Same commitment. - Seaway Bank and Trust Company

Seaway Bancshares, Inc. 2008 Annual Report
results of its operations was not material.
EARNINGS PER SHARE
Earnings per share is computed by dividing income by the weighted average
number of shares outstanding during the period.
CASH FLOW REPORTING
The Corporation uses the indirect method to report cash flows from operating
activities. Under this method, net income is adjusted to reconcile to net cash
flow from operating activities. Net reporting cash transactions is used when the
balance sheet items consist predominantly of maturities of three months or less,
or where otherwise permitted. Other items are reported gross. Cash and cash
equivalents consist of cash and due from banks.
Derivatives
The Financial Accounting Standard Board (FASB) Statement No. 133, Accounting
for Derivative Instruments and Hedging Activities, as amended, established
accounting and reporting standards for derivatives. These standards require that all
derivatives be recognized at their fair value as either assets or liabilities on the balance
sheet and specify the accounting for changes in fair value depending upon
the intended use of the derivative (FAS No. 133, as amended, in the year 2001).
The Corporation’s utilization of derivative instruments for trading or non-trading
is minimal, and the provisions of these standards are not applied because the
impact on the Corporation’s financial statements is not material.
Goodwill
The Corporation adopted FAS 142 effective January 1, 2002. The Corporation
periodically evaluates goodwill for impairment by comparing the carrying value
to implied fair value. The fair value is determined using a reasonable estimate of
future cash flows from operations and a risk adjusted discount rate to compute a
net present value of future cash flows. Information pertaining to the accounting
for goodwill is presented in Note 19.
New accounting pronouncement
The Corporation adopted SFAS No. 157, Fair Value Measurements (SFAS 157)
effective January 1, 2008. SFAS 157 defines fair value, establishes a framework
for measuring fair value and expands disclosure of fair value measurements. The
adoption of SFAS 157 did not have a material impact on the consolidated financial
statements or results of operations of the Corporation. In accordance with
Financial Accounting Standards Board Staff Position (FSP) No. 157-2, “Effective
Date of FASB Statement No. 157,” the Corporation will delay application of
SFAS 157 for non-financial assets and non-financial liabilities such as goodwill,
other intangibles, real estate owned, and repossessed assets until January 1, 2009.
SFAS 157 applies to all assets and liabilities that are measured and reported on a
fair value basis.
Note 2 — Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate such
value:
Cash and short-term investments
For those short-term instruments, the carrying amount is a reasonable estimate of
fair value.
Investment securities
Fair value equals the quoted market price, if available. If a quoted market price is
not available, fair value is estimated using quoted market prices for similar investment
securities.
Loans
The fair value is estimated by discounting future cash flows using the appropriate
rate from the treasury yield curve, adjusted for credit risk and allocated expense.
Deposit liabilities and short-term borrowings
The fair value of demand deposits, savings accounts, NOW and money market
deposits is the amount payable on demand at the reporting date. The fair value of
fixed maturity certificates of deposit is estimated by discounting future cash flows
using the appropriate rate from the treasury yield curve adjusted for allocated
expense. For short-term borrowings the carrying amount is a reasonable estimate
of fair value.
Long-term debt and securities sold not owned
The fair value of long-term debt and securities sold not owned are estimated by
discounting future cash flows using an appropriate rate from the treasury yield
curve adjusted for allocated expenses.
Core Deposit Intangibles
The fair value of core deposit intangibles is the present value of the projected
cash flow of core deposits discounted at the appropriate rate from the treasury
yield curve adjusted for allocated expenses and service charge income.
December 31, 2008: consolidated B bank Only
estimated Fair Value Approximate Carrying Value estimated Fair Value Approximate Carrying Value
Financial Assets:
Cash and Short-term Investments $ 14,799,000 $ 14,799,000 $ 14,799,000 $ 14,799,000
Investment Securities 137,546,000 137,546,000 137,546,000 137,546,000
Loans 197,755,000 196,823,000 197,755,000 196,823,000
Unallocated Reserves for loan losses — (2,161,000) — (2,161,000)
Loans, Net 197,755,000 194,662,000 197,755,000 194,662,000
Total Financial Assets $ 350,100,000 $ 347,007,000 $ 350,100,000 $ 347,007,000
Financial Liabilities
Deposits 321,764,000 315,281,000 321,778,000 315,295,000
Short-Term Borrowings 1,079,000 1,079,000 1,079,000 1,079,000
Long-Term Debt 12,282,000 12,186,000 9,096,000 6,000,000
Total Financial Liabilities 335,125,000 328,546,000 331,953,000 322,374,000
Core Deposit Intangibles — — — —
Fixed Assets and Net Other Assets and Liabilities 11,679,000 11,679,000 11,609,000 11,609,000
Net Total Asset Value $ 26,654,000 $ 30,140,000 $ 29,756,000 $ 36,242,000
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