in its primary market area
(18)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Consumer and other loans are underwritten according to parameters set by management and are classified as either exception loans or not Exception loans are tracked until such time as conditions indicate that the loan is no longer an exception Parameters included in the evaluation include the borrowers ability to service recurring payments relative to their income their credit history with the bank and with other creditors loan size and the loan to collateral value
The Company reviews and validates the credit risk program on a periodic basis Results of these reviews are presented to management The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel as well as the Companys policies and procedures
Activity in the allowance for loan losses on a disaggregated basis is as follows
1-4 Family Commercial Residential and Consumer Real Estate Asricultural and Other Total
2014 Allowance for Loan Losses Balance Beginning $ 89021 $ 71 5840 $ 1 2 1 409 $ 926270
Provision for Loan Losses 32583 32583 Recoveries of Loans
Charged-Off 16597 16597 Loans Charged-Off (2597) (2597)
Total $ 89021 $ 71 5840 $ 167992 $ 972853
1 -4 Family Commercial Residential and Consumer Real Estate A9ricultural and Other Total
2013 Allowance for Loan Losses Balance Beginning $ 89021 $ 708 166 $ 1 1 6693 $ 91 3880
Provision for Loan Losses 1 477 1 477 Recoveries of Loans
Charged-Off 7674 4716 1 2390 Loans Charged-Off (1 477) (1 477)
Total $ 89021 $ 71 5840 $ 1 21 409 $ 926270
( 1 9)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Allowance for loan losses and loans receivable disaggregated on the basis of impairment analysis method are as follows
December 3 1 2014 Allowance for Loan Losses -
Collectively Evaluated for Impairment
Loans Receivable -Collectively Evaluated
for Impairment
December 31 2013 Allowance for Loan Losses -
Collectively evaluated for impairment
Loans Receivable -Collectively Evaluated
for Impairment
$
$
$
1-4 Family Residential Real Estate
89021
8314753
1-4 Family Residential Real Estate
89021
$ 8562443
Commercial and
Agricultural
$ 71 5840
$ 1 0224941 5
Commercial and
Agricultural
$ 71 5840
$ 1 00005400
$
$
$
Consumer and Other
167992
123 1 1 516
Consumer and Other
121 409
$ 1 1 769709
Total
$ 972853
$ 122875684
Total
$ 926270
$ 120337552
No loans were specifically evaluated for impairment at December 3 1 2014 or 201 3
Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Companys loan portfolio management reviews portfolio late-pays and delinquencies and determines the proper regulatory classification for the individual credit This review is expanded in scope in the event of identifiable changes in market or economic conditions which would precede potential deterioration in credit quality
The Company risk rates its loan portfolio on regulatory parameters as follows
Loss - Loans classified loss are considered uncollectible and of such little value that their continuance as active loans of he Company is not warranted Assignment of this classification does not mean that a loan has absolutely no recovery or salvage value but simply that it is not practicable or desirable to defer writing off all or sometimes a portion of a basically worthless loan even though partial recovery may be affected in the future
Doubtful - A loan classified doubtful has all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are pronounced to a point where on the basis of current information conditions and values collection or liquidation in full is highly improbable The length of time a loan may be classified doubtful is a matter of judgment
(20)
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged if any Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt Substandard loans are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected Loss potential while existing in the aggregate amount of substandard loans does not have to exist in individual loans classified substandard
Special Mention - Special mention loans are currently protected but are potentially weak loans They constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset
Pass - All other loans
The credit risk profile by internally assigned ratings are as follows
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2014 Pass $ 8292397 $ 10224941 5 $ 12301 354 $ 122843166 Special Mention 1 5 169 10 162 25331 Substandard 7186 7 1 86
$ 8314753 $ 102249415 $ 123 1 1 516 $ 122875684
1-4 Family Commercial Residential and Consumer Real Estate Agricultural and Other Total
December 3 1 2013 Pass $ 8548173 $ 99995697 $ 1 1 764861 $ 120308731 Special Mention 2169 9703 4848 1 6 720 Substandard 1 2 1 0 1 1 2 1 0 1
$ 8562443 $ 1 00005400 $ 1 1 769709 $ 120337552
( 2 1
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the fair value of the collateral if the loan is collateral dependent The amount of the impairment is included in the allowance for loan losses The amount the Company will ultimately realize from these loans could differ materially from their carrying value because of future developments affecting the underlying collateral or the borrowers ability to repay the loans
As of December 3 1 2014 and 2013 the Company did not have any significant loans on non accrual status or that management believes met the definition of impaired
The following tables show the aging analysis of the loan portfolio by time past due
As of December 3 1 2014 and 2013 the Company did not have any significant loans that were modified in a troubled debt restructuring
(22)
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE3
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
In the ordinary course of business the Company has granted loans to executive officers directors and their affiliates (related parties) Management believes that such loans are made in the ordinary course of business with normal credit terms including interest rate and collateralization and do not represent more than a normal risk of collection Activity associated with loans made to related parties is as follows
2014 201 3 Balance at Beginning of Year $ 1 982434 $ 87301 1
New Loans 395000 1 337206 Repayments (2067830) (227783)
Balance End of Year $ 309604 $ 1 982434
NOTE 4 BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment
Bank Premises and Land
Furniture Fixtures and Equipment
Less Accumulated Depreciation
Total Bank Premises and Equipment Net
NOTE 5 DEPOSITS
A summary of deposits is as follows
Demand
NOW
Savings and Money Market
Time
(23)
201 4 $ 1 635898
1 435967 3071 865 2 1 26499
$ 945361
2014 $ 29 1 87025
45 1 1 4978 6 1 974451 5 1 321 325
$ 1 87597779
201 3 $ 1 626 1 27
2633763 4259890 328 1 7 1 3
$ 978 1 77
201 3 $ 26535556
42260208 60 362560 55021 062
$ 1 84 1 79386
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 5
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
DEPOSITS (CONTINUED)
Pursuant to a change during 2014 in the disclosure requirements of GAAP the concentration threshold for reporting certificates of deposit was increased from $1 00000 to $250000 The aggregate amounts of time deposits in denominations of $250000 or more was approximately $2 1 70402 at December 3 1 2014 The aggregate amounts of time deposits in denominations of $1 00000 or more was $1 7563 147 at December 3 1 2 0 1 3
At December 3 1 2014 the scheduled maturities of time deposits are as follows
2015 $ 31267630
2016 7775902 2017 4920527
2018 3701482
2019 3655784
Total $ 51321325
The Bank held related party deposits of approximately $55338 1 9 and $7434000 at December 3 1 2014 and 2013 respectively
NOTE 6 PROFIT SHARING PLAN
The Company maintains a noncontributory profit sharing plan covering substantially all employees meeting service and eligibility requirements Company contributions to the plan are made at the discretion of the Board of Directors The Company contributions charged to operations in 2014 and 201 3 were $297870 and $305382 respectively
NOTE 7 INCOME TAXES
The Company files income tax returns in the US federal jurisdiction and two states The Company is a pass through entity for income tax purposes whereby any federal income tax liabilities or benefits are attributable to the Companys owners
Thf Company follows the requirements for accounting for uncertain tax positions Management has determined that the Company has no material uncertain tax positions that would require recognition
The federal and state income tax returns of the Company for 201 1 and thereafter are subject to examination by the Internal Revenue Service and state taxing authorities generally for three years after filed
(24)
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE S
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
RESTRICTIONS ON SUBSIDIARY DIVIDENDS LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer funds to the parent company in the form of cash dividends loans or advances The approval of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years Under these provisions the Bank was not required to obtain approval for dividends declared to FNC Inc in 2014 and 201 3
Under Federal Reserve regulation the Bank is limited as to the amount it may loan to affiliates including the parent company and such loans must be collateralized by specific obligations Such transactions with any single affiliate are limited to 1 0 of the Banks capital and surplus and with all affiliates combined to no more than 20 of the Banks capital and surplus At December 3 1 2014 and 2013 the Bank had no such loans
COMMITMENTS AND CONTINGENCIES
In the normal course of business the Bank has outstanding commitments and contingent liabilities such as commitments to extend credit and standby letters of credit which are not included in the accompanying consolidated financial statements The Banks exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet
Financial instruments whose contract amounts represent credit risk were as follows
2014 201 3 Commitments to Extend Credit $ 21 967412 $ 1 5449 1 60
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 The Bank evaluates each customers creditworthiness on a case-by-case basis The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation Collateral held varies but may include accounts receivable inventory property and equipment and income-producing commercial properties
(25)
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 9
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
COMMITMENTS AND CONTINGENCIES
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers The Banks policy for obtaining collateral and the nature of such collateral is essentially the same as that involved in making commitments to extend credit The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the letter of credit If commitments were funded the Bank would be entitled to seek recovery from the customer At December 31 2014 and 2013 there were no outstanding commitments under standby letters of credit
NOTE 1 0 REGULATORY CAPITAL
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that if undertaken could have a direct material effect on the Companys and the Banks financial statements U nder capital adequacy guidelines and the regulatory framework for prompt corrective action the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices The Companys and the Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components risk weightings and other factors Prompt corrective action provisions are not applicable to bank holding companies
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier
1 capital (as defined) to average assets (as defined) Management believes as of December 31 2014 and 201 3 that the Bank meets all capital adequacy requirements to which it is subject
As of December 31 2014 the most recent notification from the applicable banking agencies categorizes the Bank as well capitalized under the regulatory framework for prompt corrective action To be categorized as well capitalized the Bank must maintain minimum total risk-based Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table There are no conditions or events since this notification that management believes have changed the Banks category (the dollar amounts in the table are shown in thousands of dollars)
(26)
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 1 0
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
REGULATORY CAPITAL (CONTINUED)
For Capital Actual Ade9uac Pureoses
Amount Ratio Amount Ratio As of December 31 2014middot
Total Capita (to Risk-Weighted Assets)
Consolidated $ 62980 425 NIA NIA Bank 21 992 176 $ 9992 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 62007 4 1 8 NIA NIA Bank 20949 168 4996 40
Tier 1 Capital (to Average Assets)
Consolidated 62007 246 NIA NIA Bank 20949 102 6156 30
For Capital Actual Adeguacl PurEoses
Amount Ratio Amount Ratio As of December 31 2013
Total Capital (to Risk-Weighted Assets)
Consolidated $ 60432 415 NIA NIA Bank 22222 177 $ 10020 80
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated 59506 409 NIA NIA Bank 21296 170 5010 40
Tier 1 Capital (to Average Assets)
Consolidated 59506 235 NIA NIA Bank 21 296 102 62B4 30
To Be Well Capitalized Under
Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12490 100
NIA NIA 7494 60
NIA NIA 10261 50
To Be Well Capitalized Under Prompt Corrective Action Provisions
Amount Ratio
NIA NIA $ 12525 100
NIA NIA 7515 60
NIA NIA 10473 50
In July 2013 the US federal banking authorities approved the final rules (the Basel I l l Capital Rules) which established a new comprehensive capital framework for US banking organizations The Basel I l l Capital Rules have maintained the general structure of the current prompt corrective action framework while incorporating provisions which will increase both the quality and quantity of bank capital Generally the new rules become effective on January 1 201 5 with phase-in periods for many of the new provisions Management believes the Bank will comply with the new capital requirements as the rules are phased-in
(27)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 1 FAIR VALUE MEASUREMENTS
GAAP established a framework for measuring fair value That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) The three levels of the fair value hierarchy under the standard are described as follows
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access
Level 2 - Inputs to the valuation methodology include
bull quoted prices for similar assets or liabilities in active markets
bull quoted prices for identical or similar assets or liabilities in inactive markets
bull inputs other than quoted prices that are observable for the asset or liability
bull inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term the level 2 input must be observable for substantially the full term of the asset or liability
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement
(28)
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
NOTE 1 1
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
FAIR VALUE MEASUREMENTS (CONTINUED)
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement The following table presents the balances of assets measured at fair value on a recurring basis by level as of December 31
2014
Descrition Total Level 1 Level 2 Level 3 US Treasury $ 8362031 $ 8362031 $ $ US Government Agencies 26596076 26596076 US Government Mortgage-
Backed Securities 99819 99819 State and Political Subdivisions 71 745231 71745231 Corporate Bonds 2 176990 2176990
$ 108980147 $ 8362031 $ 100618 116 $
2013
Descrietion Total Level 1 Level 2 Level 3 US Treasury $ 999688 $ 999688 $ $ US Government Agencies 30954624 30954624 US Government Mortgage-
Backed Securities 125964 125964 State and Political Subdivisions 77 776067 77776067 Corporate Bonds 2208237 2208237
$ 1 1 2064580 $ 999688 $ 111 064892 $
The Company had no significant assets or liabilities measured at fair value on a nonrecurring basis at December 3 1 2014 and 2013
Level 1 securities include those traded on a n active exchange such as the New York Stock Exchange as well as US Treasury securities that are traded by dealers or brokers in active over-the-counter markets Level 2 securities include US government agency securities mortgage-backed securities (including pools and collateralized mortgage obligations) municipal bonds and corporate debt securities For these securities the Company obtains fair value measurements from an independent pricing service The fair value measurements consider observable data that may include dealer quotes market spreads cash flows the US Treasury yield curve live trading levels trade execution data market consensus prepayment factors credit information and security terms and conditions among other things
(29)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose estimated fair values for its financial instruments The following estimates methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments
bull Cash and cash equivalents - The carrying amount approximates the estimated fair value due to the short-term nature of those instruments
bull Securities available-for-sale - The fair value of securities is estimated based on bid prices published in financial newspapers bid quotations received from securities dealers or quoted market prices of similar instruments adjusted for differences between the quoted instruments and the instruments being valued
bull Federal Reserve and FHLB Stock - The fair value of Federal Reserve and FHLB stock is equivalent to its carrying value as the stock is redeemable at par value
bull Loans - Fair values are estimated for portfolios of loans with similar financial characteristics Loans are segregated by type such as commercial real estate and installment The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan The estimate of maturity is based on the Banks historical experience with repayments for each loan classification modified as required by an estimate of the effect of current economic and lending conditions The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate
bull Accrued Interest ReceivablePayable - The recorded amount of accrued interest receivable and payable approximates fair value
bull Deposits - The fair value of deposits with no stated maturity such as noninterest bearing demand deposit NOW savings and money market accounts is equal to the amount payable on demand The fair value of certificates of deposit is based on the discounted value of contractual cash flows The discount rate is estimated using the rates currently offered for deposits of similar maturities The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market
bull Off-Balance-Sheet Financial Instruments - The fair value of commitments to extend credit and commitments to purchase or sell Joans is estimated using the difference between current levels of interest rates and committed rates The fair value of letters of credit is based on fees currently charged for similar agreements The carrying and fair value of these commitments are not considered significant
bull Limitations - Fair value estimates are made at a point in time based on relevant market information and information about the financial instrument Because no market exists for a significant portion of the Companys financial instruments fair value estimates are based on judgments regarding future expected loss experience current economic conditions risk characteristics of various financial instruments and other factors These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision Changes in assumptions could significantly affect the estimates
(30)
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 3 1 2014 AND 2013
NOTE 1 2 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Companys financial instruments were as follows
Financial Assets Cash and Cash Equivalents Securities Available-for-Sale Federal Reserve and FHLB
Stock Loans Net Accrued Interest Receivable
Financial liabilities Deposits
Demand NOW Savings and Money Market Time
Accrued Interest on Deposits
NOTE 13 SUBSEQUENT EVENTS
2014 Carrying Amount
$ 1 6437893 $ 108980147
315810 121 902831
1 835949
29 1 87025 45 1 14978 61 974451 51 321325
295563
201 3 Estimated Carrying Estimated Fair Value Amount Fair Value
1 6438000 $ 1 0448 180 $ 1 0448000 1 08980000 1 1 2064580 1 1 2065000
316000 322310 322000 121 596000 1 1 941 1 282 1 1 8843000
1 836000 1 837746 1 838000
291 87000 26535556 26536000 45 1 1 5000 42260208 42260000 61 974000 60362560 60363000 50836000 55021 062 54701 000
296000 322838 323000
Management evaluated subsequent events through March 23 2015 the date the consolidated financial statements were available to be issued Events or transactions occurring after December 3 1 2014 but prior to March 23 201 5 that provided additional evidence about conditions that existed December 3 1 2014 have been recognized in the consolidated financial statements for the year ended December 3 1 2014 Events or transactions that provided evidence about conditions that did not exist at December 3 1 2014 but arose before the consolidated financial statements were available to be issued have not been recognized in the consolidated financial statements for the year ended December 3 1 2014
(31)
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
SUPPLEMENTARY INFORMATION
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET
DECEMBER 3 1 2014
Consolidated ASSETS
Cash and Cash Equivalents Cash and Due from Banks $ 12 184064 $ Interest Bearing Deposits in Banks 2633829
Federal Funds Sold 1 620 000 Total Cash and Cash Equivalents 16 437 893
Securities Available-for-Sale 108980147 Federal Reserve and FHLB stock 315810
Loans 122875684
Less Allowance for Loan Losses (972853) Total Loans Net 121 902 831
Bank Premises and Equipment Net 945361 Accrued Interest Receivable 1835949 Other Assets 100609 Investments in Subsidiaries
Citizens First National Bank FNT Inc
TOTAL ASSETS $ 250518 600 $
LIABILITIES Deposits
Demand $ 29187025 $ NOW 451 14978 Savings and Money Market 61974451 Time 51 321325
Total Deposits 187597779
Accrued Interest Accounts Payable and Accrued Liabilities 342 234
Total Liabilities 187 940 0 1 3
STOCKHOLDERS EQUITY Common Stock 2098307 Capital Surplus 16700966 Undivided Profits 43207356 Accumulated Other Comprehensive Income 571 958
Total Stockholders Equity 62578 587
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $ 250518600 $
See Independent Accountants Review Report
(32)
Eliminations FNC Inc
248 198 $ 248198 950000
248 198 1 198 198
351820
19568014
19 568 014
1 1 1 336
21 289058 21 289058 20 060 16 1 20060 161
41 597417 $ 62578587
248 198 $
248198
248 198
1 001 000 2098307 10 189944 16 700966 29588206 43207356
570 069 571 958 41 349219 62578587
41597417 $ 62578587
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
Citizens First National Bank Citizens First Citizens Credit
FNT Inc and Subsidiary Eliminations National Bank Corporation
$ $ 12 1 84064 $ 4909 $ 12 1 84064 $ 4909 1 683829
1 620 000 1 620 000 1 683 829 1 3 804 064 4 909 1 3 804 064 4 909
1 8226540 90401787 90401 787 315810 3 1 5810
103307670 1 03307670 (972853) (972853)
102 334 817 1 02 334 817
945361 945361 149792 1 574821 1 574821
1 00609 100609
6297 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
$ $ 29435223 $ 4909 $ 29440 132 45 1 14978 45 1 1 4978 61 974451 61 974451 51 321 325 51 321 325
1 87845977 4909 1 87850886
342 234 343 622 (1388) 1 88 1 88 2 1 1 4 909 1 88 1 94 508 (1388)
1 000 1 000000 1 000 1 000000 1 000 9 189944 1 000000 1 000000
10 639325 1 8948881 5297 18 948881 5297 229 892 340 1 77 340 177
20060 161 2 1 289058 6297 21 289058 6297
$ 20060 161 $ 209477269 $ 1 1 206 $ 209483566 $ 4909
(33)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31 2014
Consolidated Eliminations INTEREST INCOME
Loans $ 6 070 162 $
Securities Taxable 415478 Exempt from Federal Income Taxes 1 312 918
1728396
Federal Funds Sold 5 080 Total Interest Income 7 803638
INTEREST EXPENSE Deposits
NOW 6374 Savings and Money Market 61545 Time 608390
Federal Funds Purchased 175 Total interest expense 676 484
Net I nterest Income 7127154
PROVISION FOR LOAN LOSSES 32 583
Net Interest I ncome After Provision for Loan Losses 7094571
NONINTEREST INCOME Trust department 582962 Service Charges on Deposit Accounts 89788 other Service Charges and Fees 975654 Equity in Earnings of Subsidiaries 3433026 Gain on Sales of Securities 3124 Other 21249
Total Noninterest Income 1672777 3433026
NONINTEREST EXPENSE Salaries and Employee Benefits 3032914 Net Occupancy Expense 114955 Furniture and Equipment 155053 other 1317 183
Total Noninterest Expenses 4 620 105
Income Before Income Taxes 4147243 3433026
INCOME TAX EXPENSE 152 641
NET INCOME $ 3994602 $ 3433026
See Independent Accountants Revie w Report (34)
FNC Inc
$ 809618
23 14 323 14346
823964
823964
823964
3433026
3433026
240788
21600 262388
3994602
$ 3994602
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNT Inc
$
216 387 772 387988
387988
387988
387 988
25694
21480 47 174
340814
$ 340814
Citizens First National Bank and Subsidiary
$
$
5260544
4 1 5239 9 1 0 823
1326062
5 080 6 591 686
6374 61545
608390 175
676484
5915202
32 583
5 882 6 1 9
582962 89788
975654
3124 21 249
1 672 777
2766432 1 14955 1 55053
1 274 103 4310 543
3244853
1 52 641
3092212
$
$
Citizens First Citizens Credit Eliminations National Bank Corporation
$ 5 260 544 $
4 1 5239 910 823
1 326062
5 080 6 591 686
6374 61545
608390 175
676484
591 5202
32 583
5 882 619
582962 89788
741738 233916 192080 1 92080
3124 2 1 249
192 080 1 630 941 233 916
2736604 29828 1 14955 1 55053
1 262 095 12 008 4268 707 4 1836
192080 3244853 192080
152 641
192080 $ 3 0922 12 $ 1 92080
(35)
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNC INC AND SUBSIDIARIES CONSOLIDATING STATEMENT OF UNDIVIDED PROFITS
Year Ended December 3 1 2014
Accumulated Adjustments Account Balance Beginning of Year Taxable Income Net of Certain Non-Taxable Items Dividends
Balance End of Year
Other Adjustments Account Balance Beginning of Year Non-Taxable Interest
Balance End of Year
Corporate Earnings and Profit Balance Beginning of Year Dividends
Balance End of Year
Other Retained Earnings Balance Beginning of Year Difference Between Book and Tax Income
Balance End of Year
Total Undivided Profits Beginning of Year Net Income Dividends
Total Undivided Profits End of Year
See Independent Accountants Review Report
(36)
$ 1 0347036 2656266
(1 51 0 780)
$ 1 1 492 522
$ 2781 2 196 1 376975
$ 29 1 89 171
$
$
$ 2564302 (38639)
$ 2 525 663
$ 40723534 3994602
(1 51 0780)
$ 43 207 356
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FNT INC
ORGAN I ZATION CHART 1 2 3 1 2 0 14
1 0 0
FNC INC
S t orm Lake I owa
I ncorpora t e d in I owa
1 0 0
San Ant oni o Texas
I nc orporated in Texas
C I T I ZENS F I RST NATI ONAL BANK
S t orm Lake I owa
I ncorpo r a t e d in I owa
1 0 0
C i t i z e n s C r e d i t Corpora t i on
( F i r s t Nat i onal Agency)
S t orm Lake I owa
Incorporated in I owa
FNC INC i t s e l f does not exerc i s e any superv i s i on ove r the
sub s i d i ary compan i e s a s each company mak e s i t s own de c i s i o n s
t hrough i t s own o f f i c e r s and Board o f D i r e c t o r s
Howeve r several key o f f i c e r s and or d i r e c t o r s o f t he Bank
Hold ing Company are a l so key o f f i c e r s and o r d i re c t or s of t he
various s ub s i d i a r i e s These key o f f i c e r s and o r d i r e c t o rs o f t he
Bank H o l d i ng company are the p o l i cy - make r s f o r e a c h o f t he
subs i d i ar i e s
By v i rtue o f the ove r l apping d i re c t o r s and o f f i c e r s t he Bank
Ho l d i ng Company has rather compl e t e i n d i r e c t supervi s i on over
t he subs i d i a ry compani e s
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
Results A list of branches for middot1our depmitory institutbullon Cl 117El$ FIRST rATbullOJAL ElNltK ii D _RSSD_ 240)
This depository insl1tution bulls held by FNC IW i25113V ltSTORM LAKE IA
The data are as of 123120 U Data reflects information that was recerved and proceed throug h 01107 2015
RewncHiat1on and VerifkaUon Steps
In the Data Action column of each branch row enter one or more of the actions specified below
2 If required enter the date in the Effective Date column
OK If the branch informatbullon 1s correct enter OK in the Data Action column
Change If the branch 1nformaton IS ncorrect or incomplete revise the data enter (hrngmiddot in the Data Action column and the date when this information first became valid in the Effective D111te rnlumn
(lose 11 a branch lsted was sold or closed enter Close in the Data Action column argtd the sale or closure date in the Effective Date column
Delete If a branch losted was never owned by this depoS1tory institution enter Dlete in he Data Action column
Add If a reportable branch 1s missing insert a row add the branch data and enter Acd in the Data Action column and the opening or acquisiton date in the Effective Date column
If pbullinting this list you may need to adjust your page setup 1n MS Excel Try using landscape orientaton page scaling andor legal sized paper
-_b_missfon Procedure
Wlgter you are finished send a saved copy to your fRB contact See the detailed instructions on this site for more information
If you ore e-ma1l1ng tigt is to your FRB contact put your Institution name city and state in the subject line of the e-mail
Note To satisfy the FR Y-10 reporting requirements you mus also submit FR Y-10 Domestic Branch Schedules for each branch wbullth a Data Action of Cha-g Cos Delete or Add
The FR Y-10 report may be submitted in a hard copy format or via the FR YmiddotlO Online application - httpsylOonlinefederalreserve_gov
bull FDIC UNiNUM Qffce Number and ltD_RSSD columns are for reference only_ Verfication of these values not required
Data Action EffectiVe Date Branch Service Type Branch IO_RSSD Popular Name Street Address City State Zip Code Collnty
0 full Service (Head Office) 424240 CITIZENS FIRST NATIONAL BANK EAST STH amp lAKE AVENUE STORM lAKE 50588 BUENA VISTA
0 Full Service 2425371 EARLY BRANCH 100 EAST 2ND STREET EARLY 50S35
obull ull Servoce 3517394 NORTH BRANCH 1831 lAKI AVENUE STORM lAKE S0588 BUENA VISTA
Country
UNITED STATES
UNITED STATES
UNITlO STATES
FDIC UNINUMbull Office Numberbull Head Office Head Office ID_RSSD Comments
2982 0 CITIZENS FIRST NATIONAL BAN 424240
570 2 CITIZENS FIRST NATIONAL BANK 424240
428550 3 CITIZENS FIRST NATIONAL BANK 424240
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
Re art Item 3 Securities Holders
Current Securities Holders with ownership control or holdings of 5 or more with power to vote as of fiscal year ending 1 2-31-2014
Securities Holders not listed in 3(1 )(a) through (3)(1 )(c) that had ownership control or holdings of 5 or more with power to vote during the fiscal year ending 12-31-2014
(1 )(a)
Name amp Address (City State Country)
Harry P Schaller Storm Lake IA USA
George H Schaller Ingram TX USA
(1 )(b)
Country of Citizenship or Incorporation
USA
USA
(1 )(c) Number and Percentage of Each Class of Voting Securities
174912 shares 5035
1 1 8864 3421
(2)(a)
Name amp Address
(City State Country)
(2)(b)
Country of Citizenship or Incorporation
(2)(c) Number and Percentage of Each Class of Voting Securities
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
-
FR Y-6
FNC INC Storm Lake Iowa
Fiscal Year Ending December 31 2014
(1) (2) (J)(a) (J)lb) (J)lc) (4)1a) (4)1b) (4)1c)
List names of other companies (includes partnerships) if 250o or more of voting securities are held (List
Title amp Position Percentage of names of
Principal Title amp Position with Other Percentage of Voting Securities companies and
Occupation if other Title amp Position with Subsidiaries Businesses Voting Securities in Subsidiaries percentage of
Names amp Address than with Bank with Bank Holding (include names of (include names of in Bank Holding (include names voting securities
(City State Country) Holding Company Company subsidiaries) other businesses) Company of subsidiaries) held)
George H Schaller NIA Director amp Director amp NIA 3421oo NIA NIA
Chairman
Ingram TX USA Chairman (Citizens First
National Bank)
Director amp Chairman
(FNT INC)
Harry P Schaller NIA Director amp Director President NIA 50_35 NIA NIA
Storm Lake IA USA President amp amp Secretary
SecretaryfT reasurer (Citizens First
National Bank)
Director
(FNT INC )
Director
(Citizens Credit
Corp)
Douqlas M Heooner Retired Director Director NIA 0_10 NIA NIA
Storm Lake IA USA Banker (Citizens First
National Bank)
Keith Briscoe Retired College Director NIA NIA 001 NIA NIA
Leawood KS USA President
Larry Stoller Attorney Director NIA Progressive 0 00 NIA Progressive
Companies Companies
Spirit Lake IA USA Interlaken Fisheries
Intl
(66_7)
Calypso Investment
Corp
(50)
- FR Y-6 Cover Page
- Report Item 1 Annual Report to Shareholders
- Report Item 2a Organization Chart
- Report Item 2b Domestic Branch Listing
- Report Item 3 Securities Holders
- Report Item 4 Insiders
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