no conditions or events since that notification which management believes have changed the <strong>Bank</strong>’scategory.The <strong>Bank</strong>’s actual capital amounts and ratios as of December 31, <strong>2006</strong> 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 <strong>Bank</strong>’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 <strong>2006</strong>, the <strong>Bank</strong>’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 <strong>Bank</strong>’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 <strong>Bank</strong>’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 <strong>Bank</strong>.34
The estimated fair value amounts below have been determined by the <strong>Bank</strong> using available market dataand appropriate valuation methodologies. However, considerable judgment is required to interpretmarket data to develop the estimates of fair value. Accordingly, the estimates presented herein are notnecessarily indicative of the amounts the <strong>Bank</strong> could realize in a current market exchange. The use ofdifferent market assumptions and/or estimation methodologies may have a material effect on theestimated fair value amounts.December 31, <strong>2006</strong>CarryingEstimatedAmountFair ValueAssets:Cash and cash equivalents $ 117,020,321 $ 117,020,321Securities—available-for-sale 336,849,607 336,849,607Securities—held-to-maturity 74,725,178 73,326,349Loans receivable—net 1,206,886,323 1,204,605,664FHLB stock 9,929,300 9,929,300FRB stock 3,385,200 3,385,200Accrued interest receivable 9,227,711 9,227,711Derivatives 30,347 30,347Liabilities:Non-interest bearing $ 161,087,398 $ 161,087,398Interest bearing 338,875,269 320,510,755Time certificates of deposit 841,320,834 843,199,259Accrued interest payable 12,450,710 12,450,710Subordinated debt 15,000,000 15,021,572FHLB term advance 125,000,000 120,955,713Federal funds purchased and securities sold 140,282,090 140,283,882December 31, 2005CarryingEstimatedAssets:AmountFair ValueCash and cash equivalents $ 130,396,266 $ 130,396,266Securities—available-for-sale 314,942,760 314,942,760Securities—held-to-maturity 88,904,644 86,519,713Loans receivable—net 1,136,916,011 1,135,012,052FHLB stock 9,635,000 9,635,000FRB stock 3,386,800 3,386,800Accrued interest receivable 8,261,241 8,261,241Derivatives 2,316 2,316Liabilities:Non-interest bearing $ 180,876,373 $ 180,876,373Interest bearing 400,265,104 400,265,104Time certificates of deposit 750,982,230 751,655,372Accrued interest payable 7,466,490 7,466,490Subordinated debt 15,000,000 15,017,810Federal funds purchased and securities sold 125,000,000 125,515,406under agreements to repurchase 107,138,851 107,139,29135