2006 ANNUAL REPORT - Far East National Bank

no conditions or events since that notification which management believes have changed the Bank’scategory.The Bank’s actual capital amounts and ratios as of December 31, 2006 are presented in the table below:Minimum To Be WellCapitalized underMinimum CapitalPrompt CorrectiveActualRequirementAction ProvisionsAmount Ratio Amount Ratio Amount RatioTotal capital (to risk-weighted assets) $ 196,934,000 13.04 % $ 120,777,000 > 8.00 % $ 150,972,000 > 10.00 %Tier I capital (to risk-weighted assets) 166,917,000 11.06 60,389,000 > 4.00 90,583,000 > 6.00Tier I capital (to average assets) 166,938,000 9.17 72,791,000 > 4.00 90,989,000 > 5.00The Bank’s actual capital amounts and ratios as of December 31, 2005 are presented in the table below:Minimum To Be WellCapitalized underMinimum CapitalPrompt CorrectiveActual Requirement Action ProvisionsAmount Ratio Amount Ratio Amount RatioTotal capital (to risk-weighted assets) $ 178,893,000 12.79 % $ 111,880,000 > 8.00 % $ 139,850,000 > 10.00 %Tier I capital (to risk-weighted assets) 150,407,000 10.75 55,940,000 > 4.00 83,910,000 > 6.00Tier I capital (to average assets) 150,406,000 8.47 70,997,000 > 4.00 88,746,000 > 5.00In September 2006, the Bank’s primary federal regulator, the Comptroller of the Currency (OCC), hasapproved the lifting of the cease and desist order issued to FENB in June 2005. The order was designedto strengthen the Bank’s internal controls over its BSA/AML compliance program and the OCC did notfind any evidence that money laundering or terrorist finances is occurring at FENB.FAIR VALUE OF FINANCIAL INSTRUMENTSThe fair value of a financial instrument is the current amount that would be exchanged between willingparties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices.However, in many instances, there are no quoted market prices for the Bank’s various financialinstruments. In cases where quoted market prices are not available, fair values are based on estimatesusing present value or other valuation techniques. Those techniques are significantly affected by theassumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fairvalue estimates may not be realized in an immediate settlement of the instrument. SFAS No. 107,Disclosure about Fair Value of Financial Instruments excludes certain financial instruments and allnonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair valueamounts presented may not necessarily represent the underlying fair value of the Bank.34