Same commitment. - Seaway Bank and Trust Company

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.
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