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2007 ANNUAL REPORT


We’ve Come a Long Way .............................................................................. Inside Front Cover Table of Contents ................................................................................................................ 1 Letter to Shareholders ................................................................................................... 2 - 3 Town and Country Financial Corporation ........................................................................... 4 Town & Country Bank of Springfield .................................................................................. 5 Town & Country Bank - Buffalo, Forsyth & Mt. Zion ........................................................... 6 Logan County Bank ............................................................................................................ 7 Town & Country Banc Mortgage Services, Inc. ........................................................... 8 Town & Country Insurance Services, LLC .................................................................. 9 INDEPENDENT AUDITOR’S REPORT ............................................................................. 11 Audited Financial Statements and Related Notes ....................................................... 12-38 Community Involvement ................................................................................................... 39 Market Makers ................................................................................................................... 40 Locations ................................................................................................ Inside Back Cover

1


Dear Shareholder: In 2007, we posted record earnings and also made significant efforts to strengthen our company’s long-term growth prospects and financial situation. These efforts included reorganizing and making investments in people and systems to enhance our back office operations, improve our compliance culture, and provide capacity that supports future growth. From a financial perspective, efforts included strengthening our loan loss reserves based on market conditions, taking measures to strengthen and diversify our balance sheet, and improving our net interest margin by lowering our cost of funds and otherwise improving our asset/liability strategies. The turmoil in the real estate and credit markets and the slowing of the economy presented significant challenges to our industry, especially in the last half of 2007. We were not directly involved in the lending practices that lead to many of these issues, yet nevertheless were impacted by the wider credit market and real estate market implications; which included lower mortgage volumes in our local markets, deterioration in the value of our equity securities, additional credit risks from the spill-over impact to our loan customers, changes to interest rates and funding spreads, and other factors. We believe the market disruptions will eventually provide opportunities to community banks as larger organizations exit certain business lines. Financial Results We are pleased to report that 2007 earnings of $3.12 million represent a record for the company. However, earnings were approximately $951 thousand when excluding the impact of certain non-recurring items (net of tax), such as a gain on sale of equity securities of $2.63 million, an increase to the carrying amount of mortgage servicing rights of $337 thousand, and one-time personnel costs (including certain accounting adjustments) of $804 thousand. During 2007, earnings were also impacted by: (1) significant costs to strengthen the company’s operations and compliance programs and (2) a provision for loan losses of $341 thousand that drove an increase in our allowance for loan losses to a strong 1.34% of loans as of December 31, 2007 as compared to 1.15% at the previous year end. The increase in the provision for loan losses was a result of a general weakening in the economy and real estate markets as well as a new methodology used in 2007 to assess the adequacy of the allowance. We believe our credit quality remains strong and 2007 net charge-offs of $150 thousand were actually down from the 2006 level of $208 thousand. The results in 2007 compare to earnings of $2.46 million in 2006, which included a onetime gain of $614 thousand (net of tax) on the sale of a branch. Earnings per share were $1.10 for 2007 as compared to $0.87 for 2006. Total assets ended the year at $367 million, down from $386 million at December 31, 2006. A slowing economy, weak loan demand, and our decision to de-emphasize indirect lending resulted in a $24 million reduction in total loans. Demand and savings deposits increased nearly $2 million while time deposits decreased $4.6 million. Total equity capital ended the year at $32.9 million, down from $37.8 million at December 31, 2006. While retained earnings increased for the year, the reduction in equity capital was due to a decrease in the unrealized gain on securities. A portion of this decrease was related to gains realized on equity securities sold (and reflected in net income), while the remainder represented a decrease in the market value of equity securities still owned at December 31, 2007. The book value per share at year-end was $11.63 as compared to $13.34 at December 31, 2006. Excluding the unrealized gain on securities, the book value increased to $10.12 at December 31, 2007 from $9.30 at the prior year-end.

2


Accomplishments Accomplishments As stated earlier, we made several accomplishments in 2007 which served to strengthen As earlier, we madegrowth several accomplishments 2007initiatives which served to strengthen the stated company’s long-term prospects. Some of in those include: the company’s long-term growth prospects. Some of those initiatives include: Developed an additional source of future non-interest income by launching Town & Developed an additional source Country Insurance Services, LLCof future non-interest income by launching Town & Country Insurance Services, Invested in management andLLC long-term succession by recruiting new leadership for Invested in management long-term succession by recruiting new Inc. leadership for the Holding Company andand Town & Country Banc Mortgage Services, the Holding Company Town to & Country Mortgageinfrastructure Services, Inc. Invested in people andand systems improve Banc our operating Invested in people and systems to improveSecurities, our operating infrastructure Refinanced $7.5 million in Trust Preferred lowering the cost from 8.97% to Refinanced $7.5 million in Trust Preferred Securities, lowering the cost from 8.97% to 6.58% 6.58% Redeemed $2.6 million in 9.5% subordinated debt Redeemed $2.6 millionmargin in 9.5% Increased net interest 14subordinated basis points debt Increased netnew interest margin 14 basis points Implemented technology solutions (Branch Capture, Check-21, and Electronic Implemented Statements) new technology solutions (Branch Capture, Check-21, and Electronic Statements) Started major remodel of 1925 S. MacArthur location Started major remodel of 1925 S. MacArthur location Future Plans Future Plans Our core strategy in 2008 is to continue improving our operations and infrastructure while Our strategy in 2008forward is to continue improving operations andthere infrastructure at thecore same time moving on several growthour initiatives. While are short-while at thecosts sameinvolved time moving forward severalwegrowth initiatives. therewill areproduce shortterm with this dual on strategy, are confident thatWhile our plans term costsimprovement involved withtothis strategy, we are confident that our plans will produce long-term ourdual growth and profitability. long-term improvement to our growth and profitability. As we look forward, we are incredibly optimistic about the growth prospects of our As we lookbased forward, we are optimisticweabout growth prospects of our on company, on the teamincredibly of professionals havethe assembled who are focused company, based on the team of professionals we have assembled who are focused our strategic initiatives. Those initiatives include additional branches and/or loan on our strategicoffices, initiatives. Those initiatives includeenhancements additional branches and/orprocess, loan and production additions to our sales force, to the sales production offices, additions to our sales force, enhancements to the sales process, aggressive marketing and product development for our commercial, retail, mortgage,and and aggressive marketinglines and of product development for ourthat commercial, wealth management business. We anticipate earnings inretail, 2008mortgage, will be a and wealth management lines of business. We anticipate 2008 will be a challenge as we make significant investments to growthat our earnings companyinquickly during challenge as we make significant investments to grow our company quickly during difficult economic, interest rate, and other market conditions. difficult economic, interest rate, and other market conditions. During 2007, the company marked its 45th anniversary. We have come a long way in 45 th anniversary. We have long way in 45 During and 2007, company marked its 45brighter years, wethe believe our future is even as we grow into acome well adiversified years, and we believe our future is evenofbrighter as weemployees, grow into aand wellboard diversified financial services company. On behalf the officers, of directors, financial services On behalf of theofofficers, employees, and board of directors, we remain gratefulcompany. for the continued support our shareholders. we remain grateful for the continued support of our shareholders.

Micah R. Bartlett President and COO

David E. Kirschner Chairman and CEO

Thank you for your support, 3


������������������ David E. Kirschner Chairman & CEO Town and Country Financial Corporation

Robert L. Evans Retired Owner Evans Construction Company

Micah R. Bartlett President & COO Town and Country Financial Corporation

Mark O. Roberts, Jr. President & Chairman of the Board Standard Mutual Insurance Company John E. Staudt Vice Chairman Town and Country Financial Corporation

John S. Cobb Attorney Samuels, Miller, Schroeder, Jackson & Sly

Dewey R. Yaeger Retired Bank President Union Bancorp

Louis H. Dixon Engineer & Senior Vice President Crawford, Murphy & Tilly, Inc.

�������� David E. Kirschner .................................................................................. Chairman & CEO Micah R. Bartlett ..................................................................................... President & COO John E. Staudt ............................................................................................ Vice Chairman Nancy J. Bahre .................................................................... Senior Vice President & CFO Henry C. Kirschner ................................................................. Director of Corporate Affairs Paula J. Bradley ......................................... Vice President & Director of Support Services James E. Burris ........................................................ Vice President & Compliance Officer Scott J. Freschi .................................... Vice President & Information Systems Security Officer Cindy E. Pierson ................................................... Vice President & Loan Support Manager Barbara L. Weatherford ........................... Vice President & Director of Human Resources Molly A. Appelt ................................................... Assistant Vice President & Product Manager A. Vicki Harbauer ............................................. Assistant Vice President & Servicing Manager Sheryl K. Meyer ............................................................ Assistant Vice President & Auditor Vickie V. Meseke .......................................................................... Assistant Vice President Denise D. Skiles ...................................................... Assistant Vice President & Controller Albert O. Eck, III ............................................................................. Senior Financial Accountant Indra M. Perry ................................................................................................ Corporate Trainer Margaret M. Schneider .................................................. Data Processing Assistant Manager Matthew V. Simhauser ......................................................................................... Credit Analyst Christine A. Smith .......................................................................................... Marketing Officer Cynthia C. Turnbull ........................................................... Loan Services Assistant Manager

������������������������������� 3601 Wabash Avenue, Springfield, IL 62711 Toll Free Number 866.770.3100 Telephone Banking Line 800.505.5124 E-mail: support@townandcountrybank.com www

.townandcountrybank.com

4


������������������ J. Michael Houston Chairman, President & CEO Town & Country Bank of Springfield

David E. Kirschner Chairman & CEO Town and Country Financial Corporation

Micah R. Bartlett President & COO Town and Country Financial Corporation

John E. Staudt Vice Chairman Town and Country Financial Corporation

Louis H. Dixon Engineer & Senior Vice President Crawford, Murphy & Tilly, Inc.

Dewey R. Yaeger Retired Bank President Union Bancorp

�������� J. Michael Houston ................................................................ Chairman, President & CEO Michael J. A. Shaw ...................................................................... Executive Vice President John W. Clark ................................................................................... Senior Vice President Grant N. Franklin ................................................................................. Senior Vice President Randy L. Brackensick .............................................. Vice President & Commercial Lender Douglas F. Finn ............................................................. Vice President & Branch Manager Stephen K. Gnuse .................................................... Vice President & Commercial Lender Harold L. Henry, III ................................................... Vice President & Commercial Lender Marianne P. Jackson ..................................................... Vice President & Branch Manager William A. Kowalski ....................................................... Vice President & Branch Manager Matthew M. Waldrop ...................................... Assistant Vice President & Branch Manager

������������������������������� 3601 Wabash Avenue, Springfield, IL 62711 2401 Wabash Avenue, Springfield, IL 62704 1925 South MacArthur Blvd., Springfield, IL 62704 2601 North Dirksen Parkway, Springfield, IL 62702 Telephone 217.787.3100 Telephone Banking Line 800.505.5124 www

.townandcountrybank.com 5


������������������ J. Bruce Moore Chairman, President & CEO Town & Country Bank

John S. Cobb Attorney Samuels, Miller, Schroeder, Jackson & Sly

Micah R. Bartlett President & COO Town and Country Financial Corporation

Robert L. Evans Retired Owner Evans Construction Company

John E. Staudt Vice Chairman Town and Country Financial Corporation

David E. Kirschner Chairman & CEO Town and Country Financial Corporation

�������� J. Bruce Moore ............................................................................. Chairman, President & CEO Larry D. Anderson ................................................................................ Senior Vice President Richard E. Logan ...................................................... Vice President & Commercial Lender Michele L. McCoy ............................................. Assistant Vice President & Branch Manager Steven K. Fryman ....................................................................................... Commercial Lender

������������������������������� 100 Elm Street, Buffalo, IL 62515 Phone 217.364.4406 107 East Highland Drive, Forsyth, IL 62535 Phone 217.872.1326 1645 State Highway 121, Mt. Zion, IL 62549 Phone 217.864.2311 Telephone Banking Line 800.505.5124 www

.townandcountrybank.com 6


������������������ Brian K. Ash Chairman, President & CEO Logan County Bank

Mark O. Roberts, Jr. President & Chairman of the Board Standard Mutual Insurance Company

Micah R. Bartlett President and COO Town and Country Financial Corporation

John E. Staudt Vice Chairman Town and Country Financial Corporation

David E. Kirschner Chairman & CEO Town and Country Financial Corporation

�������� Brian K. Ash ................................................................................. Chairman, President & CEO Sandra L. Shehorn .......................................................... Vice President & Branch Manager Keith B. Sheldon ...................................................... Vice President & Loan Sales Manager Rick L. Harbarger ................................................... Assistant Vice President & Ag Lender

������������������������������� 303 Pulaski Street, Lincoln, IL 62656 809 Woodlawn Road, Lincoln, IL 62656 Telephone 217.732.3151 Telephone Banking Line 800.505.5124 www

.logancountybank.com 7


������������������ Dana M. Dow Chairman, President & CEO Town & Country Banc Mortgage Services, Inc.

David E. Kirschner Chairman & CEO Town and Country Financial Corporation

Micah R. Bartlett President & COO Town and Country Financial Corporation

John E. Staudt Vice Chairman Town and Country Financial Corporation

Louis H. Dixon Engineer & Senior Vice President Crawford, Murphy & Tilly, Inc.

Dewey R. Yaeger Retired Bank President Union Bancorp

J. Michael Houston President & CEO Town & Country Bank of Springfield

�������� Dana M. Dow ................................................................................ Chairman, President & CEO Timothy W. Holliday ......................................................... Vice President & Sales Manager Debra K. Foster ..................................................................................... Mortgage Originator

������������������������������� TOWN & COUNTRY BANK OF SPRINGFIELD 3601 Wabash Avenue, Springfield, IL 62711 2401 Wabash Avenue, Springfield, IL 62704 1925 South MacArthur Blvd., Springfield, IL 62704 2601 North Dirksen Parkway, Springfield, IL 62702 TOWN & COUNTRY BANK - BUFFALO, FORSYTH & MT. ZION 100 Elm Street, Buffalo, IL 62515 107 East Highland Drive, Forsyth, IL 62535 1645 State Highway 121, Mt. Zion, IL 62549 LOGAN COUNTY BANK 303 Pulaski Street, Lincoln, IL 62656 809 Woodlawn Road, Lincoln, IL 62656 Toll Free Number 866.770.3100 Telephone Banking Line 800.505.5124 www

.townandcountrybank.com 8


������������������ �������������� �������������� ������������������ ������������������

Town & Country Insurance Services, LLC offers complete insurance coverage. It is our privilege to further our commitment to our customers by offering a full range of property and casualty insurance with the convenience of a one-stop financial resource. Our agency will work with leading insurance companies to provide customers comprehensive coverage at competitive rates.

���������������������������������������� 1) Online - fill out the form (www.townandcountrybank.com or www.logancountybank.com) 2) Telephone - call the toll free number 866.397.4086 3) Fax - go to any of our locations and ask for a form to fax to 217.546.6858 4) In Person - visit any of our locations and speak to a banker.

������������������������������� TOWN & COUNTRY BANK OF SPRINGFIELD 3601 Wabash Avenue, Springfield, IL 62711 2401 Wabash Avenue, Springfield, IL 62704 1925 South MacArthur Blvd., Springfield, IL 62704 2601 North Dirksen Parkway, Springfield, IL 62702 TOWN & COUNTRY BANK - BUFFALO, FORSYTH & MT. ZION 100 Elm Street, Buffalo, IL 62515 107 East Highland Drive, Forsyth, IL 62535 1645 State Highway 121, Mt. Zion, IL 62549 LOGAN COUNTY BANK 303 Pulaski Street, Lincoln, IL 62656 809 Woodlawn Road, Lincoln, IL 62656 Toll Free Number 866.770.3100 www

.townandcountrybank.com

9


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10


Independent Auditor's Report

To the Board of Directors Town and Country Financial Corporation Springfield, Illinois We have audited the accompanying consolidated balance sheets of Town and Country Financial Corporation and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Town and Country Financial Corporation and subsidiaries as of December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

Springfield, Illinois February 26, 2008

McGladrey & Pullen, LLP is a member firm of RSM International – an affiliation of separate and independent legal entities.

11


Town and Country Financial Corporation and Subsidiaries Consolidated Balance Sheets December 31, 2007 and 2006 2007

2006

Assets Cash and due from banks Federal funds sold Securities held to maturity (fair value of $1,810,863 and $2,886,523 at December 31, 2007 and 2006, respectively) Securities available for sale (cost of $85,344,017 and $77,769,064 at December 31, 2007 and 2006, respectively) Nonmarketable equity securities Loans, net of allowance for loan losses ($3,153,862 and $2,963,070 at December 31, 2007 and 2006, respectively) Mortgage loans held for sale Premises and equipment, net Mortgage servicing rights, net Other assets

$

8,427,545 9,650,000

$

10,022,587 -

1,837,654

2,834,281

92,326,935 2,132,456

96,475,747 2,094,355

231,528,779 1,862,333 9,372,428 2,197,748 7,836,130

255,157,076 337,219 9,733,290 1,765,795 7,609,521

$

367,172,008

$

386,029,871

$

31,676,753 91,886,268 19,649,414 148,310,989 291,523,424

$

34,382,629 86,241,367 20,821,718 152,926,220 294,371,934

Liabilities and Stockholders' Equity Liabilities Deposits: Demand: Noninterest bearing Interest bearing Savings Time Federal funds and securities sold under agreements to repurchase Subordinated debentures and junior subordinated debt issued to Trusts Other borrowings Deferred income taxes Accrued expenses and other liabilities Commitments, Contingencies and Credit Risk (Notes 15 and 16) Stockholders' Equity Common stock, no par value, authorized 5,000,000 shares, issued 2007 and 2006 2,983,608 shares Additional paid-in capital Retained earnings Accumulated comprehensive income Less cost of treasury shares, 2007 and 2006 151,139 shares $

See Notes to Consolidated Financial Statements. 12

11,856,000 25,795,347 1,818,270 3,234,434 334,227,475

2,175,000 14,447,000 27,882,825 6,381,965 2,980,795 348,239,519

1,657,560 9,935,098 17,820,537 4,272,290 33,685,485

1,657,560 9,935,098 15,493,522 11,445,124 38,531,304

740,952 32,944,533

740,952 37,790,352

367,172,008

$

386,029,871


Town and Country Financial Corporation and Subsidiaries Consolidated Statements of Income Years Ended December 31, 2007, 2006, and 2005 2007 Interest income: Loans Securities: U.S. Treasury and agencies States and political subdivisions Other Interest-bearing deposits with financial institutions Federal funds sold Total interest income Interest expense: Deposits Other borrowings Total interest expense

$

Net interest income Provision for loan losses Net interest income after provision for loan losses Non-interest income: Service charges on deposit accounts Other fee income Loan servicing income Fees on loans sold Gain on sale of loans Gain (loss) on sale of securities available for sale Loss on impaired securities Trust department fees Gain on sale of branch Other Non-interest expense: Salaries Employee benefits Occupancy expense, net of rental income Furniture and equipment expense Amortization of mortgage servicing rights Other Income before income taxes Income taxes Net income Basic earnings per share

2006

16,442,390

$

2005

16,172,709

$

13,985,605

1,981,021 1,082,413 741,576 82,509 475,418 20,805,327

1,929,101 1,120,631 1,156,327 86,331 128,791 20,593,890

2,250,277 1,187,384 1,037,713 60,001 81,124 18,602,104

9,465,660 2,462,732 11,928,392

9,025,913 2,797,987 11,823,900

6,545,686 2,441,937 8,987,623

8,876,935 341,000

8,769,990 255,500

9,614,481 445,500

8,535,935

8,514,490

9,168,981

1,111,888 809,064 753,857 187,456 1,050,871 4,293,376 (50,000) 173,632 417,747 8,747,891

1,272,553 717,034 779,942 116,400 534,987 (42,314) 170,944 1,049,509 396,105 4,995,160

1,323,024 662,310 788,724 121,877 634,698 19,388 153,619 399,527 4,103,167

6,150,458 1,594,304 994,283 547,202 522,385 3,362,588 13,171,220

4,830,608 1,023,062 918,526 533,942 524,311 2,887,260 10,717,709

4,835,949 1,024,226 934,961 549,727 550,062 2,803,083 10,698,008

4,112,606 992,500

2,791,941 333,762

2,574,140 394,700

$

3,120,106

$

2,458,179

$

2,179,440

$

1.10

$

0.87

$

0.77

See Notes to Consolidated Financial Statements. 13


Town and Country Financial Corporation and Subsidiaries Consolidated Statements of Stockholders' Equity Years Ended December 31, 2007, 2006, and 2005 Additional Paid-in Capital

Common Stock Balance, December 31, 2004

$

Comprehensive income: Net income Change in net unrealized gain on securities available for sale, net of reclassification adjustment and tax effect

1,657,560

$

9,935,098

-

-

-

-

Retained Earnings $

12,045,554

Treasury Stock $

2,179,440

(739,943)

Accumulated Comprehensive Income $

-

-

12,976,724

Total $

-

-

2,179,440

(542,777)

(542,777)

Comprehensive income

1,636,663

Cash dividends ($.19 per common share)

-

-

Balance, December 31, 2005

1,657,560

Comprehensive income: Net income Change in net unrealized gain on securities available for sale, net of reclassification adjustment and tax effect

(528,738)

9,935,098

-

-

-

-

-

13,696,256

-

(739,943)

2,458,179

12,433,947

-

-

(528,738) $

-

-

36,982,918 2,458,179

(988,823)

(988,823)

Comprehensive income

1,469,356

Cash dividends ($.23 per common share)

-

-

Purchase of treasury stock, 61 shares

-

-

Balance, December 31, 2006

1,657,560

Comprehensive income: Net income Change in net unrealized gain on securities available for sale, net of reclassification adjustment and tax effect

(660,913) -

9,935,098

-

-

-

-

(1,009)

15,493,522

(740,952)

3,120,106

(660,913)

-

(1,009)

11,445,124

-

-

-

$

-

-

37,790,352 3,120,106

(7,172,834)

(7,172,834)

Comprehensive (loss)

(4,052,728)

Cash dividends ($.28 per common share) Balance, December 31, 2007

35,874,993

-

$

1,657,560

$

9,935,098

See Notes to Consolidated Financial Statements.

14

(793,091) $

17,820,537

$

(740,952)

$

4,272,290

(793,091) $

32,944,533


Town and Country Financial Corporation and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, 2007, 2006, and 2005 2007

Cash Flows From Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Amortization of intangible assets Amortization of premiums on securities Amortization of mortgage servicing rights Provision for loan losses Deferred income taxes (Gain) on sale of loans held for sale (Gain) loss on sale of securities available for sale Loss on impaired securities Loss on sale of properties acquired in settlement of loans Loss on sale of premises and equipment Stock dividend on nonmarketable equity securities Gain on sale of branch Change in assets and liabilities: (Increase) decrease in other assets Increase in accrued expenses and other liabilities Net cash flows provided by operations before loan originations and sales Originations of loans held for sale Proceeds from sale of loans held for sale Net cash provided by (used in) operating activities Cash Flows From Investing Activities Securities held to maturity: Proceeds from maturities, calls, and paydowns Purchases Securities available for sale: Proceeds from sales Proceeds from maturities, calls, and paydowns Purchases Purchase of nonmarketable equity securities Proceeds from sale of nonmarketable equity securities Increase in federal funds sold (Increase) decrease in loans Purchases of premises and equipment Proceeds from sale of properties acquired in settlement of loans Proceeds from sale of branch, net of expenses Proceeds from sale of premises and equipment Net cash flows provided by (used in) investing activities

(Continued) 15

$

3,120,106

2006 $

2,458,179

2005 $

2,179,440

790,543 39,288 32,276 522,385 341,000 (12,764) (1,050,871) (4,293,376) 50,000 35,730 -

772,671 39,288 171,342 524,311 255,500 (343,703) (534,987) 42,314 62,246 550 (1,049,509)

844,806 39,288 287,825 550,062 445,500 (334,090) (634,698) (19,388) 26,368 31 (110,895) -

347,171 253,639

(142,162) 491,152

(620,195) 552,937

175,127

2,747,192

3,206,991

(46,808,078) 45,452,511 (1,180,440)

(37,667,770) 38,008,733 3,088,155

(46,480,489) 47,108,978 3,835,480

1,149,000 (155,630)

345,500 -

349,997 (154,000)

5,295,380 22,164,164 (30,820,140) (38,101) (9,650,000) 22,381,785 (429,681)

6,213,875 15,199,037 (10,157,878) 551,190 (7,340,329) (494,345)

530,616 17,074,311 (12,484,972) (20,755,328) (665,280)

183,700 -

171,906 1,207,370 -

21,932 2,063

10,080,477

5,696,326

(16,080,661)


Town and Country Financial Corporation and Subsidiaries Consolidated Statements of Cash Flows (Continued) Years Ended December 31, 2007, 2006, and 2005 2007

2006

2005

1,766,721 (4,615,231)

$ (2,524,194) (3,307,081)

$ (7,888,587) 19,564,367

(2,175,000) 8,046,843 7,500,000 (7,500,000) (10,134,321) (2,591,000) (793,091) (10,495,079)

(4,350,000) 7,131,673 (3,864,413) (660,913) (1,009) (7,575,937)

3,175,000 31,673 (3,400,394) (528,738) 10,953,321

(1,595,042)

1,208,544

(1,291,860)

10,022,587

8,814,043

10,105,903

$

8,427,545

$ 10,022,587

$

8,814,043

$

9,340,081

$

8,450,175

$

6,233,161

Interest on other borrowings

$

2,530,558

$

2,779,802

$

2,460,497

Income taxes, net

$

1,995,091

$

778,056

$

533,000

$

954,338

$

356,138

$

447,784

Investing Activities: Loans transferred from held for sale to portfolio

$

8,359

$

75,033

$

201,135

Property acquired in settlement of loans

$

832,498

$

140,809

$

45,343

Cash Flows From Financing Activities Net increase (decrease) in demand and savings accounts Net increase (decrease) in time deposits Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase Proceeds from other borrowings Proceeds from issuance of subordinated debt Payment on retirement of subordinated debt Principal payments on other borrowings Principal payments on subordinated debt Dividends paid Purchase of treasury stock Net cash flows provided by (used in) financing activities

$

Net increase (decrease) in cash and due from banks

Cash and due from banks: Beginning Ending Supplemental Disclosures of Cash Flow Information Cash payments for: Interest on deposits

Supplemental Schedule of Noncash Operating Activities: Capitalization of mortgage servicing rights

See Notes to Consolidated Financial Statements.

16


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 1.

Significant Accounting Policies

Nature of business: Town and Country Financial Corporation (Company) is a multi-bank holding company, which through its subsidiaries provides a full range of financial services to individual and corporate customers in the Central Illinois area. The Company is subject to competition from other financial institutions and nonfinancial institutions providing financial products. Additionally, Town and Country Financial Corporation and its bank subsidiaries are subject to regulations of certain regulatory agencies and undergo periodic examinations by those regulatory agencies. Principles of consolidation: The consolidated financial statements include the accounts of Town and Country Financial Corporation and its wholly-owned subsidiaries, Town & Country Bank of Springfield and its wholly-owned subsidiary Town & Country Banc Mortgage Services, Inc., Logan County Bank, Town & Country Bank, Haley, LLC, and Town & Country Insurance Services, LLC. All material intercompany accounts and transactions are eliminated in consolidation. Use of estimates: Preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions, which affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates which are particularly susceptible to change in a short period of time include the determination of the allowance for loan losses, valuation of real estate and other properties acquired in connection with foreclosures or in satisfaction of amounts due from borrowers on loans and the fair value of investment securities. Actual results could differ from those estimates. Trust assets: Assets held by the subsidiary banks' trust departments as an agent or as a fiduciary, other than trust cash on deposit at the subsidiary banks, are not included in these financial statements because they are not assets of the subsidiary banks. Cash and due from banks: The Bank maintains cash balances in several financial institutions which, from time to time, exceed the federally insured limits. The Bank has not experienced any losses in such accounts as a result of this concentration and believes it is not exposed to any significant credit risk on cash balances. For the purposes of reporting cash flows, the Company includes all cash and due from banks, which are not subject to withdrawal restrictions or penalties, as cash. Cash flows from loans originated by the Bank, federal funds sold, deposits and federal funds purchased and securities sold under agreements to repurchase are reported net. Securities held to maturity: Securities classified as held to maturity are those debt securities the Company has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs or changes in general economic conditions. These securities are carried at cost adjusted for amortization of premium and accretion of discount, computed by the interest method over their contractual lives. Securities available for sale: Securities classified as available for sale are those debt securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity, and marketable equity securities. Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company's assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Securities available for sale are carried at fair value with unrealized gains or losses reported as a separate component of comprehensive income, net of the related deferred tax effect. The amortization of premiums and accretion of discounts, computed by the interest method over their contractual lives, are recorded as interest income. Realized gains or losses, determined using the specific identification method, are included in earnings.

17


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 1.

Significant Accounting Policies (Continued)

Declines in the fair value of individual securities classified as either held to maturity or available for sale below their amortized costs that are determined to be other than temporary result in write-downs of the individual securities to their fair value with the resulting write-downs included in current earnings as realized losses. Nonmarketable equity securities: Nonmarketable equity securities, consisting primarily of Federal Home Loan Bank stock and Federal Reserve Stock, are securities which do not have a readily available market value. Nonmarketable equity securities are carried at cost. Loans: Loans are stated at the outstanding amount of principal, net of the allowance for loan losses. With the exception of mortgage loans held for sale, the Company intends to originate and hold loans and to collect the contractual payments over the terms of the loans. Loan commitment fees and certain direct loan costs are being deferred and the net amount amortized as an adjustment of the related loan's yield. Interest on loans is calculated by using the simple interest method applied to the daily balances of the principal amount outstanding. A loan is impaired when it is probable the Company will not be able to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Impaired loans are measured based on the present value of the estimated future cash flows of interest and principal discounted at the loan's effective interest rate or on the fair value of the collateral for collateral dependent loans or as a practical expedient, at the loan’s observable market price. The accrual of interest income on impaired loans is discontinued when, in the opinion of management, there is reasonable doubt as to the borrower's ability to meet payments of interest or principal when they become due. Interest income on these loans is recognized to the extent interest payments are received and the principal is considered fully collectible. Allowance for loan losses: The allowance for loan losses is established through a provision for loan losses charged to expenses and reduced by net charge-offs. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb losses on existing loans that may become uncollectible based on evaluations of the collectibility of loans and prior loan loss experience. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrowers' ability to pay. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions. Mortgage loans held for sale: Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or estimated market value. Net unrealized losses are recognized in a valuation allowance by charges to income. The fair values are estimated using discounted cash flow analysis, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. Gains and losses on sales of loans held for sale are computed using the specific identification method and are reflected in income at time of sale.

18


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 1.

Significant Accounting Policies (Continued)

Mortgage servicing rights: The cost of mortgage servicing rights is capitalized and amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment of mortgage servicing rights is assessed based on the fair value of those rights. Fair values are estimated using discounted cash flows based on a current market interest rate. For purposes of measuring impairment, the rights are stratified based on predominant risk characteristics of the underlying loans, including loan type, weighted average interest rate, and weighted average maturity date. The amount of impairment recognized is the amount by which the capitalized mortgage servicing rights for a stratum exceed their fair value. Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal on these loans amounted to approximately $299,356,000 and $303,293,000 as of December 31, 2007 and 2006, respectively. Transfers of financial assets: Transfers of financial assets are accounted for as sales only when the control over the financial assets have been surrendered. Control over transferred assets is deemed surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of the right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Intangible assets: Deposit intangible assets relate to a branch acquisition and are included in other assets on the consolidated balance sheet. The excess of the purchase price over the fair value of net assets is amortized into other expense on a straight-line basis over 15 years. Rate lock commitments: The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans. Fair value is based on fees currently charged to enter into similar agreements, and for fixed-rate commitments also considers the difference between current levels of interest rates and the committed rates. Premises and equipment: Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed using straight-line and accelerated depreciation methods over the estimated useful lives of the assets. Estimated lives are 5 to 35 years for buildings and improvements, and 3 to 10 years for furniture and equipment. Income taxes: Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Deferred taxes are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of its deferred tax assets will not be realized. Basic earnings per share: Basic earnings per share are calculated by dividing net income by the weighted average number of shares outstanding. Weighted average shares outstanding were 2,832,469 for December 31, 2007, 2,832,484 for December 31, 2006, and 2,832,530 for December 31, 2005, respectively. The Company declared a 3 for 2 stock split on January 24, 2006, payable to stockholders of record on March 2, 2006. Retroactive effect was given to the 994,536 shares issued in connection with the stock split.

19


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 1.

Significant Accounting Policies (Continued)

Other real estate owned: Other real estate owned (OREO) represents properties acquired through foreclosure or other proceedings and is initially recorded at fair value at the date of foreclosure, which establishes a new cost. After foreclosure, OREO is held for sale and is carried at fair value less estimated costs of disposal. Any write-down to fair value at the time of transfer to OREO is charged to the allowance for loan losses. Property is evaluated regularly to ensure that the recorded amount is supported by its current fair value and adjustments to reduce the carrying amount to fair value less estimated costs to dispose are recorded as necessary. Revenue and expense from the operation of OREO and adjustments to fair value are included in loss on foreclosed real estate. Adoption of Statement 142: On January 1, 2002, the Company implemented Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. SFAS 142 requires that an acquired intangible asset should be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the asset can be sold, transferred, licensed, rented or exchanged, regardless of the acquirer’s intent to do so. Intangible assets disclosures are as follows: Accumulated Amortization

Intangible Assets $

December 31, 2007:

651,610

$

373,014

Net Balance $

278,596

$

39,288 39,288 39,288 39,288 39,288 82,156

$

278,596

Amortization expense for the years ending December 31: 2008 2009 2010 2011 2012 Thereafter

There was no goodwill reported as of December 31, 2007 or 2006. Note 2.

Restrictions on Cash and Due from Banks

The Bank subsidiaries are required to maintain legal reserves composed of funds on deposit with the Federal Reserve Bank, Travelers Express and cash on hand. The required balances were approximately $3,234,000 and $2,645,000 at December 31, 2007 and 2006, respectively.

20


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 3.

Securities

Amortized costs and fair values of securities as of December 31, 2007 and 2006 are summarized as follows:

Held to maturity State and political subdivisions Corporate notes

Gross Unrealized Gains

Amortized Cost

2007

Gross Unrealized Losses

Fair Value

$

1,364,610 473,044

$

10,333 14,289

$

51,413 -

$

1,323,530 487,333

$

1,837,654

$

24,622

$

51,413

$

1,810,863

2006 State and political subdivisions Corporate notes

$

2,361,445 472,836

$

53,182 43,164

$

44,104 -

$

2,370,523 516,000

$

2,834,281

$

96,346

$

44,104

$

2,886,523

2007

Available for sale U.S. Government agencies State and political subdivisions Corporate notes Equity securities Mortgage-backed securities

$

19,313,112 20,401,953 11,972,876 1,511,554 32,144,522

$

190,293 819,382 6,346,116 187,377

$

21,788 401,022 22,400 115,040

$

19,481,617 21,221,335 11,571,854 7,835,270 32,216,859

$

85,344,017

$

7,543,168

$

560,250

$

92,326,935

2006 U.S. Government agencies State and political subdivisions Corporate notes Equity securities Mortgage-backed securities

$

24,274,681 20,858,557 9,037,365 1,743,558 21,854,903

$

63,228 896,570 43,658 18,396,046 51,901

$

287,605 12,503 32,150 412,462

$

24,050,304 21,755,127 9,068,520 20,107,454 21,494,342

$

77,769,064

$

19,451,403

$

744,720

$

96,475,747

21


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 3.

Securities (Continued)

The amortized cost and fair value of securities as of December 31, 2007 by contractual maturity are shown below. Expected maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be prepaid without any penalties. Also, no stated maturity exists for the equity securities. Therefore, these securities are not included in the maturity categories in the following maturity summary. Available for Sale Amortized Fair Cost Value Due in one year or less Due after one year through 5 years Due after 5 years through 10 years Due after 10 years Equity securities Mortgage-backed securities

Held to Maturity Amortized Fair Cost Value

$ 12,865,579 12,789,176 2,723,917 23,309,269 1,511,554 32,144,522

$ 12,876,361 13,172,371 2,803,623 23,422,451 7,835,270 32,216,859

$

177,022 437,588 470,000 753,044 -

$

176,687 435,810 448,139 750,227 -

$ 85,344,017

$ 92,326,935

$

1,837,654

$

1,810,863

Gross realized gains and (losses) from the sale of investment securities classified as available for sale follow: For the years ended December 31, 2007 2006 2005 Gross realized gains Gross realized (losses) Net gains

$

4,293,376 -

$

3,979 (46,293)

$

19,388 -

$

4,293,376

$

(42,314)

$

19,388

Securities with a carrying value of approximately $35,288,000 and $40,970,000 at December 31, 2007 and 2006, respectively, were pledged to secure public deposits, securities sold under agreement to repurchase and for other purposes as required or permitted by law. Marketable equity securities represents primarily SLMA stock. The Company held 282,861 and 357,861 shares of SLMA stock with a carrying value of approximately $5,696,821 and $17,453,000, at December 31, 2007 and 2006, respectively. The Company sold 75,000 shares of SLMA stock during 2007 resulting in a gain of $4,293,376.

22


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 3.

Securities (Continued)

Information pertaining to securities with gross unrealized losses at December 31, 2007 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

2007

Less Than Twelve Months Gross Unrealized Fair Losses Value Securities Available for Sale Debt securities: U.S. Government and federal agency Mortgage-backed Other Total debt securities Marketable equity securities Total securities available for sale Securities Held to Maturity State and political subdivisions

$

$

3 396,313 396,316 396,316

$

66

$

$

$

1,428 9,598,970 9,600,398 9,600,398

$

19,933

Securities Available for Sale Debt securities: U.S. Government and federal agency Mortgage-backed Other Total debt securities Marketable equity securities Total securities available for sale Securities Held to Maturity State and political subdivisions

$

$ $

141 28,996 29,137 29,137 -

23

$

$ $

$

$

21,788 115,037 4,709 141,534 22,400 163,934

$

51,347

$

2006

Less Than Twelve Months Gross Unrealized Fair Losses Value

2,997,180 1,209,883 4,207,063 4,207,063 -

Over Twelve Months Gross Unrealized Fair Losses Value

$

5,463,590 13,195,702 1,006,995 19,666,287 128,000 $ 19,794,287 734,101

Over Twelve Months Gross Unrealized Fair Losses Value

$

287,464 383,466 12,503 683,433 32,150 715,583

$

44,104

$ 15,074,994 17,940,277 1,019,770 34,035,041 168,250 $ 34,203,291 $

885,902


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 3.

Securities (Continued)

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. At December 31, 2007, sixty-eight debt securities have unrealized losses with aggregate depreciation of 1.93% from the Company’s amortized cost basis. These unrealized losses relate principally to the fluctuations in the current interest rate environment. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies and whether downgrades by bond rating agencies have occurred. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available for sale, no declines are deemed to be other than temporary. At December 31, 2007, two marketable equity securities have unrealized losses with aggregate depreciation of 14.9% from the Company’s cost basis. These unrealized losses relate primarily to investments in the financial industry. Although the issues have shown declines in fair value and earnings as a result of fluctuations in the current interest rate environment and credit risk associated with Fannie Mae, no credit issues have been identified that cause management to believe the decline in market value is other than temporary. In analyzing the issuers financial condition, management considers industry analysts reports and projected target prices of investment analysts within a one year time frame. The Company reduced the carrying amount of its investment in a perpetual preferred stock issue of Freddie Mac, a government sponsored enterprise, by $50,000 at December 31, 2007. The perpetual stock issue is an investment grade security (AA- by S&P and Aa3 by Moody’s) that is held in the Company’s available-for-sale securities portfolio. Prior to this charge, impairment was recorded as an unrealized mark-to-market loss on securities available-for-sale and reflected as a reduction to equity through other comprehensive income. Accordingly, the reclassification of the unrealized after-tax loss to an other-than-temporary impairment non-cash charge did not affect stockholders’ equity. The Company recorded the other-than-temporary charge due to a significant decline in the market value of the security caused by Freddie Mac’s recent negative financial results and capital raising activity.

Note 4.

Loans

The major classifications of loans follow: December 31, 2007 2006 Commercial Residential real estate Installment Less: Allowance for loan losses

24

$ 145,835,786 38,216,630 50,630,225 234,682,641

$ 151,160,640 48,714,736 58,244,770 258,120,146

3,153,862

2,963,070

$ 231,528,779

$ 255,157,076


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 4.

Loans (Continued)

The Company's opinion as to the ultimate collectibility of these loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers. The following table presents data on impaired loans as of and for the years ended December 31, 2007 and 2006:

2007

2006

Impaired loans for which an allowance has been provided Impaired loans for which no allowance has been provided

$

4,747,881 290,381

$

3,346,050 676,499

Total loans determined to be impaired

$

5,038,262

$

4,022,549

$

1,294,746 5,037,186 300,920 306,581

$

824,900 3,990,826 255,270 256,337

Allowance for loan losses for impaired loans included in the allowance for loan losses Average recorded investment in impaired loans Interest income recognized from impaired loans Cash basis interest income recognized from impaired loans

The Banks utilize their data processing system to identify loan payments not made by their contractual due date and calculate the number of days each loan exceeds the contractual due date. The accrual of interest on any loan is discontinued when in the opinion of management, there is reasonable doubt as to the collectibility of interest and principal, or the loan reaches ninety days past due. Loans contractually past due in excess of ninety days and loans no longer accruing interest are summarized as follows:

December 31, 2007 2006 Loans contractually past due ninety days or more and still accruing interest: Not impaired Impaired Loans no longer accruing interest: Not impaired Impaired

$

165,184 127,849

$

626,634 -

1,210,012

525,256

$ 1,503,045

$ 1,151,890

The bank subsidiaries have had, and may be expected to have in the future, banking transactions with directors, executive officers, their immediate families and affiliated companies on essentially the same terms as those prevailing for comparable transactions with others. These persons and firms were indebted to the subsidiaries for loans totaling approximately $2,908,000 and $2,901,000 at December 31, 2007 and 2006, respectively.

25


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 5.

Allowance for Loan Losses

An analysis of activity in the allowance for loan losses follows:

2007 Balance, beginning

$

Provision for loan losses Recoveries

Note 6.

2,963,070

$

341,000 86,414 3,390,484 (236,622)

Loans charged off Balance, ending

Years Ended December 31, 2006

$

3,153,862

2,915,378

$

255,500 73,049 3,243,927 (280,857) $

2,963,070

2005 2,690,076 445,500 98,243 3,233,819 (318,441)

$

2,915,378

Loan Servicing

Mortgage and commercial real estate loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid balance of these loans are summarized as follows: 2007 Mortgage loan portfolios serviced for Federal National Mortgage Association Commercial real estate loan portfolios serviced for third party investors

Note 7.

$

December 31,

299,356,183 9,583,217

$

2006

303,292,711 5,686,534

Premises and Equipment

Premises and equipment consist of:

2007 Land Construction in progress Buildings and improvements Furniture and equipment

2006

$

2,645,714 79,727 8,971,407 6,201,268 17,898,116 8,525,688

$

2,662,940 8,919,888 6,004,311 17,587,139 7,853,849

$

9,372,428

$

9,733,290

Less accumulated depreciation

26

December 31,


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 8.

Deposits

As of December 31, 2007, the scheduled maturities of time deposits are as follows:

Years Ended December 31,

Amount

2007 2008 2009 2010 2011

$

105,753,180 23,209,227 16,412,993 1,744,449 1,191,140

$

148,310,989

The aggregate amount of time deposits, each with a minimum denomination of $100,000, was $51,519,016 and $55,288,205 at December 31, 2007 and 2006, respectively.

Note 9.

Subordinated Debentures and Junior Subordinated Debt Issued to Trusts

At December 31, 2006, the Company had $2,591,000 of subordinated debentures outstanding, which required semiannual interest payments at 9.5% and were due September 15, 2007. The debentures were unsecured to the claims of depositors and certain other creditors of the Bank. Subordinated debentures are eligible as capital under regulatory guidelines, with certain restrictions. The balance of $2,591,000 at December 31, 2006 matured during 2007. On March 26, 2002, Statutory Trust I (the Trust) was formed and issued $7,732,000 of floating rate Cumulative Trust Preferred Securities which is classified as junior subordinated debt in the accompanying balance sheet. The interest rate, 8.97% at December 31, 2006, is tied to the 3-month LIBOR rate plus 3.60%. The funds raised from the Trust’s issuance of these securities were all passed to the Company. The sole asset of the Trust is a note receivable from the Company. This debt requires quarterly interest payments and matures March 26, 2032. This debt may be redeemed after March 31, 2007 as outlined in the indenture agreement. On March 22, 2007, the debt was redeemed with the proceeds from Statutory Trust III. On March 17, 2004, Statutory Trust II (the Trust) was formed and issued $4,124,000 of floating rate Cumulative Trust Preferred Securities which is classified as junior subordinated debt in the accompanying balance sheet. The interest rate 7.78% and 8.15% December 31, 2007and 2006, respectively, is tied to the 3-month LIBOR rate plus 2.79%. The funds raised from the Trust’s issuance of these securities were all passed to the Company. The sole asset of the Trust is a note receivable from the Company. This debt requires quarterly interest payments and matures March 17, 2034. This debt may be redeemed after March 31, 2009 as outlined in the indenture agreement. On March 22, 2007, Statutory Trust III (the Trust) was formed and issued $7,732,000 of floating rate Cumulative Trust Preferred Securities which is classified as junior subordinated debt in the accompanying balance sheet. The interest rate, 6.58% at December 31, 2007, is tied to the 3-month LIBOR rate plus 1.68%. The funds raised from the Trust’s issuance of these securities were used to redeem Statutory Trust I. The sole asset of the Trust is a note receivable from the Company. This debt requires quarterly interest payments and matures March 22, 2037. This debt may be redeemed after March 22, 2012 as outlined in the indenture agreement.

27


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 9.

Subordinated Debentures and Junior Subordinated Debt Issued to Trusts (Continued)

In the event of certain changes or amendments to regulatory requirements or federal tax rates, the debt is redeemable in whole. The obligations under these instruments are fully and unconditionally guaranteed by Town and Country Financial Corporation and rank subordinate and junior in right of payment to all other liabilities of the Company. The Trust preferred securities qualify as Tier 1 Capital for the Company, subject to certain limitations, with the excess being included in total capital for regulatory purposes.

Note 10.

Other Borrowings

The Company's subsidiary banks had $25,522,600 and $27,406,921 in secured advances from Federal Home Loan Bank of Chicago at December 31, 2007 and 2006, respectively. Interest is payable monthly at rates ranging from 3.23 to 6.26 %. The advances are secured by the Federal Home Loan Bank of Chicago stock, approximately $22,491,000 of qualifying first mortgage loans and approximately $2,186,000 of securities. The Company's subsidiary banks had $272,747 and $475,904 in demand notes from the U.S. Treasury at December 31, 2007 and 2006, respectively. Interest is payable monthly at 25 basis points below the federal funds rate (3.06% at December 31, 2007 and 5.17% at December 31, 2006). The notes are secured by investment securities. Borrowings at December 31, 2007 and 2006 have maturity dates as follows: Maturity Year Ending December 31,

2007

2007 2008 2009 2010 2011 Thereafter

Note 11.

2006

$

5,045,347 1,000,000 7,250,000 8,500,000 4,000,000

$

6,475,904 5,906,921 2,000,000 11,500,000 2,000,000

$

25,795,347

$

27,882,825

Income Taxes

Income taxes consist of:

Federal and state: Current Deferred

2007

Years Ended December 31, 2006

2005

$

1,005,264 (12,764)

$

677,465 (343,703)

$

728,790 (334,090)

$

992,500

$

333,762

$

394,700

28


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 11.

Income Taxes (Continued)

The Company's income tax expense differed from the statutory federal rate of 34% as follows:

2007 Expected income taxes Income tax effect of: Tax-exempt income State income tax Dividends received Cash surrender value of life insurance Other

$

Years Ended December 31, 2006

1,398,286

$

(408,437) 142,646 (35,633) (43,896) (60,466) $

992,500

949,260

2005

$

875,208

(444,655) 127,052 (106,310) (42,281) (149,304) $

333,762

(423,034) 72,597 (94,277) (38,869) 3,075 $

394,700

The net deferred tax liabilities in the accompanying balance sheets include the following amounts of deferred tax assets (liabilities). 2007 Deferred tax liabilities Deferred tax assets Net deferred tax liability

December 31,

2006

$

(3,944,363) 2,126,093

$

(8,387,905) 2,005,940

$

(1,818,270)

$

(6,381,965)

The tax effects of principal temporary differences are shown in the following table.

2007 Allowance for loan losses Premises and equipment basis Securities available for sale Deferred compensation Deferred loan fees Mortgage servicing rights Alternative minimum tax credit Other Net deferred tax liability

29

December 31,

2006

$

1,147,343 (177,784) (2,710,634) 191,536 (1,799) (853,122) 456,664 129,526

$

1,057,972 (235,640) (7,261,565) 13,379 (3,132) (685,445) 433,379 299,087

$

(1,818,270)

$

(6,381,965)


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 12.

Capital Ratios

The Company's primary source of cash is dividends from its subsidiary banks. By regulation, the Banks are prohibited from paying dividends that would reduce regulatory capital below a specific percentage of assets without regulatory approval. The Banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory--and possibly additional discretionary-actions by regulators that, if undertaken, could have a direct material effect on the Banks' financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Banks must meet specific capital guidelines that involve quantitative measures of the Banks' assets, liabilities, and certain off-balancesheet items as calculated under regulatory accounting practices. The Banks' capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Banks to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to riskweighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2007, that the Banks meet all capital adequacy requirements to which they are subject. As of December 31, 2007, the most recent notification from the Federal Deposit Insurance Corporation categorized the Banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Banks must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Banks' category.

30


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 12.

Capital Ratios (Continued)

Actual capital amounts and ratios for the Company and the Banks are presented in the following tables:

December 31, 2007:

Actual Amount

Ratio

Minimum Required For Capital Adequacy Purposes Ratio Amount

To be Well Capitalized Under Regulatory Provisions Ratio Amount

Total Capital (to Risk Weighted Assets) Consolidated $ 45,870,679 Town & Country - Spfld 25,140,143 Logan County Bank 6,702,290 Town & Country Bank 5,860,146

15.52 % 12.43 14.82 13.81

Tier I Capital (to Risk Weighted Assets) Consolidated Town & Country - Spfld Logan County Bank Town & Country Bank

37,858,193 20,357,426 6,334,132 5,327,128

12.81 10.06 14.00 12.55

11,823,327 8,091,549 1,809,548 1,697,923

4.0 4.0 4.0 4.0

12,137,324 2,714,322 2,546,884

6.0 6.0 6.0

Tier I Capital (to Average Assets) Consolidated Town & Country - Spfld Logan County Bank Town & Country Bank

37,858,193 20,357,426 6,334,132 5,327,128

10.15 8.58 8.71 8.35

14,901,317 9,492,224 2,907,342 2,541,301

4.0 4.0 4.0 4.0

11,865,280 3,634,178 3,176,626

5.0 5.0 5.0

December 31, 2006:

Actual Amount

Ratio

$ 23,646,654 16,183,098 3,619,096 3,395,846

8.0 % 8.0 8.0 8.0

$

Minimum Required For Capital Adequacy Purposes Ratio Amount

20,228,873 4,523,870 4,244,807

10.0 % 10.0 10.0

To be Well Capitalized Under Regulatory Provisions Ratio Amount

Total Capital (to Risk Weighted Assets) Consolidated $ 48,754,166 Town & Country - Spfld 30,193,499 Logan County Bank 6,720,466 Town & Country Bank 6,001,129

16.44 % 15.53 14.56 12.08

Tier I Capital (to Risk Weighted Assets) Consolidated Town & Country - Spfld Logan County Bank Town & Country Bank

34,703,124 20,026,125 6,257,604 5,409,232

11.70 10.30 13.56 10.89

11,859,630 7,778,753 1,846,330 1,986,720

4.0 4.0 4.0 4.0

11,668,129 2,769,495 2,980,080

6.0 6.0 6.0

Tier I Capital (to Average Assets) Consolidated Town & Country - Spfld Logan County Bank Town & Country Bank

34,703,124 20,026,125 6,257,604 5,409,232

9.06 8.26 8.69 8.15

15,312,410 9,695,139 2,880,229 2,642,905

4.0 4.0 4.0 4.0

12,118,924 3,600,286 3,303,631

5.0 5.0 5.0

31

$ 23,713,260 15,557,505 3,692,660 3,973,440

8.0 % 8.0 8.0 8.0

$

19,446,881 4,615,825 4,966,800

10.0 % 10.0 10.0


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 13.

Employee Benefit Plans

The Company has an Employee Stock Ownership Plan (ESOP) to provide retirement benefits for substantially all employees. All full time employees who meet certain age and length of service requirements are eligible to participate in the ESOP. Dividends on allocated shares of common stock are allocated directly to the participant's account. All shares held by the ESOP have been allocated to the Plan participants and are included in the computation of weighted average common shares outstanding. During the years ended December 31, 2007, 2006, and 2005 the Company made a cash contribution of $5,000, $50,000 and $50,000, respectively, to the Plan. These contributions are included in employee benefits expense in the accompanying income statements. In the event a terminated Plan participant desires to sell his or her shares of the Company's stock, or for certain employees who elect to diversify their account balances and the Plan elects not to purchase the shares, the Company would be required to purchase the shares from the participant at their fair market value as determined by an independent appraiser. At December 31, 2007 and 2006, the Plan held 89,855 shares. The fair market value of those shares totaled approximately $1,257,970 and $1,213,000 as of December 31, 2007 and 2006, respectively. The Company makes contributions to a savings investment plan established for the benefit of substantially all of the Company's employees. A portion of the Company's contribution is based upon the employees' contributions and another portion of the Company's contribution is at the discretion of the Board of Directors. Contributions by the Company to the plan were $142,458, $94,235, and $99,636 for the years ended December 31, 2007, 2006, and 2005, respectively. The Company has a non-qualified executive incentive retirement plan (the Plan) that covers select members of management. Contributions to the Plan are based upon the Company meeting certain financial performance measures and are deferred until the employee reaches the “normal retirement age� of 65. Retirement benefits are paid out of the general assets of the Company. The retirement benefit is paid out in monthly installments for a 13 year period. During the first 13 years of retirement, should death occur, the beneficiary will continue to receive payments until the 13th year following retirement. During active service, should death occur, the beneficiary will receive monthly installments for a 13 year period in an amount equal to the greater of the deferral account balance or $272,757. The Plan vests over time and allows for an early termination benefit that is determined by the employee’s years of service. The accrued expenses related to the Plan were $394,683 and $437,106 as of December 31, 2007 and 2006, respectively.

Note 14.

Fair Value of Financial Instruments

Management has estimated the fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments have been excluded from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

32


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 14.

Fair Value of Financial Instruments (Continued)

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments: Cash and due from banks: The stated carrying amounts approximate their fair values. Federal funds sold and purchased: The stated carrying amounts of federal funds sold and purchased approximate their fair values. Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The carrying amount of accrued interest receivable approximates its fair value. The carrying values reported in the balance sheet for nonmarketable equity securities are used to approximate their fair values due to the lack of available market prices for these securities and comparable instruments. Loans and mortgage loans held for sale: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for fixed-rate loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The carrying amount of accrued interest receivable approximates its fair value. Originated mortgage servicing rights: The fair values for mortgage servicing rights are estimated using discounted cash flows based on current market conditions. Off-balance-sheet instruments: Fair values for the Company's off-balance-sheet instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. The fair value of these items is not material. Deposits: The fair values for demand deposits are, by definition, equal to the amount payable on demand at the balance sheet date. The carrying values for variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the balance sheet date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. The carrying amount of accrued interest payable approximates its fair value. Borrowings: The fair value of securities sold under agreements to repurchase, notes payable, subordinated debentures, trust preferred securities and other borrowings are determined using a discount rate similar to the rates available to the Company for debt with similar terms and remaining maturities.

33


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 14.

Fair Value of Financial Instruments (Continued)

The following table reflects a comparison of carrying values and the fair values of financial instruments at December 31, 2007 and 2006:

Carrying Value Financial Assets: Cash and due from banks Federal funds sold Securities Nonmarketable equity securities Loans Mortgage loans held for sale Originated mortgage servicing rights, net Accrued interest receivable Financial Liabilities: Deposits Federal funds purchased Note payable and junior subordinated debentures Other borrowings Accrued interest payable

$

2007

2006

Fair Value

Carrying Value

8,427,545 9,650,000 94,137,798 2,132,456 230,754,748 1,872,517

$ 10,022,587 99,310,028 2,094,355 255,157,076 337,219

$ 10,022,587 99,362,270 2,094,355 256,891,443 339,192

2,197,748 1,909,799

2,875,426 1,909,799

1,765,795 2,138,157

2,317,081 2,138,157

291,523,424 -

292,779,628 -

294,371,934 2,175,000

294,649,461 2,175,000

11,856,000 25,795,347 1,743,888

12,148,336 26,671,748 1,743,888

14,447,000 27,882,825 1,686,135

14,521,309 27,881,148 1,686,135

8,427,545 9,650,000 94,164,589 2,132,456 231,528,779 1,862,333

$

Fair Value

In addition, other assets and liabilities of the Company that are not defined as financial instruments are not included in the above disclosures, such as property and equipment. Also, nonfinancial instruments typically not recognized in financial statements nevertheless may have value but are not included in the above disclosures. These include, among other items, the estimated earnings power of core deposit accounts, the earnings potential of loan servicing rights, the earnings potential of the trust operations, the trained work force, customer goodwill and similar items.

Note 15.

Lease Commitments and Total Rental Expenses

The Company leases certain facilities under agreements expiring through 2014. The total minimum rental commitment at December 31, 2007 follows: Years Ended December 31,

Amount

2008 2009 2010 2011 2012 Thereafter

$

43,725 43,725 49,737 50,284 50,284 104,758

$

342,513

Total rental expense was $83,895, $67,154, and $82,391 for the years ended December 31, 2007, 2006, and 2005, respectively.

34


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 16.

Commitments, Contingencies and Credit Risk

In the normal course of business, there are outstanding various contingent liabilities such as claims and legal actions, which are not reflected in the accompanying balance sheet. In the opinion of management, no material losses are anticipated as a result of these actions or claims. The Company's bank subsidiaries are parties to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of their customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The contractual amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company's bank subsidiaries exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit written is represented by the contractual amount of those instruments. The Banks use the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments. Financial instruments whose contractual amounts represent credit risk at December 31, 2007 and 2006 follow:

December 31, 2007: Financial instruments whose contract amounts represent credit risk: Commitments to extend credit Standby letters of credit

Variable Rate Commitments

Fixed Rate Commitments

Total Commitments

Range of Rates on Fixed Rate Commitments

$ 31,842,471 1,624,569

$

8,852,536 345,216

$ 40,695,007 1,969,785

4.99 - 9.75% 5.0 - 8.0%

$ 40,426,317 906,862

$

9,148,687 345,216

$ 49,575,004 1,252,078

3.99 - 11.25% 5.00 - 8.00%

December 31, 2006: Financial instruments whose contract amounts represent credit risk: Commitments to extend credit Standby letters of credit

As of December 31, 2007 and 2006, the Company has no futures, forwards, swaps or option contracts, and does not have a material amount of other financial instruments with similar characteristics. All of the Company's loans, commitments to extend credit, and standby letters of credit have been granted to customers in the Company's market area. Investments in securities issued by state and political subdivisions also involve governmental entities within the Company's market area. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Standby letters of credit were granted primarily to commercial borrowers. The Company, as a matter of policy, does not extend credit to any single borrower or group of related borrowers in excess of $7,500,000. Although the Company has a diversified loan portfolio, a substantial portion of its debtors' ability to honor their contracts is dependent upon the performance of the economy in Sangamon, Logan, Macon and Macoupin Counties.

35


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 17.

Sale of Palmyra Branch

On October 19, 2005, Town & Country Bank of Springfield, a wholly owned subsidiary of Town and Country Financial Corporation, entered into a contract for the sale of Town & Country Bank of Springfield’s Palmyra branch. The acquiring bank, located in Modesto, Illinois, obtained all fixed assets of the branch and assumed liability for all deposits of the branch. The remaining assets and liabilities will remain with Town & Country Bank of Springfield. Town & Country Bank of Springfield received $1,250,000 on March 17, 2006, the closing date. The Company sold fixed assets with a net book value of $157,862 incurred attorney fees of $23,465, incurred employee benefit expense of $13,164 and incurred data processing conversion expense of $6,000. This resulted in a gain on sale to the Company of $1,049,509. The Company sold deposits totaling $11,008,635.

Note 18.

New Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standard No. 157 (SFAS No. 157), Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. This Statement does not require any new fair value measurements, but rather, it provides enhanced guidance to other pronouncements that require or permit assets or liabilities to be measured at fair value. This Statement is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. The Company is currently evaluating the impact, if any, of the provisions of SFAS 157. In February 2007, the FASB issued Statement on Financial Accounting Standard No. 159 (SFAS No. 159), The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115. SFAS 159 permits an entity to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective as of the beginning of any entity’s first fiscal year that begins after November 15, 2007. The Company does not expect that the adoption of this Statement will have a material impact on its financial position, results of operation and cash flows. In June 2006, the FASB issued FASB Interpretation No. 48 (“FIN48”), Accounting for Uncertainty in Income Taxes. This interpretation applies to all tax positions accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 clarifies the application of SFAS No. 109 by defining the criteria that an individual tax position must meet in order for the position to be recognized within the financial statements and provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition for tax positions. This interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption permitted. On January 23, 2008, the FASB decided to defer the effective date of FIN 48 for eligible nonpublic enterprises and to require those enterprises to adopt FIN 48 for annual periods beginning after December 15, 2007. The Company is eligible for the deferral and management has decided to defer the implementation of FIN 48. The Company does not expect that the adoption of this Interpretation will have a material impact on its financial position, results of operation and cash flows.

36


Town and Country Financial Corporation and Subsidiaries Notes to Consolidated Financial Statements Note 18.

New Accounting Pronouncements (Continued)

In September 2006, the Emerging Issues Task Force (“EITF”) reached a final consensus on Issue 06-04, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” The consensus stipulates that an agreement by an employer to share a portion of the proceeds of a life insurance policy with an employee during the postretirement period is a postretirement benefit arrangement required to be accounted for under SFAS No. 106 or Accounting Principles Board Opinion (“APB”) No. 12, “Omnibus Opinion – 1967.” The consensus concludes that the purchase of a split-dollar life insurance policy does not constitute a settlement under SFAS No. 106 and, therefore, a liability for the postretirement obligation must be recognized under SFAS No. 106 if the benefit is offered under an arrangement that constitutes a plan or under APB No. 12 if it is not part of a plan. Issue 06-04 is effective for annual or interim reporting periods beginning after December 15, 2007. The Company has endorsement split-dollar life insurance policies and is currently assessing the financial statement impact of implementing EITF 06-04. The Company does not expect that the adoption of EITF 06-04 will have a material impact on its financial position, results of operation and cash flows. In March 2007, the Emerging Issues Task Force (“EITF”) reached a final conclusion on Issue 06-10, “Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements”. The consensus concludes that a liability must be recognized for the postretirement obligation related to a collateral assignment split-dollar life insurance arrangement in accordance with SFAS No. 106 or APB No. 12. Any asset should be recognized and measured based on the nature and substance of the collateral assignment split-dollar life insurance arrangement. The effective date of EITF 06-10 is for fiscal years beginning after December 15, 2007. The Company is currently assessing the financial statement impact of implementing EITF 06-10. The Company does not expect that the adoption of EITF 06-10 will have a material impact on its financial position, results of operation and cash flows.

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We value teamwork. By working with others, we will do much more than we could on our own. Our community support is a classic example of the power of teamwork. Our team of volunteers reach out to both our servicing and outlying areas. We also provide financial support to a number of local charities as diverse as our employee base (see a complete list below). Town and Country Financial Corporation is dedicated to leveraging our financial and human resources to better our community. Abe Lincoln High Twelve Club No. 38 American Red Cross, IL Capitol Area Chapter Big Brothers Big Sisters of Sangamon County Blessed Sacrament School Boys and Girls Clubs of Springfield Boy Scouts, Abraham Lincoln Council Brown Street COGIC Butler Elementary School CASA’s Playhouse Project Capital Area Association of Realtors Children’s Miracle Network Christ the King School Farmingdale Elementary School Parent Teacher Club Fellowship of Christian Athletes Festival of Trees Silent Auction Glen-Aire Association Block Party/Picnic 2007 International Brotherhood of Electrical Workers Golf Outing Knights of Columbus Lincoln Art & Balloon Festival Lincoln Land Community College Foundation Lincoln High School Student of the Month Logan County Farm Bureau Lutheran Social Services of Illinois March of Dimes Mary Teubner Memorial Open Midwest Petroleum and Convenience Trade Show Silent Auction 2007 Muscular Dystrophy Association Newspapers in Education (State State Journal-Register Journal-Register) PORA (Positive Options, Referrals and Alternatives) Race for the Cure Rotary Club St. Agnes Parish Auction 2007 St. Teresa High School The Salvation Army Senior Services of Central Illinois Sparc The Springfield Chapter of Hadassah Springfield Lion’s Club Springfield Overflow Shelter Springfield Southeast High School Springfield Sports Hall of Fame Springfield Urban League Springfield Vicinity Sheet Metal Contractors Association & Mechanical Contractors Association of Central Illinois St. John’s Evangelical Lutheran Church St. John’s Hospital United Way of Central Illinois, Inc. YMCA of Springfield 39


����������������� Town and Country Financial Corporation shares are quoted on the OTC Bulletin Board under the symbol TWCF. If you are interested in purchasing shares of Town and Country Financial Corporation, you may contact the following Market Makers:

Automated Trading Desk Financial Services, LLC 866-283-2831 Ferris, Baker Watts, Inc. 800-638-7411 Hill Thompson Magid & Co., Inc. 800-631-3083 Howe Barnes Investments, Inc. 800-621-2364 Hudson Securities, Inc. 800-624-0050 Knight Equity Markets, L.P. 800-232-3684 McAdams Wright Ragen, Inc. 503-922-4888 Monroe Securities, Inc. 800-766-5560 Pershing Trading Company, L.P. 800-305-0161 UBS Securities LLC (UBSS) 203-719-8710

40


3601 Wabash Avenue Springfield, IL 62711 Toll Free 866.770.3100 www.townandcountrybank.com or www.logancountybank.com


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