Dear Shareholder:
The 2006 Annual Consolidated Report of The First National Bank of Wellston is presented for your review.
Total assets and liabilities increased 1.60% in 2006. Total deposits increased by 1.60%, with the majority of combined growth, 8.40%, coming from certificates of deposits and individual deposits. The certificates of deposits grew primarily from a shirt from lower cost savings deposits. This shift was anticipated by our board of directors and management. However, it had the effect of increasing cost of funds for the bank.
Net loans grew by .50%. The bank’s investment portfolio grew by 17.70%. The minimal loan growth was the result of the board of director’s and management’s resolve to maintain high loan underwriting standards during the current economic slow-down in our market area. Loan run-off and new deposits were put into the investment portfolio.
Our bank’s yield on investments is higher than our peer group, but the yield is lower than what could be realized on loans. This lower yield plus the higher cost of deposits and a large loss on a single commercial loan resulted in a decrease in net earnings of 22.50%. Your bank was still able to increase total capital in 2006 by 3.50% and pay a dividend of $2.00 per share. Management and your board of directors anticipate earnings for 2007 to return to a level comparable to 2003 or 2004.
We will be completing a face-lift to our Jackson office in 2007, which includes a new roof, a heating and cooling system, a new drive-up ATM, and exterior/interior painting.
Our bank will be taking advantage of new technology by going “real-time” with all of our customers’ ATM and point-of-sale transactions. We are now exchanging data electronically with our Federal Reserve Bank, and in 2007 we will be transmitting transactions electronically from our branch to the main office data processing center. We are continuing to utilize the most advanced fraud detection software to protect our customers’ financial information and account access.
In 2007 we will continue to enhance our shareholders’ value by working toward expanding our market presence through additional branching or possible acquisitions.
Sincerely,
/s/ ERIC EMMERT
Eric Emmert, President
STATEMENT OF FINANCIAL POSITION
as at December 31, 2006
(In $,000’s)
ASSETS | 2005 | 2006 | Change |
Cash & Due from Banks | 3,208 | 3,082 | (126) |
Fed. Funds Sold | 1,529 | 365 | (1,164) |
TOTAL: Cash & Cash Equivalents | 4,737 | 3,447 | (1,290) |
Mortgage Backed Securities | 1,900 | 2,129 | 229 |
Mtg. Backed Securities - Mkt. Value Adjustment | (6) | (2) | 4 |
U.S. Agency Securities | 4,921 | 5,779 | 858 |
U.S. Agency Securities - Mkt. Value Adjustment | (83) | (40) | 43 |
Municipal Securities | 9,232 | 11,101 | 1,869 |
Municipal Securities - Mkt. Value Adjustment | 79 | 54 | (25) |
Corporate Securities | 416 | 399 | (17) |
Corporate Securities - Mkt. Value Adjustment | (11) | (3) | 8 |
Federal Reserve Bank Stock | 30 | 30 | 0 |
Federal Home Loan Bank Stock | 435 | 461 | 26 |
TOTAL: Investments | 16,913 | 19,908 | 2,995 |
Credit Card Receivables | 402 | 416 | 14 |
Loans - net of Unearned Income | 59,928 | 60,290 | 362 |
Less: Valuation Reserve | (399) | (491) | (92) |
TOTAL: Net Loans | 59,931 | 60,215 | 284 |
Interest Receivable | 400 | 452 | 52 |
Fixed Assets - Wellston Office | 2,244 | 2,156 | (88) |
Fixed Assets - Jackson Office | 476 | 471 | (5) |
Prepaid Expenses | 204 | 233 | 29 |
Other Assets | 601 | 11 | (590) |
TOTAL: Assets | $85,506 ====== | $86,893 ====== | $1,387 ====== |
LIABILITIES | |||
Demand Deposits, NOW Accounts & Savings Acc | 42,068 | 41,496 | (572) |
Certificates of Deposit | 32,122 | 33,885 | 1,763 |
TOTAL: Deposits | 74,190 | 75,381 | 1,191 |
Accrued Interest Payable | 64 | 80 | 16 |
Other Accrued Expenses | 108 | 113 | 5 |
Accrued Federal Income Tax | 44 | -42 | (86) |
Other Accrued Taxes | 20 | 20 | 0 |
Deferred Federal Income Tax | 6 | 56 | 50 |
Deferred Federal Income Tax-Securities MV Adjus | -7 | 3 | 10 |
Fed. Funds Purchased | 0 | 0 | 0 |
Other Liabilities | 17 | 26 | 9 |
TOTAL: Liabilities | 252 | 256 | 1,195 |
STOCKHOLDERS’ EQUITY | |||
Capital | 500 | 500 | 0 |
Surplus | 500 | 500 | 0 |
Net Adjustment-Securities MV | -13 | 7 | 20 |
Undivided Profits | 10,077 | 10,249 | 172 |
TOTAL: Stockholders’ Equity | 11,064 | 11,256 | 192 |
TOTAL: Liabilities & Stockholders’ Equity | $85,506 ====== | $86,893 ====== | $1,387 ====== |
STATEMENT OF CHANGES IN EQUITY
For Year Ended December 31, 2006
2005 | 2006 | |
Beginning Balance | 10,939 | 11,256 |
Adjustments | ________ | ________ |
Balance as Adjusted | 10,939 | 11,256 |
Dividends Paid | (400) | (400) |
Change in Securities Mkt. Value - Net Adjustment | (213) | 7 |
Net Income before Extraordinary Item | 738 | 572 |
_______ | ________ | |
Ending Balance | $11,064 ====== | $11,435 ======= |
STATEMENT OF OPERATIONS
Year Ended December 31, 2006
(In $,000’s)
REVENUES | 2005 | 2006 | Change |
Interest & Fees on Loans | $4,403 | $4,785 | $382 |
Interest - Fed. Funds Sold | 40 | 77 | 37 |
Interest - Mtg. Backed Securities | 102 | 81 | (21) |
Interest - U.S. Agency Securities | 173 | 241 | 68 |
Interest - Municipal Securities | 427 | 375 | (52) |
Interest - Corporate Securities | 15 | 13 | (2) |
Interest - Time C.D.’s | 0 | 0 | 0 |
Interest - Federal Home Loan Bank | 2 | 5 | 3 |
Interest - Credit Cards | 36 | 37 | 1 |
Dividends - Federal Reserve Bank Stock | 2 | 2 | 0 |
Dividends - Federal Home Loan Bank | 21 | 26 | 5 |
TOTAL: Interest Income | 5,221 | 5,642 | 421 |
Other Fees & Commissions | 493 | 482 | (11) |
Net Gain (Loss) on Sale of Investment Securities | 0 | 0 | 0 |
Other Gains (Losses) | 11 | 0 | (11) |
Other Income | 34 | 67 | 33 |
TOTAL: Non-Interest Income | 538 | 549 | 11 |
TOTAL Revenues | $5,759 ====== | $6,191 ====== | $432 ====== |
EXPENSES | |||
Interest Expense - Time C.D.’s of $100,000 or mo | $352 | $402 | $50 |
Interest Paid - Other Deposits | 1,370 | 1,713 | 343 |
Provision for Loan Losses | 173 | 180 | 7 |
Salaries & Employee Benefits | 1,385 | 1,448 | 63 |
Occupancy Expense | 71 | 72 | 1 |
Furniture & Equipment Expense | 106 | 107 | 1 |
Other Operating Expenses | 1,162 | 1,373 | 211 |
Depreciation | 183 | 175 | (8) |
TOTAL: Expenses | 4,802 | 5,470 | 668 |
Income Before Taxes & Extraordinary Items | 957 | 721 | (236) |
Provision for Taxes | 219 | 149 | (70) |
Income Before Extraordinary Items | 738 | 572 | (166) |
Net Operating Income | $738 ====== | $572 ====== | ($166) ====== |
COMMON STOCK | |||
No. of Shares Authorized - 200,000; No. of Shares Issued - 200,000; Par Value $0.50 | |||
EARNINGS PER SHARE | 2005 | 2006 | |
Before Securities Gains or Losses, Extraordinary Items & Applicable Income Tax | $4.79 | $3.61 | |
After Securities Gains or Losses, Extraordinary Items & Applicable Income Tax | $3.69 | $2.86 | |
STATEMENT OF CASH FLOWS
For Year Ended December 31, 2006
(In $,000’s)
Cash Flows from Operating Activities: | ||
Net Income Before Extraordinary Items: | $572 | |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization/Accretion, Net | 62 | |
Depreciation expense | 175 | |
Provision for credit losses | 180 | |
Loss (Gain) on sale of investment securities | 0 | |
(Increase) decrease in interest receivable | (52) | |
Increase (decrease) in interest payable | 16 | |
(Increase) decrease in prepaid expenses | (29) | |
Increase (decrease) in expenses payable | 5 | |
Increase (decrease) in other liabilities | 9 | |
Increase (decrease) in taxes payable | (86) | |
(Increase) decrease in other assets | 590 | |
Increase (decrease) in deferred taxes | 50 | 920 |
Net Cash Provided by Operating Activities: | $1,492 | |
Cash Flows from Investing Activities: | ||
Payments on Investment Securities | 825 | |
Proceeds from maturity of investment securities | 2,330 | |
Purchase of investment securities | (7,720) | |
Purchase of premises and equipment | (82) | |
Net (increase) decrease in credit card receivables | (14) | |
Net (increase) decrease in loans to customers | (450) | |
Net Cash Used in Investing Activities | (5,111) | |
Cash Flows from Financing Activities: | ||
Increase (decrease) in deposits | 1,191 | |
Payment of cash dividend | (400) | |
Proceeds from federal funds purchased | 0 | |
Net Cash Provided by Financing Activities | 791 | |
Net Increase (decrease) in Cash | ($2,828) ====== | |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid during the year for: | ||
Interest | $1,712 | |
Income taxes | $235 |
