2006 ANNUAL REPORT - Far East National Bank

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Recent Accounting Pronouncements— Issued June 2006 FIN 48, Accounting for Uncertainty inIncome Taxes—an interpretation of FASB Statement No. 109. Effective for fiscal years beginning afterDecember 15, 2006. This Interpretation prescribes a recognition threshold and measurement attribute forthe financial statement recognition and measurement of a tax position taken or expected to be taken in atax return. This Interpretation also provides guidance on derecognition, classification, interest andpenalties, accounting in interim periods, disclosure, and transition. Adoption of this interpretation is notexpected to have a significant impact on the Bank’s consolidated financial statements.September 2006 FAS 157, Fair Value Measurements. Effective for fiscal years beginning afterNovember 15, 2007, and all interim periods within those fiscal years. This Statement defines fair value,establishes a framework for measuring fair value in generally accepted accounting principles (GAAP),and expands disclosures about fair value measurements. Adoption of this interpretation is not expected tohave a significant impact on the Bank’s consolidated financial statements.February 2007 FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115. Effective as of the beginning of an entity’s firstfiscal year that begins after November 15, 2007. This Statement permits entities to choose to measuremany financial instruments and certain other items at fair value. The objective is to improve financialreporting by providing entities with the opportunity to mitigate volatility in reported earnings caused bymeasuring related assets and liabilities differently without having to apply complex hedge accountingprovisions. Adoption of this interpretation is not expected to have a significant impact on the Bank’sconsolidated financial statements.Reclassifications—Certain reclassifications were made to the prior year’s presentation to conform to thecurrent year's presentation.SECURITIESThe Bank enters into purchases of securities under agreements to resell substantially identical securities.These agreements are classified as secured loans.The amounts advanced under these agreements are reflected as assets in the consolidated balance sheets.It is the Bank’s policy to take possession of securities purchased under agreements to resell. Agreementswith third parties specify the Bank’s rights to request additional collateral, based on its monitoring of thefair value of the underlying securities on a daily basis. The securities are delivered by appropriate entryinto the Bank’s account maintained at the Federal Reserve Bank or into a third-party custodian’s accountdesignated by the Bank under a written custodial agreement that explicitly recognizes the Bank’s interestin the securities.The securities purchased under agreements to resell were $50,000,000 for period ended December 31,2006 and 2005. Securities purchased under agreements to resell averaged approximately $71,424,658and $50,698,630 during the years ended December 31, 2006 and 2005, respectively. The maximumamount outstanding at any month-end during the years ended was $50,000,000 for both 2006 and 2005.20
The amortized cost, gross unrealized gains and losses and estimated fair value of securities are asfollows at December 31:2006Gross Gross EstimatedAmortized Unrealized Unrealized FairSecurities Held-to-Maturity Cost Gains Losses ValueU.S. government sponsoredenterprise debt securities $ 45,059,045 $ 53,697 $ (480,575) $ 44,632,167Collateralized mortgage obligations 19,459,728 - (798,811) 18,660,917Municipalities 10,206,405 - (173,140) 10,033,265Total $ 74,725,178 $ 53,697 $ (1,452,526) $ 73,326,349Securities Available-for-SaleU.S. government sponsoredenterprise debt securities $ 252,463,968 $ 30,854 $ (2,482,690) $ 250,012,132Mortgage-backed securities 6,930,646 15,387 (115,748) 6,830,285Collateralized mortgage obligations 80,381,412 5,520 (599,104) 79,787,828Equity securities 89,331 130,031 - 219,362Total $ 339,865,357 $ 181,792 $ (3,197,542) $ 336,849,6072005Gross Gross EstimatedAmortized Unrealized Unrealized FairSecurities Held-to-Maturity Cost Gains Losses ValueU.S. government sponsoredenterprise debt securities $ 53,711,444 $ - $ (1,200,306) $ 52,511,138Collateralized mortgage obligations 24,966,363 - (979,197) 23,987,166Municipalities 10,226,837 - (205,428) 10,021,409Total $ 88,904,644 $ - $ (2,384,931) $ 86,519,713Securities Available-for-SaleU.S. government sponsoredenterprise debt securities $ 239,751,144 $ 7,119 $ (4,164,316) $ 235,593,947Mortgage-backed securities 8,335,837 36,300 (106,583) 8,265,554Collateralized mortgage obligations 71,368,441 299 (413,812) 70,954,928Equity securities 89,331 39,000 - 128,331Total $ 319,544,753 $ 82,718 $ (4,684,711) $ 314,942,76021
Page 1: 2006 ANNUAL REPORT
Page 4 and 5: Year inReview/2006During 2006, our
Page 6 and 7: A Message from theChairman and the
Page 8 and 9: Board ofDirectorsPaul C. Lo is the
Page 10 and 11: CorporateExecutive OfficersFred Tsa
Page 12 and 13: Branches andOffice LocationsCorpora
Page 14 and 15: FAR EAST NATIONAL BANK AND SUBSIDIA
Page 20 and 21: inherent in the loan portfolio at t
Page 24 and 25: The maturity distribution of securi
Page 26 and 27: The unrealized loss positions on th
Page 28 and 29: The following table presents a brea
Page 30 and 31: 6. GOODWILL INTANGIBLE ASSETSOn Aug
Page 32 and 33: 11. INCOME TAXESCurrent and deferre
Page 34 and 35: 12. 401(k) PLANThe Bank has a 401(k
Page 36 and 37: no conditions or events since that
Page 38 and 39: The following methods and assumptio
Page 40: As of December 31, 2006 and 2005, t

2006 ANNUAL REPORT - Far East National Bank

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