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IEEGIEIV
FEB 0e 201?
FRY6OMB Numb3r 7'100{297App(ovsl expires SeBember 30, 2018Page 'l of 2
Board of Govemors of the Federal Reserve System
Annua Report of Ho d ng Compan ss-f R Y-6
Report at the close of business as of ttre end of fiscal year
This Report is required by law: Seciion s(cXlXA) of the BankHolding Company Act(12 U.S.C. S 18aa(cX1XA)), sections 8(a)and 13(a) of the lnternational Banking Act (12 U.S.C. SS 3106(a)and 3108(a)); sections 11(a)(1), 25, and 25A of the FederalReserve Act (12 U.S.C. SS 248(a)(1), 602, and 611a), and sec-tions 113, 165, 312, 618, and 809 of the DodGFrankAct (12 U.S.C.SS 5361, 5365, 5412, 1850a(c)(1), and 5468(b)(1)) Retum to theappropriate Federal Reserve Bank the original and the number ofcopies specified.
This report form is to be filed by all top-tier bank holding compa-nies, top-tier savings and loan holding companies, and U.S. inter-mediate holding companies organized under U.S. law, and byany foreign banking organization that does not meet the require-ments of and is not teated as a qualiffing foreign banking orga-nization under Seclion 211 .23 of Regulation K (12 C.F.R. S2'11.23). (See page one of the general instructions for more detailof who must file.) The Federal Reserve may not conduct or spon-sor, and an organization (or a person) is not required to respondto, an information collection unless it displays a cunenty validOMB contol number.
NOTE: The Annual Report of Holding Companies must be signed byone director of the top-tier holding company. This individual shouldalso be a senior oftcial of the top-tier holding company. ln the eventthat the top-tier holding company does not have an individual who isa senior offcial and is also a director, the chairman of the board mustsign the report. lf the holding company is an ESOP/ESOT formed asa corporation or is an LLC, see the General lnstructions for lheauthorized individual who must sign the report.
l, Hyman D. SauerNanE of the Holding Comparry Director and Official
PresidentTitle of tlle Holding Comparry Director aM Ofiicial
attest that the Annual Repoil of Holding Companies (includingthe supporting attachments) for this report date has been pre-pared in conformance with the instructions issued by the FederalReserve System and are tue and conect to the best of myknowledge and belief.
Wth respd to intormation regarding indMduals contained in thisrepoil, the Repr'rer ceftifies lhal ft has the authority to proide thisinformation to the Federal Reserye. The Repofter also certifresthat it has the authoity, on behalf of each indMdual, to consent orobject to public release of intormation regarding that indiidual.The Fedenl Reserye may assume, in the absence of a request forconfidential treatmert sufunitted in accordance with the bard's"Rules Regading A of lntormation," 12 C.F.R. Part 261,that the Repr',.er and consent to public release of all
inthe repil that individual.
of HoldirE Dlrector and Ofiicial
0t2017of Signature
Date of Report (top-tier holding company's fiscal year-end):
December 31 2016Month / Day /Year
N/AReporters Legal Entity ldentfier (LEl) (2Goharac{er LEI tue)Reporter's Name, Steet, and MailingAddress
First Eldorado Bancshares. lnc.L€galTrtle of Hobang Comparry
100 South Main P.O. Box 737(Mailing Address of the Holding Comp6ny) Street / PO Etox
Eldorado TX 76936-0737City State Zip Code
Pfrysical Loc8tion (if difierent from mailing address)
Person to whom questions abod this report should be directed:Angela Redish CashierNarrE Trtle
32+853-2561|ext. 114Area Code / PlEne Number / ExterEion
325-853-3458Area Code / FAx Number
aredish@frrbeldorado.comE-mailAddress
www.fttbeldorado.comAddress (URL) for the Holding Comparys web page
For Federal Reserve Bank Use Only
RSSD rD ZL3ti1 Uc.t
Ofiice of Manag€ment and BudgEt Paperwork Reductron Prcject (/100{297), Wbshington, OC 20503 12tzo16
For holding cwnpanies not registered with the SEC-lndicate status of Annual Report to Sharcholdens:
E is irrcluded with the FR Y€ report
E witt Ue sent under separate c-over
E is not prepared
(E]lo
1=Yes 0ls confklential treatment requestred for any portionof thas report submission?..ln accordance with the General lnstructions br this report(cieckonly one),
1. a lethr justifying thie request is being proviled alongwith the report ..........
2. a letter justifying this request has been providedseparately.. , ..
NOTE: lnformation forwhich confrdential treatnent is beingrequested must be provided separately and labeledas 'confilent'n1."
tr
FRY4Page2 ol 2
For Use By T ered Ho ding Compan esTofiieredholdingampaniesmusllistthenames,mailingaddress, andphpbal locafionsofeachoftheirsubsidiaryholdingcunpniesbelow.
First Eldorado Delararare Bancshares, lnc.LegElTrtle of Sub6idiary Holdirg Company
15 E North Street P.O. Box 899
Legal Trtle of Subsidiary HoldirE Company
(Mailing Address of the Subsidiary HoldirE Comparry) Street / PO Box
Dove DE 19903
(Mailing Address of the Subsidiary HoldirE Comparry) Street / PO Ebx
City State Zip Code State Zip CodeCity
Plrysical Location (if difierent from nEiling address) Ptvsical Locataon (if difierent trom mailing address)
LegElTrtle of Subsidiary HoldirE Comparry Legal Title of Sub6idiary HoldirE Comparry
(Mailing Address of the Subsidiary HoldirE Comparry) Street / PO. Elox (Mailang Addess of the Subcidiary HoldirE Comparry) Street / PO. Ebx
City State Zip Code City State Zip Code
Ptrysical Location (if different from rnailing address) Plrysical Location (if difierent from mailing address)
LegEl Tnle of Subsidiary HoldirE Company Legal Trtle of Subsidiary HoldirE Comparry
(Mailing Addres6 of the Sub6idiary HoldirE Comparry) Street / PO Ebx (Mailing Address of the Subsidiary HoldirE Comparry) Street / PO Ebx
City State City StateZipCldP- Zip Code
Plrysical Location (if differert from rnailing address) Pfrysical Location (if ditrerert from rnailing address)
Legal Title of Subsidiary HoldirE Company LegBl Title of Subsidiary HoldirE Company
(Mailing Address of the Subsidiary HoldirE ComFErry) Street / PO, Ebx (Mailing Address of the Subsidiary HoldirE Comparry) Street / PO Box
Ptrysioal Location (lf differert from rtailing adclresB)
Zip Code
Ptrysical Location (if difierent fIom rnailing acldress)
Zip Code
12tzJ12
City StaE Statecity
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Form FR Y-6
First Eldorado Bancshares, Inc.Eldorado, Texas
Fiscal Year Ending December 31, 2016
Report Item
t: The bank holding company prepares an annual report for its shareholders.Copy enclosed.
2: Organwation Chart
FIRST ELDORADO BANCSHARES, INC.ELDORADO, TEXASIncorporated in Texas
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Owns 1007" of:
FIRST ELDORADO DELAWARE BAI\CSHARES, INC.DOVER, DELAWARE
Incorporated in Delaware
Owns l00o/o ofz
THE FIRST NATIONAL BANK OF ELDORADOELDORADO, TEXASIncorporated in Texas
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CONSOLIDATED FINANCIAL STATEMENTSAND INDEPENDENT AUDITOR'S REPORT
FIRST ELDORADO BANCSHARES, INC.AIYD SI.]BSIDIARIBS
December 31, 2016 and 2015
.t
FIRST ELDOBAITO BANESEARES, XNg. ilJlID SIIBSII'IAnIES
DEoemtrer 3l- 2016,aurl 2015
Ti BI,EOE CONIENTS
trndem. pntAurlitu's Rcport
eeaso-li&@ B.alaoe- Shoe,n
Conmlidoqi statemen6 of Ineo,m6
Corsolidlped Etaeutrns of eonrreihnsjlrc, hcolie
Consolidaed Bt*enent$ ofr Ghangos itr Stoclho. l0etrf ' E$ity
Coogolidfleal StatEf,ft€nrc otr Caeh,Flom
Notes,to Gbn6ofidgEd,Hilrosi=sl Staroeus,
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INDEPENDENT AUDITOR'S REPORT
Board of DirectorsFimt Eldorado Bancshares, IncEldorado, Texas
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of First Eldorado Bancshares. lnc. and
Subsidiaries which are comprised of the consolidated balance sheets as of December 3I,2016 and 2015, and therelated consolidated stal€ments of income, comprehensive in@me, changes in stockholders' equity and cashflows for the years then ended, and the related notes to the consolidated financial statements.
Mar agement' s Resp on s i bility for th e Consolid ated Fin ancial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordancewith accounting principles generally accepted in the United States of America; this includes the design,implementation and maintenance of internal control relevant to the preparation and fair presentation of financialstatements that ae free from material misstatement. whether due to fraud or error.
Auditor's Respon sibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted ouraudits in accordance u,ith auditing standards generally accepted in the United States of America. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judment, including the assessment of therisks of material misstatement of the furancial statements, whether due to fraud or error. In maliing those riskassessments the auditor considers intemal control relevant to the entity's preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in the sirsrrmstances. but not for thepurpose of eryressing an opinion on the effectiveness of the entitv's intemal control. Accordingly, we express nosuch opinion. An audit also includcs evaluating the appropriatreness of accounting policies uscd and thereasonableness of significant accounting estimates made b1. management, as lr,ell as evaluating the overallpresentation of the financial statements.
We believe that the audit evidence rve have obtained is suffrcient and appropriate to pror.ide a basis for our auditopinion.
Opinion
ln our opinion, the consolidated hnancial statements referred to above present fairly, in all material respects, thefinancial position of First Eldorado Bancshares, Inc. and Subsidiaries as of December 3l, 20l6 and 2015 and theresults of their operations and their cash florvs for the 1,ears then ended, in confomriS' u,ith accounting principlesgeneralll, accepted in the United States of America.
Certified Public Accountonts
2909 Sherwood Woy, Suite 204, Son Angelo, TX 76901
325.949.2567 | www. H ombyHengeli.comil
t
Repofl on Consolidating Information
Our audits were conducted for the purpose of forming an opinion on the consolidated frnancial statements as awhole. The consolidating schedules on pages 27 through 30 are presented for purposes of additional malysis ofthe consolidated financial statements rather than to pesent the financial position and results of operations of theindividual companies, and are not a required part of the consolidated frnancial staGments. The supplementalconsolidating schedules are the responsibility of management and was derived from and relate directly to theunderlying accounting and other records used to prepare the consolidated financial stat€ments. The supple,martalconsolidating schedules have been subjected to the auditing procedures applied in the audits of flte consolidatedfinancial statements and certain additional procedures, including comparing and reconciling the informationdirc,ctly to the underlying accounting records used to prcpare the consolidated finsrcial statements and to theconsolidated financial statements themselves, and other additional procedures in accordance with auditingstandards generally accepted in the United States of America. In our opinion, the suppleme,ntal consolidatingschedules are fairly stated in all material respects in relation to the consolidated frnancial statements as a whole.
N.*J*g +San Angelo, To<asJanuary 25,2017
LLC
FIRST ELDORADO BANCSHARES, INC. AND SI]BSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31
20t6 20r5
ASSETS
Cash and due from banks
Federal ftnds soldCash and cash equivalents
Secwities available for sale
Nonmarketable equit_v s ecuritiesLoans, netPremises and equipment, netBank owned life instnanceAccrued interest receivableOther assets
$
LIABILITIES AND STOCKHOLDERS' EQUITY
LiabilitiesDepcits
Noninterest-bearingInterest-bearing
Total deposits
Advances from Federal Home Loan BankAc crued interest payable
Other liabilities
Total liabilities
Commitments (Notes H and J)
Stockholders' equity
Common stock - 1,000,000 shares $l par value stock authorized:
127,338 shares issued and outstanding in 2016 and 2015
SurpluRetained eamings
Accumulated other comprehensive income (loss)
Total stockholders' equrt)'
The accompanling notes are an integral part of these conso[dated statements
3
$ 5,627,3565,000,000
s 10,170,839
6,000,0001o,627,356
26,156,26879,939
23,213,203745290
2278,89s48243385,190
16,170,839
26,733,35779.939
20-723.891803,650
2207,123461,02099,835
74 $ 67,279,654
$ 17,295,96838,529,972
$ 18,660,619
40,816,72855,825,940
192,407, 5?5
130.554
59,477,347
207,174
2,130
66,538
56,151,436 59,753,189
r27,338
1,767,451
5,809,814
(t87,465)
127,338
1,767,457
5,395,622
236,0547,517,138 7,526,465
$ 63,668.574 $ 67,279,654
\
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF TNCOME
Years ended December 31
2016 2015
Interest inconp
Loans, including fees
Debt secuities
Odrer interest and dividends
Total interest inconp
Interest expense
DepcitsBorrowed firnds and other
Total interest expense
Provision for loan lmses
Net interest income after provision for loan lmses
Noninterest inconre
Service charges on depcit accotnts
Net ganr qr sale of securitiesl
Net los cm sale of asseb
Ottrer inconp
Total noninterest income
Noninterest expense
Salaries and enployee benefis
Occupancy and equipnrent
Data processing
Regrrlatory fees and assessmenb
Odrer general and afrninistativeTotal noninterest expense
NET INCOME
$ 1,761,579
5W,y)5
25,441
$ 1,62,340494,717
29 473
69,3U
7,sil
2287,915 2,186,530
53,890
6,791
60,681 76,%8
2?27W 21G,582
nrA73
29,257
(438)
Lm,ffiz
230p76
63,852
(737)
76,229
350,894 369A20
1,032,425
?36,614
159,100
67,y7395,638
1,036,&5
z992s2
150,050
72,9f35
470,547
7,941,124 2,49,479
$ 637,034 $ 49,523
I Net gan on sale of securifies includes $29,257 and $63,852 accwrn:lated other conprehensive inconp
reclassifications for tnrealized net pins on available for sale sectrities for 2016 asnd 2015, respectively
The accompanf ing notes are an integral part of these consolidated statements.
4
FIRST ELDORADO BANCSEARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSTVE INCOME
Years erded December 31,
20t6 2015
$ 637,034 $ 44,95?3Net ircmre
Other cungehensive loss
Goss tmealired losses on availabb fs sab seouritbs
Reclassificatirn adjustment for gams realindin net irrcme
Total cther corryrehensive kss
TOTAL COMPREHENSIVE INCOIvIE
The accompanyrng notes are an integral part of these consolidated stat€ments.
5
(3e4262)(n257)
(4:778)(63,852)
(423,519) (108,630)
$ 213115 $ 3q,893
FIRST ELTX)RAIX) BAI\ICSIIARES, INC. AI\D SI.JBSIDHRIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQTIITY
Yeers Ended December 31, 2016 and 2015
RetairedEamius
Accurflrlat€dOtber
Corryr,ebensive
lncme Total
Cmn Treasury
Stock S'tek Surphls
$115903 $ - $ 2,106,819Balance al D€ceder 31, a)l4Net incorrOtter cqrehensirn hss
Treasury stock FlchaseTreasury stock retiementCash diviten& pail
Balaace al December 31, a)15
Net incorOther caryrelrcrive hss
Cash divllen& palt
Balance at Decernber 31,2016
$ 5,857133 $
44.9,523
34,/,,6U S
(108.630)
8355,r39@,523
(r0E630)
(t,t@p74)(r8J6t
(l,r(D,074)
t,ro9$74 (339J68) (751,141)
(160.493)
l?338 1,767A51 5395,6D637,034
(nzuz)$1n338 $ - $ rJ57,451 $ 5,8(D,814
060.493)
236p54 754455- 637fi4
(4,.3,519) (423,519)
$ (187,465) $ 7rrZB8
The accmrpanying notes arc an integral part ofltese consolidatd staternents.
5
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December3l
20r6 2015
s 637,034 $ 449,5?3
Cas h fl ows from o perating activities
Net income
Adjustnrents to reconcile net incorre to cash provided by operating activities
Net anprtization of premiumon inveslnrent securities
Gain on sale of investment securities
Depreciation and anprtization eryense
Inss on disposition of premises and equipnrent
Increase in cash s unender value ofbank owned life insurance
Net change in:
Accrued interest receivable and other assets
Accrued interest payable and other liabilities
Cash provided by operating activities
Cash flows from investing activities
Proceeds from maturitie s, calls and paydowns of securities available for sale
Proceeds fromsales of securilies available forsalePurchases of securities available for sale
lnans onginated, net of principal collections
Purchase of bank owned life insurance
Additions to premises and equipment
Cash used for investing activities
Cash flows fromfinancing activities
Net change in deposits
Principal payrnents on Federal Home [.oan Bank bonowings
Purchase of treasury stockCash dividends paid on conrnon stock
Cash used for fmancing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning ofyear
Cash and cash equivalenls,end ofyear
S u pplenrental disclo sure o f ca s h flou' in formation
Cash paid during the period for:
Interesl on deposits and bonoued funds
The accompanyrng notes are an integral part of these consolidated statements.
7
391.385
(2e2s7)
125267
438
(7r,772)
(6,768)
64A21
287,Ut(63,852)
129,308
tit(,14,130)
(40,es7)
35,'741
l,l 10,748 't53,391
3,9?5,000 5,960,000
3249M5 4366,038
(?432,603) (15235,U2)
(2A8e312) 3;778_12e
- (s00.000)
(68,34s) (1r4D4\(2;t6s21s) (1,74s,%9)
(35sr,407)
(14,161)
(222,U2)
(6.340,087)
(17,931)
(1,109,074)
(160,493)
(3.889.0r6) (7.627.58s)
(s,s43,483)
16,170,839
(8,620.163)
24,791,m2
s r0,627,3s6 S 16,170,839
s 60276 S 79,|ffi
FIRST ELDORADO BANCSIIARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31. 2016 and 2015
NOTE A - SUMMARY OF SIGNIFICANT ACCOT]NTING POLICIES
The accounting and reporting policies ofFirst Eldorado Bancshares, Inc. and Subsidiaries conform to accountingprinciples generally accepted in the United States of America and to general practice within the banking industry.The following is a summary of the significant accounting and reporting policies:
Oreanization and Principles of Consolidation
First Eldorado Bancshares, Inc. is a banli holding company which owns 100%o of the common stock of FirstEldorado Delaware Bancshares, Inc. which in turn owns l00oZ of the common stock of The First NationalBank of Eldorado ('the Bank"). The entities are collectively referred to as 'the Company".
The accompanying consolidated frnancial statements include the consolidated totals of the accounts of theCompany. Significant intercompany accounts and transactions have been eliminated in consolidation.
Nature of Ogerations
The Company provides a variety of banking seryices to individuals and businesses through their location inEldorado, Texas. Their primary deposit products are checking, savings and term deposit accounts. Theirprimary lending products are agricultural and commercial business loans, real estate mortgages andinstallment loans. The Bank is subject to competition from other financial institutions and to regulation bycertain federal agencies. The Bank undergoes periodic examinations by these regulatory authorities.
Use of Estimates
To prepare frnancial statements in conformity with accounting principles generally accepted in the UnitedState of America management makes estimates and assumptions based on available information. Theseestimates and assumptions affect the amounts reported in the financial statement and the disclosuresprovided and actual results could differ.
Sienficant Concentrations of Crcdit Risk
Most of the Company's actir.ities are with customers located in Schleicher County. Therefore, theCompanr,'s exposure to credit risk is significantly affected by, changes in the economf in the SchleicherCoung' area. Note B discusses the tlpes of securities that the Companl, inr.ests in. Note D discusses thetypes of lending that the Company engages in. The Company does not have any sigrrificant concentrationsto an), one indusffy or customer.
Cash and Cash Eouivalents
For purposes of the statements of cash floll's, the Companl, has defined cash equivalents as those amountsinoluded in the balance sheet caption "Cash and due from banks" and "Federal funds sold". Cash and cashequivalents include cash, deposits u.ith other financial institutions u"ith maturities feuer than 90 da1,s, andfederal funds sold.
Balances in transaction accounts at other financial institutions and at the Federal Home Loan Banli ural'exceed amounts covered by federal deposit insurance. Management regularll, evaluates the credit riskassociated s'ith other financial institutions and believes that the Companf is not exposed to an1, significantcredit risks on cash and cash equir.alents.
8
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31,2016 and 2015
Investment Securities
Debt securities that management has the positive intent and ability to hold to maturity are classified as'heldto maturiqr" and recorded at amortized cost. Securities not classified as trading, including equity securitieswith readill, detenninable fair values, are classified as "available for sale" and recorded at fair value, withunrealized gains and losses excluded from earnrngs and reported in other comprehensive income.
The amortized cost of debt securities classified as held-to-maturity or available-for-sale is adjusted foramortization of purchase promirrms and accretion of purchase discounts. Premirms and discounts arerecognized in interest income usirrg the ilterest method over the terms of the securities. Gains and losses onthe sale of securities are determined using the specific identification method.
Management evaluates securities for other-than-temporary impairment ("OTfl") on at least a quarterlybasis, and more frequently when economic or market conditions warrant such an evaluation. For securitiesin an unrealized loss position- management considers the extent and duration of the unrealized loss, and thefinancial condition and near-term prospects of the issuer. Management also assesses whether it intends tosell, or it is more likell, than not that it will be required to sell, a security in an unrealized loss positionbefore recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell ismet. the entire difference betwee,n amortized cost and fair value is recognized 25 sn impakment charge toearnings, For debt securities that do not meet the aforementioned criteria, the amount of impairment is splitinto two components as follows: l) OTTI related to credit loss, which is recognized as an impairmentcharge to earnings, and 2) OTTI related to other factors, rvhich is recognized in other comprehensiveincome. The credit loss is defined as the difference belween the present value of the cash flows expected tobe collected and the amodzed cost basis. For equity securities- the entire amount of impairment isr *ognized through earnings.
Nonm arketable Eouitv Securities
The Compan),, oS a member of the Federal Reserve Bank of Dallas and the Federal Home loan Bank ofDallas (FHLB), is required to maintain an investment in the capital stock of each. Also, the Companymaintains an investuent in the capital stock of TIB - The Independent BankersBank. No ready marketexists for these stocks, and they have no quoted market value. For financial reporting purposes, such stockis considered restricted and is carried at cost under the caption "nonmarketable equiS'securities."
Periodically, management el'aluates nonmarketable equiqv securities for otler-than-temporalv impairment.Management revieu,s for impairment based on the ultimate recoverability of the cost basis in the stock.Both cash and stock dividends are reported as income.
Loans
The Companl, grants real estate, comnrercial, agricultural and consumer loans to customers. A substantialportion of the loan porfolio is represented b1'real estate and commercial loans principallf in the SchleicherCoun5, area. The abiliS, of the Companl/s borrou,ers to honor their confacts is dependent upon the realesiate and general economic conditions in this area.
Loans that management has the intent and abilitv to hold for the foreseeable future or until maturitv or pa\/-off generally are reported at their outstanding unpaid principal balances adjusted for chargeoffs and theallowance for loan losses. lnterest income is accrued on the unpaid principal balance.
9
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31,2016 and 2015
Past due loans are any loans for which payments of interest- principal or both have not been received withinthe timeframes designated by the loan agreements. Loans rvith payments in arrears but for which borrowershave resurned niaking scheduled payments are considered past due until arearages are brought current.Loans that experience insignificant payment delays or palment shorfalls generally are not considered pastdue. Management determines the significance of p4pent delays and payment shorfalls on a case-by-casebasis, taking into consideration all of the circumstances surrounding the loan and the borrower, includingthe length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount ofthe shorfall in relation to the principal md interest owed.
The accrual of interest on any loan is disconunued at the time the loan is specifically determined to beimpaired unless the loan is well secured and in process of collection. Additionally, Ioans are placed onnonaccrual at an earter date if collection of principal or interest is considered doubtful. When placing a
loan on nonaccrual status, interest accrued to date is generally reversed and is charged against the currentyear's interest income. Payments received on a loan on nonaccrual status are applied against the principalbalance of the loan. A loan is returned to accrual status when principal and interest are no longer past dueand collectibility is no longer doubful.
Troubled debt restmcturings arc loans for which concessions in terms have been made as a result of theborower experiencing financial difficult-v. Generally, concessions granted to customers include lowerinterest rates and modification of the payment stream to lower or defer pqrments. Interest on toubled debtrestructurings is accrued under the new terms if the loans are performing and full collection of principal andinterest is expected. However. interest accruals are discontinued on troubled debt restructurings that meetthe Company's nonaccrual criteria.
Generally, loans are charged off in whole or in part on a loan-byJoan basis after they' become significantlypast due and based upon management's review of the collectibility of all or a portion of the loan unless theloan is in the process restructuring. Charge off amounts are determined based upon the carrying amount ofloans and the amount estimated to be collectible as determined by anall.ses of expected future cash flowsand the liquidation ofloan collateral.
Allowance for Loan Losses
The allorvance for loan losses is a valuation allowance for probable incurred credit losses, and is establishedthrouglr a provision for loan losses charged to earnings. Loan losses are charged against the allowancewhen management believes the uncollectibiliS' of a loan balance is confirmed. Subsequent recoveries, ifan)/, are credited to the allou,mce. Management estimates the allowance balance required using past loanloss experience. the nature and volume of the portfolio, information about specific borrorver situations and
estimated collateral values, economic conditions and other factors. Allocations of the allou,ance may bemade for specific loans, but the entire allou,ance is available for an1, loan that, in management's judgement,should be charged off.
The allorvance consists of specific and general components. The specific component relates to loans thatare considered impaired, and is comprised of valuation allou'ances calculated on a loan-b1'Joan basis.Lnpaired loans are all specificallf identified loans for u'hich it is probable that the Company will not collectall amounts due according to the contractual terms of the loan agreement. Loans for which the terms havebeen modified resulting in a concession, and for u,hich the borrorver is experiencing financial dilficulties,are considered troubled debt restructuring (TDRs) and are classified as impaired. Factors considered b1,
management in determining u,hether a loan is impaired include palment status, collateral value, t}teborrou'er's financial condition and orerall loan qualitl' as determined by an internal loan grading s]'stem.
l0
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCTAL STATEMENTS (CONTINUED)
December 3l- 2016 and 2015
Included in impaired loans are aII nonaccrual loans and all accruing troubled debt resructurings. Loans thatexperience insignificant pqrment delays or payment shordalls generally are not considered impaired. Forimpaired loans for which repayment is expected solely from the collateral- impairment is measured based
on the fair value of the collateral. For other impated loans, impairment may be measured based on the fairvalue ofthe collateral or on the present value ofexpected future cash florvs discounted at the loan's originaleffective interest rate. When the measure of the impaired loan is less than the recorded investuent in theloan, the impainnent is recorded tlrough a valuation allowance.
Troubled debt restnrcturings are individually evaluated for impairment and included in the separatelyidentified impairment disclosures. TDRs are measured at the present value of estimated future cash flowsusing the loan's effective rate at inception. If a TDR is considered to be a collateral dependent loan, the loanis reported, net, at the fair value of the collateral. For TDRs that subsequently default, the Companydetermines the amount of the allowance on that loan in accordance wrth the accounting policv for theallowance for loan losses on loans individually identified as impaired.
The general component relates to non-imparred loans, and is based on historical loss experience adjusted forthe effects of economic factors that are likely to cause estimated credit losses as of the evaluation date todiffer from the portfolio's historical loss experience. The historical loss experience is determined byporfolio segment and is based on the actual loss history experienced by the Company. This actual loss
experience is supplemented with other economic factors based on the risks present for each portfoliosegment. Economic facton include the following: economic conditions: industr-v conditions; changes inlending policies and procedures; trends in the volume and terms of loans: the experience, ability and depthof lending staff: levels and trends in delinquencies and impaired loans: levels and trends in chargeolf andr@overy activity; levels and trends of loan quality as determined by an internal loan grading system;portrolio concentrations.
On a quarterly basis, management estimates the allowance balance required using the criteria identifiedabove in relation to the relevant risks for each of the Company's major loan segments. Significant overallrisk factors for both the Company's commercial and consumer portfolios include the strength of the realestate and agricultural market in the Company's lending area.
The qualiS, of the Compory,'s loan portfolio is assessed as a function of the levels of past due loans andimpaired loans, and internal credit quality ratings which are updated quarterll, by, management. The ratingson the Companr,'s internal credit scale are broadly grouped into the categories "pass", "special mention"and "substandard." Loans rvith a pass rating are those loans with minimal identified credit risk. Specialmention loans include those with potential credit weaknesses vr,hich desen'e management's attention but foru'hich full collection of contractual principal and interest is not significantly at risk. Substandard loans arethose loans that have welldefined u'ealness that put full collection of contractual principal or interest atrisk, and doubtful loans for u'hich it is probable that the Companl' rvill not collect all contractual principalor interest are also considered impaired. The credit qualiS' rarings are an important part of the Companl,'5orerall credit risk management process and are considered in the determination of the allou'ance for loanIosses.
Determination of the allovyance is inherently subjectir.e as it requires estimates that are susceptible tosigrrificant revision as more information becomes available. In addition, r.arious regulatory agencies, as an
integral part of their examination process, periodicalll, 1s1,leq, the Company's allowance. Such agencies
ma1. require the Compan), to recognize additional losses based on their judgments about informationavailable to them at the time of their examination.
il
FIRST ELDORADO BANCSIIARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTTNUED)
December 31,2016 and 2015
Premises and Equipment
Land is carried at cost. Premises and equipment are camed at cost, less accumulated depreciationcomputed on the straight-line method over the estimated useful lives of the assets. Maintenance andrepairs, which do not extend the useful lives of buildings and equipment, are charged to expense as
incurred.
Bank Owned Life Insurance
The Ban-k has purchased life insurance policies on certain ke1, e*""odu".. Bank owned life insurance isrecorded at the amount that can be realized under the insurance contract at the balance sheet date. which isthe cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
lncome Tares
The Compalry, with the consent of its shareholders, elected to be t&\ed under the provisions of Subchapter S
of the Internal Revenue Code. Under those provisions, the Company neither pays corporate income taxeson its taxable income nor is allowed a net operating loss carryover or carryback as a deduction. lnstead, theshareholders of the Company include their respective shares of the Company's net operating income or loss
in their individual income tar retuns. Accordingly- no income taxes are reflected in the consolidatedfinancial staterrents.
Because the Company's stockholders will be obligated to pay income taxes on the earnings of theCompany, the Company expects to declare cash dividends suffrcient to fund the stockholders' ta< pq/mentsas they come due.
The Companl,is no longer subject to examination by taxing authorities for years before 2013
Loan Commituents and Related Financial lnstruments
Financial instruments include off-balance sheet credit instruments, such as commituents to make loans andcommercial letters of credit, issued to meet customer financing needs. The face arnount for these itemsrepresents the exposure to loss, before considering customer collateral or ability re repa),. Such financialinstruments are recorded when they are funded.
Transfers of Financial Assets
Transfers offinancial assets are accounted for as sales rvhen control over the assets has been relinquished.Control over transferred assets is deemed to be relinquished when the assets have been isolated from theCompany', the transferee obtains the right (free of conditions that constrain it from tahing advantage of thatright) to pledge or exchange the transferred assets, and the Company does not maintain effective controlover the transferred assets through an agreement to repurchase them before their maturi5'.
Loss Contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are
recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can bereasonabll, estimated. Management does not belier,e there nolt are such matters that will have a materialeffect on the financial statements.
t2
FIRST ELDORADO BAI\CSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 3l- 2016 and 2015
Restrictions on Cash
Cash on hand or on deposit with the Federal Reserve Bank was required to meet regulatory reserve and
clearing requirements.
Dividend Restrictions
Banking regulations require maintaimng certain capital levels and may limit the dividends paid by the banlrto the holding company or by the holding company to shareholders.
Fair Value Measurements
Fair values of financial instruments are estimated using the relevant market information and otherassumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and
matters of significant judgement regarding interest rates, credit risk, prepalments and other factors,especially in the absence of broad markets for particular items. Changes in assumptions or in marketconditions could significantly affect these estimates.
Comorehensive lncome
Components of comprehensive income are net income md other comprehensive income. The onlycomponent of other comprehensive income consists of net unrealized holding gains and losses on available-for-sale securities.
Accounting Standards Updates
ASU 2014-09 "Revenue from Conlracts with Customers " ASU 201449 implements a common revenuestandard that clarifies the principles for recogrrizing revenue. It will supersede most curent revenuerecognition requirements when it becomes effective. The core principle of the guidance is that an entiry-
should recognize reyenue to depict the tansfer of promised goods or services to customers in an amountthat reflects the consideration to which the entity expects to be entitled in exchange for those goods orservices. To achieve that core principle, an entity should apply the following steps: (i) identi$ thecontract(s) with a customer, (ii) idenuS the performance obligations in the contract, (iii) determine thetransaction price, (iv) allocate the transaction price to the performance obligations in the contract, (v)recognize revenue when (or as) the enti5, 566r6es the performance obligation. This guidance becomeseffective for annual reporting periods beginning after December 15, 2018. The Company is currentlyevaluating the effect that the guidance rvill have on its consolidated financial statements and discloswes, ifan)'.
ASU 2016-01 "Finutcial Instrumenls - Overoll: Recognition and Measuremenl of Financial Assets ondFinancial Liabilities". ASU 2016-01 amends a number of accounting standards, including: (l) Requiringequiqv investrnents (except those accounted for under the equitl' method of accounting, or those that resultin consolidation of the investee) to be measured at fair value u'ith changes in fair value recognized inincomel (2) Requiring public business entities to use the exrt price notion n'hen measuring the fair value offinancial irstruments for disclosure purposes; (3) Requiring separate presentation of financial assets andfinancial liabilities b1' measurement category and form of frnancial asset (i.e., secwities or loans andreceil'ables); ( ) Simpli$,ing the impairment assessment of equiS' inves ,ents without readill, determinablefair values b1' requiring a qualitative assessment to identiff impairment; (5) ClanS'ing that an entiS' shouldevaluate the need for a valuation allorvance on a deferred tax asset related to available-for-sale securities incombination u'ith the entih"s other deferred toi assets. (6) Eliminatrng the requirement for public businessentities to disclose the melhod(s) and significant assumptions used to estimate the fair value that is required
l3
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 3I,2016 and 2015
to be disclosed for financial instruments measured at amortized cost; and (7) Eliminating the requirement todisclose the fair value of financial instmments measured at amortized cost for entities that are not publicbusiness entities. This guidance becomes effective for annual reporting periods beginning after December15,2018. The Company is currently evaluating the overall effect that the guidance will have on itsconsolidated fi nancial statements and disclosures.
ASU 2016-02 "Leases". ASU 2016-02 will require lessees to recognize the following for all leases (withtlre exception of short-term leases) at the commencement date: (l) A lease liability, which is a lessee'sobligation to make lease payments arising from a lease, measured on a discounted basis: and(2) A rightof-use asset, which is an asset that represents the lessee's right to use, or contol the use of, aspecified asset for the lease tenn. Under the new guidance, lessor accounting is largely unchanged. Thisguidance becomes effective for annual reporting periods beginning after December 15, 2019. TheCompany is currently evaluating the overall effect that the guidance will have on its consolidated financialstatements and disclosures.
ASU 2016-li "Financial Instraments - Credit Losses: Measarement of Credit losses on FinancialInstrumenls ". The amendm€nts under ASU 2016-13 require the measurement of all expected credit losses
for financial assets held at the reporting date based on historical experience, curent conditions. andreasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit ;o.5 s5.imates. Many of the loss est''nation techniquesapplied today will still be permitted, although the inputs to those teclrniques will change to reflect the fullemount of expected credit losses. In addition. the ASU ,mends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. This guidance becomeseffective for annual reporting periods beginning after December 15, 2020 and, interim reporting periodsbeginning after December 15, 2021. The Company is currently evaluafing the effect that the guidance willhave on its consolidated financial statements and disclosures.
Subsequent Events
The C.ompany has evaluated subsequent events for reoognition and disclosure through January 25,2017,which is the date the financial statements were available to be issued.
l4
FIRST ELDORADO BANCSIIARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 3 1. 201 6 and 201 5
NOTE B _ II{YESTMENT SECURITIES
The following presents information related to the Company's porfolio of debt securities:
December 31.2016
Amornzed
Cost
GossUnrealired
Gains
Crross
Unreali.red
Losses
Secr.ritbs available for sab
State and municipal
Securitbs available for sab
U.S. Agency
State ad municipal
Fair Value
s 26343,733 $ 99,120 s (286.s85) $ 26,1s6268
December 31 2015
AmortiredCost
C,ross
Unrea[zed
Gains
C,ross
Unrealized
Losses Fat Vahrc
$ 1,500,000
24,997,303 279.O02
$ (3,351)
(3e.640)
$ (42,eet)
$ rA%.6e225236.66
$ 43
$ 26197,303 $ 2?9,M5 $ 26,733,357
The amortized cost and estimated market value of debt securities at December 31, 2016. b1, contractualmaturity are as follows:
Available for Sab
Amortized
Cost Fair Vahre
Due in one year or less
Due after one year through fn'e years
Due after five years through ten 1,ears
Due after ten years
$ 3197,873
18,857294
3,720220
268)46
$ 3,509"345
18,715,683
3,667,540
263,700
s 26343,733 $26,156268
Expected maturities s,ill differ from contractual maturities because borrou,ers mav have the right to call orprepa)' obligatrons u'ithout call or prepalment penalties.
At Deceruber3l.20l6 and 2015. investment securities lrith canl,ing values of $20,042,262 and 521,076.221,respectivell', uere pledged lo secure public deposits and for other purposes.
During 2016- there were gross realized gains of $29,257 and no gross realized losses on the sale of investmentsecurities. Do.iog 2015, there were gross realized gains of $65,297 and gross realized losses of $I,445 on thesale of investnent securities.
l5
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 3l- 2016 and 2015
Information pertaining to securities with gross unrealized losses, at December 31. 2016 and 2015 aggregatedby invesbnent category and length of time that individual securities have been in a continuous loss position-follows:
December 3l 2016
Less than 12 months Over 12 monthsGross
Unrealized
Losses
Crross
Unrealized
Losses
Securitbs available for sabState and muebipal
Securitbs availabb for sab
U.S. Agency
State and munbfual
Fair Value Fair Value
$ 279,t95 $ 17,786,650 $ 7390 $ 306,333
December 31,2015
Less than 12 months Over 12 months
Gross
Unrealizpd
Losses Fair Vahre
Gross
Unrealired
Losses Fair Value
$ 496,650
7,531487$ $
$ 42991 $ 8,028,137 $ $
Management evaluates securities for other-than-t€mporary impairment on a periodic basis. Consideration isgiven to (l) the length of time and the ertent to which the fair value has been less than cost, (2) the financialcondition and near-term prospects of the issuer, and (3) the intent and abiliS, of flre Company to retain itsinvestment in the issuer for a period of time suffrcient to allow for an;- anticipated reco\€r)/ in fair value.
NOTE C - NONMARKETABLE EQI.IITY SECTIRITIES
Nonmarketable equi5, securities carried at cost are as folloua
December 3l2016 2015
$ 335t39,&0
Federal Home loan Bank of Dallas
Federal Resen'e Banli
TIB - The Independent BanliersBanli
$ 15,750
39,600
24,589
$ 15,750
39,600
24589
l6
$ 7e93e $ 7e93e
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 3L,2016 and 2015
NOTE D - LOANS
Major classifications of loans are as follows:
Real Estate
Agrbullral Produotbn
Commercial
Consumer and Other
Less: Albwance For Loan Losses
Total Loars
Transactions in the allowance for loan losses are as follows:
December 3l20r6 2015
$ 13,036,722
292329E
5,61039228t,89
23,852284
(63eO81)
$ 10952,6M
3,119-076
4908,014
23802s02r35e944
(636,053)
$ 232t3203 $ 20,723,89t
Year Ended December 3l 20t6Agrbuhual
Real Estate Productbn Commercial
Cons'merand Other Total
Balance at December 31, 2015
Provision for han losses
Charge-offs
Recoverbs
Net (charge-offs ) recoverbs
Balance at December 31, 2016
Balance at December 31,2014
Prol'isbn for loan losses
Charge-offs
Recoveries
N et (charge-offs) recoveries
Balance at December 31,20I5
$ 307972 $
1J87
83,790 $
(20,85s)
r66p46 $
24)55
79,t45 $
(5,087)
(6,1 16)
s9r2
636p53
(6,1 l6)9,tM3n2
3232 (204) 3,028
$ 3ll,89l S 62,935 $ 190.401 $ 73,854 $ 639p81
Year Ended December 31, 2015
AgrbulhralReal Estate Productbn Conrmercial
Consumer
and Other Total
$ 267528 $
28,175
$ 280,041 $
( I 13,995)
44J0r $
36,016
(r,8el)319
626356
Lt26e1t269 (t,572) 9,697
$ 307.072 $ 83.790
33986
49,804
(1,891)
I1,588
t7
$ 166,046 $ 79,145 $ 636,053
FTRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 3l-2016 and 2015
Components of the allorvance for loan losses, and the related carrying ,mounts of loans for which the allowance is
determined, are as follows:
Year Ended December 3l 20t6
Agricultural
Real Estate Production Conrnercial
Consumer
and Other Tolal
Allocation of Allowance To:lmpaired loans - evaluated indivi<tuafu
hpaned bans - evaluated collectively
Total impated loans
Unimpated loans - evaluated collective!
Recorded Investment In:Impaired loans - evaluated indivifuatvImpaired loans - evaluated collectively
Total impaired loans
Unimpaired loans - evah:ated collectively
$ $ $ $ $
311,891 62,935 190F01 73-854 639p81
$ 311,891 $ 62,935 $ 190;401 $ 73.854 $ 639,081
$ $ $ $ $
t3,036,722 2,92329 5,610399 228t,89 23.8522U
s t3,036,722 52,923299 $5,610,399 $ 2281,8@ 523,8522U
Year Ended December 31, 2015
AgrrcuhralRealEstate Prodrction Conrnercial
Consumer
and Other Total
Allocation of Allowance o:Impaired loans - evahrated ndividually
Impaired loans - evahrated collecwelyTotal impaired loans
Unimpaired loans - evahrated colbctiveh,
$ $ $ $ $
307 972 83,790 166,M6 79,t45 636,053
s 307972 $ 83,790 $ 166,M6 $ 79,145 S 636p53
Recorded Investment In:Impaired loans - evahrated indir&tua\'Impaired hans - evaluated colbctiveh,
Totalimpaired loans
Unimpaired loans - evalua ed collectiveh,
s $ $ $ $
10,952,604 3,119,076 4,908,014 2,380250 2t,359.944
$ 10,952,601 $ 3,119,076 $4,908,014 S 2,380250 $2t,359,9M
There rvere n6 impaired loans at December 3 I , 20 I 6 and 201 5. The Companv did not have an1' troubled debtrestructurings at December 3 I , 20 I 6 and 201 5.
l8
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 3l- 2016 and 2015
The carrying amounts of loans by performance status are as follows
December 3l 2016
Accruing Loans
Current
30-89 Days
Past Due
90 Days or Nonaccrual
More Past Due Loans Total Loans
Real Estate
A griculnral P roduction
Commercial
Cons 'mer and Other
Total
Real Estate
A gric ultual P roduction
Commercial
Consumer and Other
Total
s t2932,834 $
29232ee5,610199
22483r4
103.888 $ $ s 13,036.722
29232ee5,610399
2281.86433,550
s 23.714,846 $ 132438 $ $ $ 23.8s2284
December 31 2015
Accruing Loans
Cr:rent30-89 Days
Past Due
90 Days or NmaccrualMore Past Due Loans Total l,oans
$ 10,909J01 $3,119,076
4,987,611
2362.170
43.103 $ $ $ 10,952,604
3,119,076
4908,014
23802s020103
18.080
$ - s 21359,9M
The carrl.ing amounts of loans by credit qualiS' indicator are as follows
December 3l 20r6
Special
Mention Substandard Total Loans
Real Estate
Agricuhural Production
Commercial
Consumer and Other
Total Loans
s 13936J22 $2,525,890
5,057,883
228t,864
Pass
$
537,414
397109
15,102
$ 22902359 $ 537,414 $ 412,511 5 23,852284
$ 13,036,722
29232ee5,6r0399
2281,864
l9
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINAI.ICLAL STATEMENTS (CONTINLJED)
December 31,2016 and 2015
December 3l 2015
Special
Mentim Substandard Total LoansPass
Real Btate $ 10952F04 $
AgrbufturalProduction 3,119p76
Commercial 4,868911
Consumer and Other 2380250
$
39,103
$ 10952,604
3,119976
4908,014
2380250
Total loans $ 21320,841 $ $ 3ql03 $ 2r3se944
NOTE E - PREMISES AI\[D EQTIIPMENT
Premises and equipment are as follows:
December 3l20r6 2015
Land
BuiHirgs and improvements
Furniture, fucures and equipment
$ 93-418
1,498,895
$ e3I18t$78,U8
7M,729'759 780
2352,093
(1,606,803)
2318:7e4
(u15,144)Accumulated depreciatbn
$ 745290 $ 803,650
NOTE F'- DEPOSITS
Time deposits that meet or exceed the FDIC lnsurance limit of $250,000 at December 31, 2016 and 2015 was$859,494 and $85 8,827, respectively.
At December 31,2016, the scheduled maturities of time deposits are as follows:
Year Endine December 31.
20t72018
2019
2020
202rThereafter
s 730eACE
1303918
658332
20
$ 9271,659
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCTAL STATEMENTS (CONTINUED)
December 31. 2016 and 2015
NOTE G - BORROWINGS
Advances from the Federal Home Loan Bank
FHLB advances amounting to $192,407 and $207,174 were outstanding at December 31,2016 and 2015,respectively. The interest rates on fixed rate,long-term debt ranged from3.l9Yo to 5.86%. At December 31,2016 and 2015, the weighted average interest rate was 3.38yo and 3.44o/o, respectivell,. The advances werecollateralized by $9,483,005 and $8,954,419 of first mortgage loans under a blanket lien agreement atDecember 31,2016 and 2015- respectively. Based on this collateral and the Company's holdings of FHLBstock, the Company is eligible to borrow up to a total of $9,290,599 at December 3l- 2016.
At December 31. 2016, future scheduled principal pailments on Federal Home Loan Bank borrowings are as
follows:
Year Endine December 31.
2017
20r8
20r9
2020
2021
Thereafter
Unfunded cornmiments to exlend credil
Corunercial ard standbl' letters of credit
$ 12,116
12,588
13.079
13,593
11.691
129340
$ te2to7
Lines of Credit
The Companl' maintains a short terrn line of credit rvith The Independent BankersBanli at a rate to bedetermined by,the lender at the time the funds are borrowed. At December 31,2016, the Companl,waseligible to borrorv $2,000,000. No amounts were outstanding under these lines at December 31, 2016 and 201 5.
NOTE H _ LOAN COMMITMENTS AI\D OTHER R.ELATED ACTIVITY
Some financial instruments, such as loan commituents, credit lines, letters of credit and overdraft protection,are issued to meet customer financing needs. These are agreements to provide credit or to support the credit ofothers, as long as conditions established in the contract are met, and usualll' have expiration dates.
Commituents ma1'expire u'ithout being used. Off-balance sheet risk to credit loss exists up to the fact amount
of these instruments, although material losses are not anticipated. The same credit policies are used to makesuch commitments as are used for loans, including obtaining collateral at exercise of the commitment.
The contractual anrounts of financial instruments $'ith off-balance sheet risk at December 31, 2016 and 2015,!\'ere as follorvs:
20t6 2015
$ 8.013.238
816,831
$ 5.133,499
620507
2l
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31.2016 and 2015
NOTE T - MINIMTJM REGI.]LATORY CAPITAL REQTIIREMENTS
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.Failure to meet minimunr capital requirements can initiate certain mandatory and possibly additionaldiscretionary actions by regulators that, if undertaken, could have a direct effect on the Company's and theBank's financial statements. Under capital adequacy guidelines and the regulatory framework for promptcorrective action, the Bank must meet specific capital guidelines that invoh,e quantitative measures of itsassets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. TheBanli's capital amounts and classification are also subject to qualitative judgments by the regulators aboutcomponents, risk weightings, and other factors.
The frnal rules implementrng Basel Commrttee on Bankrng Superrsron's capital guidelines for U.S. banks(Basel trI rules) becnme effective for the Bank on January l, 2015 with full compliance with all of therequirements being phased in over a multi-year schedule, and fully phased in by January l, 2019. Under theBasel III rules, the Bank must hold a capital conservation buffer above the adequately capitalized, risk-basedcapital ratios. The capital conservation buffer is being phased in from 0.0% for 2015 to 2.5%by 2019. Thecapital conservation buffer for 2016 is0.625%o. The net unrealized gain or loss on available for sale securitiesis not included in computing regulatory capital. Management believes, as of December 31, 2016, that the Bankmeets all capital adequacy requirements to which it is subject.
Prompt corective action regulations provide five classifications: well capitalized, adequately capitalized.undercapitalized, significantly undercapitalized- and critically undercapitalized, although these terms are notused to represent overall furancial condition. If adequately capitalized, regulatory approval is required toaccept brokered deposits. [f undercapitalizd, capital distributions a's limited, as is asset growth andexpansion, and capital restoration plans are required. At 1,ear-end 2016 and 2015, the most recent regulatorynotification categoizrA tlre Bank as well capita\zed under the regulatory framework for prompt correctiveaction. There are no conditions or events since that notificafion that management believes have changed theBank's category.
The Bank's actual and required capital amounts and ratios as of December 31, 2016 and 2015 are presented inthe following table.
22
FIRST ELDORADO BANCSIIARES, INC. AND STJBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTTNUED)
December 31. 2016 and 2015
Acbral
Minimun capiral
requrement
Minimr:rn to be wellcapitalized under
prompt correctiv'e
aclon polrsnnsAmount Ratio Amount Ratio Amount Ratio
(dolhrs in thousands)
As of December 31.2016
Total capital (to risk weighted assets)
Tier I capital (to nsk weighted assets)
Cornmcxr Tier I capital (to risk weighted assets)
Tbr I capital (to average assets)
As of December 31.2015
Total capital (to risk weiglrted assets)
Tier 1 capital (to risk weighted assets)
Canmcn Tbr I capital (to risk weighted assets)
Tbr I capital (to average assets)
$ 8,088
7,688
7,688
7,688
$ 7,670
2702702t0
25.5o/"
24.20h
24.2%
t2.2%
242%22.9/o
22.9/o
t0.6%
$ 2,542
1,906
1,430
2,519
$ 2,539
1,904
u282-744
8.U/o
6.U/o
4.5%
4.U/o
8.tr/o
6.tr/o
4.sYo
4.ff/o
$ 3.177
2,542
2,M5
3,148
10.tr/o
8.U/o
6.s%
5.U/o
10.tr/o
8.ff/o
6.s%
5.U/o
7
7
7
$ 3.173
253e2,M3
3.430
NOTE J _ EMPLOYEE BENEFIT PLANS
Safe Harbor 401(k) Plar
The Company has a 401(k) plan in which substantially all eligible employees participate. Effective January' l,2076, a safe harbor provision was added to the plan. Employees may contribute up to 100% of theircompensation subject to certain limits based on federal tax laws. Under the safe harbor plan, emplol'ercontributions will be 3% of the employee's annual salary that vests immediate5,. 11r" Corupany can also makea discretionary' profit sharing or matching contribution to the plan that vests over 6 years. For the years endedDecember 31.2016 and 2015, the Companl,'s expense related to the plan was $97,947 and $97,686,respectively.
Deferred Compensation Plan
The Company, started a deferred compensation plan during 2015 that co\/ers one officer. Under the plan, theCompany pays the participant, or their beneficiar1,, an annual benefit of $30,000 over l5 years beginning u'iththe indir.idual's terurination of senice, death, disabiliq, or change in control. A liabiliS' is accrued for theobligation under this plan. The expense incurred for the deferred compensation plan for the years endedDecember 3I,2016 and 2015 rvas $5,807 and $1,412, respectively,. This resulted in a deferred compensationliabiliS' of $7,219 and $1,412 as of December 31,2016 and 2015, respectivell'flrat is included in otherliabilities.
Split Dollar Life lnsurance Apreements
The Companl' started a split dollar insurance program for certain employees and directors in 2015. Under thisprogram, the Bank has purchased and orvns the life insurance policies on the participants; the cash surrendervalue of policies has been classified as "Banl owned Iife insurance." The Compan;- has entered into separateagreements with the participants that split the poliq,benefits between the Companl, and the employees. A
23
FIRST ELDORADO BANCSIIARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2016 and 2015
tiability is accrued for the obligation under these agreements. At December 3l- 2016 and 2015- the Companyhad $18,560 and $6.501, respectively accrued for the benefit, which is included in the other liabilities. Inaddition- the agreements stipulate a reimbursement to the employees for imputed income and the associated taxcost incurred during the postretirement period. A liabiliq, is accrued over the smployee's expected serviceperiod for the present value of the reimbursements expected to be paid during the postretirement period. AtDecember 31.2016 and 2015, the Company had $5,965 and $1,939, respectively accrued for thepostretirement reimbursement, which is included in other liabilities.
NOTE K- RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company has granted loans to executive offrcers, principal shareholdersand directors and parties atf-rliated with those persons (collectively, "insiders"). The Company has loans toinsiders aggregating $377.886 and $365,835 at December 3l- 2016 and 2015, respectively. At December 31,2016 and 2015, deposits from insiders totaled $934,922 and $935,818, respectively.
NOTE L - F'AIR VALI.JE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants. excluding transaction costs. When measuring fair value,entities should maximizr the use of observable inputs and minimize the use of unobservable inputs. Thefollowing describes the three levels of inputs that may be used to measure fair value:
Level I Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that thereporting entity has the abiliqv to access at the measuremenl date.
Level 2 Inptts - Significant other observable inputs other than Level I prices such as quoted prices forsimilar assets or liabilities: quoted prices in markets that are not active; or other inputs that areobservable or can be corroborated by observable madiet data.
Level 3 Inputs - Unobservable inputs that reflect an entitl,'s own assumptions about the assumptionsthat market participants would use in pricing the assets or liabilities
TIre Companl'used the follou'ing methods and significant assumptions to estimate fair value:
Securilies Available for Sale - Securities are recorded at fair value on a recurring basis based uponmeasurements obtained from an independent pricing sen.ice. The fair value measurements considerobsen'able data that may include dealer quotes, market spreads, cash flou,s, the U.S. Treasuq'1,ield cuwe,market consensus prepalment speeds, credit infonnation and the bonds' terms and conditions, amongother things (Ler.el 2).
The follou'ing table provides the hierarchl' and fair value for each major category of assets and liabilitiesrecorded at fair value on a recurring basis:
December 3l 2016Level I Level 2 Total
Secwities available for sale
State and municipal S
24
s26.t56268 S
Level 3
s26,rs6268
FIRST ELDORADO BAI{CSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FrNA){CLAL STATEMENTS (CONTINUED)
December 31,2016 and 2015
December 31,2015Level I I-evel 2 Level 3 Total
Securitbs availabb for sab
U.S. AgerrcyState and munLpal
s 1A96,69225,236,665
s $26,733,357 $ $26,7333s7
Dudng 2016 and 2015, there were no level 3 asseb or liabilities measured at fair value on a recurring basis.
There were no assets and liabilities rpcorded at fair value on a non-recruring basis as of December 31, 2016 and2015.
$ $ t496,6e225236,665
$
25
SUPPLEMETAL CONSOLIDATING SCHEDULES
FIRST ELDORADO BANCSHARES, INC. AND SI.]BSIDIARIES
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
December 31, 2016
The Fint
National Bank
ofEHorado
Fint Eldomdo
Delaware
Bancshares,
Inc.
Finl Eldorado
Bancshares,
hc. Eiminations C.onso[dated
ASSETS
Cash and due tom banls
Federal firnds sold
Cash and cash equivalents
Securitbs available for sale
Nonmarketable equity s ecurities
Investmenl in First NationalBark ofEdorado
Investrreot in Fint Edorado Delaware Bancshares.lnc.
loans, net
Prenises and equipment net
Bank oumed life insuramce
Accrued interesl receivable
Other assets
UABIITTIES AND STOCIGOLDRS' EQUITY
Liabilities
Deposits
Noninteres 1-bearing
Intercst-bearing
Totaldeposits
Advances tom Federal Home loan Bank
Accrued interest payable
Other liabililies
Total liabilities
Stockhohen'equily
Comlon stock
Surplus
Retained eamings
Accumuhted other coryrehens ive income
Tolal stocHrohen' equitl'
s ss23,M $
5,000,000
4,W) $ 12588 $ (12,588)ti,ffi:ffi
to,6B2i4
%,1%,%8
D,vi9
23.213203
745,N
\27E,M48L433
85,190
4,W)
7,500,458
12588 (12588)
7,504,550
0,5m,458)(7,504,550)
rc.6n356
26t56268
79,%9
B,?].3,N3
745,N
\27LW54f,.433
85,190
$ $ 7,504,550 S 7.512138 $ 0s,0175!)6) S 63,668,5?4
$ 17,308,556 $
38.5D972
$ $ (lzs88) $ 17,R5,968
- 38,5D972
55,838,528
tn407
zs3s
I30,554
(12,588) 55.8?Jg4o
sLnTL535
I 30,554
56,t64,024
150,m0
375,m0
1,t6ZeB
087.465)
1,000
4,6$,836
3,000,t79
(r87.465)
tn3381,76'1,451
5.809,814
08?,465)
(l 51,000)
(5,065.836)
(r0,163,102)
374,9i0
tn,$8t,76',7,451
5,809,814
(187.465)
(12,588) 56,151,436
7,500,458 7,s04,5s0 7,517,138 (15,m5,008) 7,,7,138
s 63,661482 S 7,504,5s0 $ 7,517,138 $ (15,017,5q') $ 63,668,574
27
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING INCOME STATEMENT
Year ended December 31. 2016
IheFirst
National Bank
ofEldorado
FintEldorado
Dlauare
Bancshares,
hc.
First Eldorado
Bancshares,
Inc.
krterest income
loans, inchrding fees
Debt securities
Other interes t and dividends
Totalinterest income
Interest eryense
Ikposits
Bonorred funds md other
Totalinterest eryense
Provh ion for loan los s es
Net interest income afler provision for loan bs ses
Noninterest incom
Servicc charyes on deposit accounls
Dividends fiom subs idiary
Net gain on sale ofseourities
Net bss on sah ofassets
Otherinoone
Total noninteresl income
Noninterest eryense
Sahries and erybyee benefits
Ocoupancy and quipment
Ihta pmcessing
Regulatory fecs and assessments
0lrer genenl and administrative
Total non interes t eryens e
Income before equity in undhtntuted net income
ofsubsidiaries
fruity in undhtrbuted net inoome of subsidiaries
NLTINCOME
$ I,761,579 S
500p6.00
25,44t.U
$
Flimrnations Consolidated
u6t,s't9500925
25,44r
$
?.x7945 Ln?945
53,S0.m
6,791.00
53,890
CI68r 60,681
?27W \D7W
DI,4T3 nun2240f[ n4w (448,000)
D,257 D,X7
tm.,flz
350,8t
tm,602
n4,w n4,w (448,m0) 350,89r
r,03\4?5
716,6t4
l59Jm
67,W
391.183 534 3921
1936,69 534 392t 1941,124
641,489 22.,4ffi fl),079 (448,0m)
ffi4.444)
637,0y
417,489 416,955
$ 641,489 S 640955 $ 637,034 $ 0,il2444) $ 637,034
6,79t
(438)(438)
r,03\4x7M,614
r5qrm
67,347
395,638
28
FIRST ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
December 31. 2015
The Fint
National Bank
of Edorado
Fint Eldorado
Delawart
Bancsh ares,
Inc.
Fint Bdorado
Bancs hares,
Inc. Fliminations Consolidated
ASSETS
Gsh and due from banls
Federalfunds sold
Cash and cash equivalents
Securities availabh for sale
Nonmarlietab h equ ity s ecurities
Investment in Fint NationalBank of Edorado
Investment in Fint Edorado Delauare Bancshares,Inc.
[oans, nel
Premhes and equipment net
Bank ovmed life insurance
Accrued interest receivable
Other as s ets
UABILNIES AND STOCKHOLDRS' EQUITY
Liabilitbs
Deposits
Non interes t-bearing
Interest-bearing
Total deposits
Advanoes from Federal Home Loan Bank
Accrued interest payable
ftherlrabilities
Total liabilities
StockhoHers' equ ity
Common stock
Surplus
Retaired eamings
Accumulated other comprehensive hcome
Total stockholden' equily
$ 10,166,212 $
6.000,000
4,6n $ r535r $ (r535r) t'l,l#,ffi
t6.166.2r2
26.733,357
'19,%9
4,627 r 5,351 (15351)
7,506,48? (7,s06,487)
(i,5r1.il4)7.51t.1 14
16,170,839
26,',t33,351
79939
20,7?3,81
803,650
an,tB46t,0x
9,835
il.'1Z3,Bt
803,650
\x7,tB461,020
9.835
$ 6'1,2't5,0n $ 7,5ll,ll4 $ '1,5%,465 $ (15,032952) $ 61279,654
$ l&675,970 $ - $ (15,351)$18,660,619
40,8t6,7?3 40,816,728
59,4n6% (15,351) 59,477,341
m1,n4
el3066,538
m7)'t4
4r30
65,538
(1535r) 5e,753,r89
(r5r,000) 127338
(5,065,836) r,767,4s1
(9.323,657) 53%,622
59.768,540
150,frn
175.000
6,i45.433
236,0t4
r,0m
4,690,836
L583,D4
216,054
t27_138
1,161.451
5,395.6n
236.054 (472108) 23i6,054
7.506.487 7,5il,il4 1.526.465 (15,0t7,60r) 7.526.465
s 67.275.027 S 7.5lr,lr4 S 7.526.465 $ 05.032.952) $ 6't.279.654
29
FIRST ELDORADO BANCSHARES, INC A}ID SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING INCOME STATEMENT
Year ended December 31. 2015
The Fust
Nationalhnk
ofEdorado
Fint Edondo
Delawure
Boncshares,
Inc.
Frst Edondo
hncshues,
Inc.
Interesl incom
Ioans, including fees
kbt securities
Other inlerest and dividends
Total interest incorr
Inlelesl eryense
Deposils
Bormwedfirnds and olher
Totalinterest eryense
Provision for loan losses
Net interesl income aflerprovision forloan losses
Noninlerest incom
Service chuges on deposil rccounts
Dividends from subsidiary
Net gain on sale ofsecurilies
Net loss on sale ofassets
Otherinconr
Total nonintercst incorrc
Noninterest eryense
Salaries and eryloyee benefis
0ccupancy and quipmnlDatr pocessing
Regulatory fees and assessments
Olher general an d adminis rative
Total nonintercst eryense
Lrcorr before equity in undistributed net inoorc
ofsubsidiaries
ftuity in undistnluted nel incosE ofsubsidiuies
NEIINCOI,IE
$ l,66zvo $
494,7r7
n,473
Eliminations Consolidated
$ 1,662,340
494,',n1
n,471
$
'1,56A'1,56t
$
2'186,530 2,1E6,530
69,1U 69,3E4
76,94t 76.948
e109,5E2 2,109,5E2
?30,076 R0.0't6
1,290,000 LDo,mo (z5m.om)
63,t52
76,n9
%9,4m 1D0,000 I,D0,m0 (2,580,000) x9,4m
(i37)
63,E52
037)76,D9
1,036,645
D9,252
150,050
72:v$
450,036
I,036,645
299.,252
150,050
n,985
470,547525 19,916
200E.%8 525 19,986
470,034
LDD.479
$ 470,0x
1,2J9,475
(E19,966)
$ 469,509
I,270,014
(820,49r)
(a5m,m0)
1,610,457
449,58
$ 449,523 $ (939.513) S U9.s21
30