Same commitment. - Seaway Bank and Trust Company

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Seaway Bancshares, Inc. 2008 Annual Report Note 8 — Deposits consolidated B bank Only 2008 2007 2008 2007 Non-Interest-Bearing Deposits Deposits of individuals, partnerships and corporations $ 34,847,289 44,333,762 34,861,667 $ 45,219,224 Deposits of the United States Government 9,946 136 9,946 136 Deposits of state and political subdivisions 73,186 630,710 73,186 630,710 Certified and official checks 1,652,920 1,857,620 1,652,920 1,857,620 Total non-interest-bearing deposits 36,583,341 46,822,228 36,597,719 47,707,690 Interest-Bearing Deposits: Deposits of individuals, partnerships and corporations 164,323,652 154,033,289 164,323,652 154,033,289 Deposits of the United States Government 7,996,227 8,513,676 7,996,227 8,513,676 Deposits of state and political subdivisions 102,868,140 87,075,013 102,868,140 87,075,013 Other Depository Institutions in US 3,509,502 3,704,101 3,509,502 3,704,101 Total Interest-Bearing Subdivisions 278,697,521 253,326,079 278,697,521 253,326,079 Total Deposits $ 315,280,862 300,148,307 315,295,240 $ 301,033,769 Certificates of deposit of $100,000 or more included in the balance of interest-bearing deposits amounted to $132,794,803 and $99,172,123 at December 31, 2008 and 2007 respectively. Certificates of deposits maturing in years ending December 31, at December 31, 2008: 2009 $ 133,145,710 2010 9,628,079 2011 1,750,721 2012 5,337,510 2013 and thereafter 19,601,203 $ 169,463,223 At December 31, 2008, deposits of executive officers, directors, and principal shareholders of the Bank and corporations in which such officers or directors had a beneficial interest total approximately $10,589,752 Note 9 — Income Taxes Effective January 1, 2001, the Corporation and the Bank jointly elected to be treated as an S Corporation for federal income tax purposes. As an S Corporation, the Corporation and the Bank are generally only currently liable for federal corporate level income taxes on certain “built-in gains” existing at December 31, 2000 which are recognized after that date and any applicable state corporate level income taxes (including the Illinois Replacement Tax). As a further consequence of the S Corporation election, the Corporation and the Bank have been required to revalue certain deferred tax assets and liabilities at the lower statutory tax rates applicable to S Corporations. The current and deferred components of income tax expenses are as follows: consolidated B bank Only 2008 2007 2008 2007 Current Federal $ 8,400 — 8,400 $ — State 30,716 14,169 30,716 12,064 Deferred (4,416) (9,169) (4,416) (7,064) Total $ 34,700 5,000 34,700 $ 5,000 The sources of timing differences resulting in deferred income taxes and the tax effects for the years ended December 31, 2008 and 2007, on a consolidated and bank basis are as follows: consolidated B bank Only 2008 2007 2008 2007 Loan loss deduction charged to operating expenses less than (in excess of) that for income tax purposes $ (4,810) (1,583) (4,810) $ (1,583) Depreciation expense for income tax purposes in excess of the amount charged to operating expense 3,539 (1,729) 3,539 376 State Income Tax — — — — Accretion of bond discount, Net (788) 446 (788) 446 Other (2,357) (6,303) (2,357) (6,303) $ (4,416) (9,169) (4,416) $ (7,064) As a result of FAS 115, which relates to the recording of unrealized security gains and losses, the following deferred tax items are not included in the above tables and are charged or credited directly to shareholders’ equity: at December 31, 2008, and 2007, $46,263 and $86,549 of tax liabilities, respectively, were recorded for unrealized security gains relating to securities classified as available for sale. The effective tax rates for both the Corporation and the Bank are less than the statutory Federal Income Tax rates. The reasons for the difference between such rates and the Federal Income Tax statutory rates for 2008 and 2007 are as follows: 20
Note 9, continued December 31, 2008 consolidated B bank Only Amount Percent of Pretax Income Amount Percent of Pretax Income Tax expense at statutory rate $ 980,433 34.0% 1,129,158 34.0% Increase (reduction) in taxes resulting from: S Corporation Election (972,264) -33.7% (1,120,989 -33.8% Tax Exempt Interest (15,276) -0.5% (15,276) -0.5% State Replacement Tax 30,716 1.1% 30,716 0.9% Other 11,091 0.4% 11,091 0.3% Net Reduction (945,733) (32.7) (1,094,458) (33.1) $ 34,700 1.3% $ 34,700 .9% December 31, 2007 consolidated B bank Only Amount Percent of Pretax Income Amount Percent of Pretax Income Tax expense at statutory rate $ 866,487 34.0% $ 1,088,521 34.0% Increase (reduction) in taxes resulting from: S Corporation Election (802,517) (31.5) (1,024,551) (32.0) Tax Exempt Interest (20,001) (0.8) (20,001) (0.8) State Replacement Tax 12,064 0.5 12,064 0.4 Other (51,033) (2.0) (51,033) (1.6) Net Reduction (861,487) (33.8) (1,083,521) (34.0) $ 5,000 0.2% $ 5,000 0% Included in Other Liabilities in 2008 and Other Assets in 2007 of the Consolidated and Bank-Only Statements of Condition are deferred tax assets and liabilities as follows: consolidated B bank Only 2008 2007 2008 2007 Deferred Tax Asset $ 56,636 $ 54,944 $ 56,636 $ 54,944 Deferred Tax Liability (50,973) (93,983) (50,973) (93,983) Net Deferred Tax Assets/(Liabilities) $ 5,663 $ (39,039) $ 5,663 $ (39,039) Note 10 — Long-Term Debt-Subordinated Debentures In 2006, the Corporation formed a wholly-owned unconsolidated finance subsidiary (“Trust”), for the sole purpose of issuing $6 million of Trust Preferred securities. The proceeds of the Trust Preferred securities, along with proceeds of $186,000 from the issuance of common securities by the Trust to the Corporation, were used to purchase $6,186 million of the Corporations fixed rate junior subordinated notes (“Debentures”). The Debentures mature 30 years from the issuance date, but are redeemable (at par) at the Corporation’s option at any time commencing on the fifth anniversary of the issuance (or upon the occurrence of certain other prescribed events). Interest payments on the debentures are payable quarterly. So long as an event of default has not occurred (described further below), the Corporation may defer interest payments for up to 20 consecutive quarters. Events of default include failure to pay interest at maturity, or filing bankruptcy. If the Corporation were to elect to defer interest on the Debentures, the Corporation would generally be restricted from declaring or paying any dividends to common shareholders or repurchasing its common stock. Debentures outstanding totaled $6.186 million at December 31 2007. The scheduled maturity of the Debenture is $6.186 in 2036. Interest and fees included in interest expense totaled $397,760 at December 31, 2008. The Debenture interest rate is fixed for 5 years at 6.43% and then after floating at the 6 month Libor rate plus 159 basis points. Note 11 — Common Stock The following schedule summarizes the information concerning the common stock of the Corporation and the Bank at December 31, 2008 and 2007. consolidated B bank Only 2008 2007 2008 2007 Par Value $ 1 $ 1 $ 10 $ 10 Shares Authorized 400,000 400,000 93,570 93,750 Shares Outstanding 301,513 301,513 85,101 85,101 Weighted average number shares outstanding 301,513 301,513 85,101 85,101 Note 12 — Regulatory Matters The Corporation’s principal source of income is the payment of dividends on the stock of the bank owned by the Corporation. Illinois law restricts the Bank’s ability to pay these dividends. Under the Illinois Banking Act, no dividend may be declared by an Illinois state-chartered bank (i) except out of the bank’s net profits and (ii) unless the bank has transferred to surplus at least one-tenth of its net profits since the date of the declaration of the last preceding dividend, until the amount of its surplus is at least equal to its capital. Net profits under the Illinois Banking Act must be adjusted for losses and bad debts (i.e. debts owing to the bank on which interest is past due and unpaid for a period of six months or more unless such debts are well secured and in the process of collection). Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), no insured depository institution may declare any dividend if, following the payment of such dividend, the institution would be undercapitalized. The Bank is required to have minimum tier one and total risk based capital ratios of 6% and 10% respectively. The Bank’s actual ratios as of December 31, 2008 and December 31, 2007 were 17.21% and 17.73% respectively. The Bank’s leverage ratio at December 31, 2008 and December 31, 2007 was 10.11% and 10.30% respectively. 21
Page 1 and 2: Seaway Bancshares, Inc. 2008 Annual
Page 3 and 4: Letter to Our Shareholders Without
Page 5 and 6: The installation of the new Seaway
Page 7 and 8: Best of all, our new charter promis
Page 9 and 10: Seaway Bancshares, Inc. 2008 Annual
Page 11 and 12: Seaway Bancshares, Inc. and Subsidi
Page 13 and 14: Seaway Bank and Trust Company State
Page 15 and 16: Seaway Bank and Trust Company State
Page 17 and 18: Notes to Financial Statements For t
Page 19 and 20: Note 2, continued December 31, 2007
Page 21: Note 4, continued During 2008, sale
Page 25 and 26: Independent Auditor’s Report To t
Page 27 and 28: Banking Facilities Design: Stephen

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