<PAGE> 1
ORIGINAL
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934. For the period ended September 30, 1995.
Transition Report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934. For the transition period from __________ to
__________.
Commission file number 2-94209
FIRST EVERGREEN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-2952700
- -------- ----------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
3101 W. 95th Street, Evergreen Park, Illinois 60805
- --------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(708) 422-6700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each issuer's class of common
stock, as of the latest practicable date.
Common Stock - $25.00 par value, 2,000,000 shares authorized, 432,842
shares issued and 403,061 shares outstanding at
October 31, 1995.
1
<PAGE> 2
FIRST EVERGREEN CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Numbers
-------
<S> <C>
Consolidated Balance Sheets .......................... 3
Consolidated Statements of Income..................... 4
Consolidated Statements of Cash Flows................. 6
Notes to Consolidated Financial Statements............ 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS........... 8
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K............... 11
</TABLE>
2
<PAGE> 3
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Condition
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
ASSETS ------------- ------------
<S> <C> <C>
Cash and due from banks $ 56,948,740 $ 68,711,783
Federal funds sold 20,000,000 0
Securities available for sale (carried at market value) 138,622,205 128,581,562
Securities held to maturity (carried at amortized cost)
U.S. Treasury obligations 279,694,356 395,069,714
U.S. Government agencies 421,141,711 445,233,900
Obligations of states and political subs. 144,349,927 131,657,144
Mortgage-backed securities 50,061,934 35,442,348
Collateralized mortgage obligations 181,401,650 127,651,180
Other securities 1,385,400 1,385,400
------------- -------------
Total Held to Maturity 1,078,034,978 1,136,439,686
(Market value of $1,094,293,000 in 1995
and $1,117,807,000 in 1994)
Loans 510,248,626 478,764,434
Less allowance for loan losses (3,839,382) (3,852,390)
------------ ------------
Net loans 506,409,244 474,912,044
Bank premises and equipment (net) 29,429,090 28,461,567
Accrued interest receivable 26,432,382 24,484,116
Goodwill and other intangibles (net) 5,334,213 5,965,895
Other assets 13,048,751 4,478,504
-------------- --------------
$1,874,259,603 $1,872,035,157
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $ 173,120,453 $ 178,025,251
Savings deposits and NOW accounts 644,848,414 771,800,903
Money market accounts 100,264,693 101,015,611
Time deposits 746,699,136 643,775,088
------------- -------------
Total deposits 1,664,932,696 1,694,616,853
Securities sold under agreements to repurchase 14,385,000 13,160,000
Accrued interest and other liabilities 26,508,603 6,794,518
------------- -------------
Total liabilities 1,705,826,299 1,714,571,371
Stockholders' equity ------------- -------------
Common stock - authorized, 2,000,000 shares
of $25 par value; issued, 432,842 shares
in 1995 and 1994 10,821,050 10,821,050
Surplus 4,814,972 4,814,972
Retained earnings 160,653,508 150,658,871
Unrealized loss - AFS (336,737) (1,926,440)
------------ ------------
175,952,793 164,368,453
Less treasury stock - at cost, 29,781 shares
in 1995 and 28,258 shares in 1994 (7,519,489) (6,904,667)
------------ ------------
Total stockholders' equity 168,433,304 157,463,786
-------------- --------------
$1,874,259,603 $1,872,035,157
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three months ended September 30
-------------------------------
1995 1994
<S> <C> <C>
Interest income
Interest and fees on loans $ 10,255,542 $ 9,394,663
Interest and dividends on investment securities
Taxable securities 15,870,561 16,717,065
Securities exempt from Federal taxes 2,249,877 1,965,190
Dividends 20,706 20,706
Interest on available for sale securities 2,193,019 1,519,792
Interest on Federal funds sold 440,434 184,941
---------- ----------
Total interest income 31,030,139 29,802,357
---------- ----------
Interest expense
Interest on deposits 16,336,963 13,763,354
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 123,403 0
---------- ----------
Total interest expense 16,460,366 13,763,354
---------- ----------
Net interest income 14,569,773 16,039,003
Provision for loan losses 0 0
----------- ----------
Net interest income after provision
for loan losses 14,569,773 16,039,003
---------- ----------
Other operating income
Service charges on deposit accounts 748,312 750,076
Trust department income 385,742 458,261
Other income 342,756 347,286
Net security gains (losses) 160,812 (18,408)
--------- ----------
Total other operating income 1,637,622 1,537,215
Other operating expenses
Salaries and employee benefits 5,616,380 5,056,093
Net occupancy expense of bank premises 883,410 740,929
Equipment depreciation, rentals and maintenance 634,780 556,446
Insurance (61,826) 1,045,154
Outside fees and services 491,673 558,354
Data processing 521,647 461,012
Other expenses 1,315,098 1,377,796
--------- ---------
Total other operating expenses 9,401,162 9,795,784
--------- ---------
Income before income tax expense 6,806,233 7,780,434
Income tax expense 1,672,000 2,156,000
--------- ---------
NET INCOME $ 5,134,233 $ 5,624,434
========= =========
Net income per share $12.73 $13.86
------- -------
Weighted average shares outstanding 403,394 405,914
------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30
------------------------------
1995 1994
<S> <C> <C>
Interest income
Interest and fees on loans $ 29,928,414 $ 27,159,012
Interest and dividends on investment securities
Taxable securities 48,590,730 49,146,353
Securities exempt from Federal taxes 6,710,012 5,769,092
Dividends 62,118 62,118
Interest on available for sale securities 5,712,191 4,272,115
Interest on Federal funds sold 1,210,007 395,296
---------- ----------
Total interest income 92,213,472 86,803,986
---------- ----------
Interest expense
Interest on deposits 46,803,533 39,909,667
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 362,253 0
Interest on note payable 0 6,973
---------- ----------
Total interest expense 47,165,786 39,916,640
---------- ----------
Net interest income 45,047,686 46,887,346
Provision for loan losses 0 0
Net interest income after provision ---------- ----------
for loan losses 45,047,686 46,887,346
---------- ----------
Other operating income
Service charges on deposit accounts 2,240,401 2,200,906
Trust department income 1,297,498 1,259,182
Other income 1,114,027 1,036,453
Net security gains (losses) 1,263,817 (1,330,178)
--------- -----------
Total other operating income 5,915,743 3,166,363
Other operating expenses
Salaries and employee benefits 16,774,888 15,016,264
Net occupancy expense of bank premises 2,489,819 2,257,160
Equipment depreciation, rentals and maintenance 1,853,127 1,639,878
Insurance 1,996,657 3,139,748
Outside fees and services 1,565,176 1,488,441
Data processing 1,563,936 1,436,084
Other expenses 4,528,599 4,085,424
---------- ----------
Total other operating expenses 30,772,202 29,062,999
---------- ----------
Income before income tax expense 20,191,227 20,990,710
Income tax expense 4,937,000 5,630,000
---------- ----------
NET INCOME $ 15,254,227 $ 15,360,710
========== ==========
Net income per share $37.76 $37.81
------- -------
Weighted average shares outstanding 403,962 406,239
------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
FIRST EVERGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30
------------------------------
1995 1994
------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $15,254,227 $15,360,710
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 2,505,901 2,313,313
Amortization of investment security discounts/premiums 8,567,954 19,147,626
Net (gain) loss on investment securities (1,263,817) 1,330,178
Deferred income taxes (138,392) (79,129)
Increase in accrued interest receivable (1,948,266) (5,613,177)
Increase in other assets (9,287,849) (1,341,115)
Increase in accrued interest and other liabilities 19,714,085 3,279,692
---------- ----------
Net cash provided by operating activities 33,403,843 34,398,098
Cash flows from investing activities:
Capital expenditures (2,841,741) (4,017,555)
Proceeds from maturity of securities held to maturity 202,611,705 253,712,842
Purchases of securities held to maturity (152,187,795) (215,490,345)
Proceeds from sales of securities available for sale 972,131,627 239,145,469
Purchases of securities available for sale (979,049,911) (247,190,156)
Net increase in loans (31,497,200) (47,819,842)
----------- -----------
Net cash provided by (used in) investing activities 9,166,685 (21,659,587)
Cash flows from financing activities:
Net decrease in demand, money market, savings and NOW
accounts (132,608,205) (123,585,598)
Net increase in time deposits 102,924,048 84,602,090
Net increase in Securities sold under agreements to
repurchase 1,225,000 13,160,000
Cash dividends paid (5,259,592) (5,285,787)
Principal payment on note payable 0 (2,000,000)
Acquisition of treasury stock (614,822) (449,247)
----------- -----------
Net cash used in financing activities (34,333,571) (33,558,542)
----------- -----------
Increase (decrease) in cash and cash equivalents 8,236,957 (20,820,031)
Cash and cash equivalents at beginning of period 68,711,783 65,027,016
----------- -----------
Cash and cash equivalents at end of period $76,948,740 $44,206,985
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $45,255,917 $39,163,195
Income taxes 4,510,000 5,330,000
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
September 30, 1995
(Unaudited)
NOTE A
The unaudited interim consolidated financial statements of First Evergreen
Corporation (First Evergreen) include the accounts of First Evergreen and its
subsidiary bank, First National Bank of Evergreen Park.
The unaudited interim consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and reporting
practices. The more significant policies are incorporated in the Notes to
Financial Statements in the 1994 Annual Report and Form 10-K, and should be
read in conjunction herewith.
The unaudited interim consolidated financial statements in this report have
been reviewed by independent public accountants. In the opinion of management,
all adjustments necessary for fair presentation of the financial position and
the results of operations for the interim periods have been made.
NOTE B
First Evergreen adopted SFAS 114, "Accounting by Creditors for Impairment of a
Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan--Income Recognition and Disclosures," as of January 1, 1995. SFAS No. 114
requires that certain impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's original effective interest
rate. As a practical expedient, impairment may be measured based on the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a valuation
allowance. As a result of adopting these statements, no additional allowance
for loan losses was required as of January 1, 1995.
As of September 30, 1995, the Bank's recofrded investment in impaired loans and
the related valuation allowance calculated under SFAS No. 114 and No. 118 are
as follows:
<TABLE>
<CAPTION>
Recorded Valuation
Investment Allowance
---------- ---------
<S> <C> <C>
Impaired loans -
Valuation allowance required $231,000 $18,000
No valuation allowance required -0- -0-
------- ------
Total Impaired Loans $231,000 $18,000
======== =======
</TABLE>
This valuation allowance is included in the allowance for loan losses on the
balance sheet. The average recorded investment in impaired loans for the nine
months ended September 30 was $232,000. Payments received on impaired loans
are recorded as reductions of principal. First Evergreen did not recognize any
interest on impaired loans in the nine months ended September 30, 1995.
7
<PAGE> 8
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION
Through the nine month period ended September 30, 1995, the deposit base
decreased by $29,684,000. Rates on short term time deposits reached 5.15%
during the period, while the rate paid on savings deposits remained at 3.00%.
Accordingly, the volume of time deposits increased by $102,924,000, while the
savings/NOW category declined by $126,952,000. During the same period, the
volume of demand deposits and Money Market Accounts decreased by $4,905,000 and
$751,000, respectively. In the same 1994 period, total deposits decreased by
$25,824,000. As rates available on short term time deposits exceeded the
savings rate, the volume of time deposits increased $84,602,000, while the
savings/NOW category experienced a $111,894,000 decline. In the same period,
the volume of Money Market deposits increased $8,573,000, while demand deposits
declined by $7,105,000.
Interest earning assets increased by $3,120,000 during 1995. The held to
maturity portfolio declined by $58,405,000, lead by a $115,375,000 decrease in
U.S. Treasury obligations. The loan portfolio, securities available for sale
and Federal Funds sold increased by $31,484,000, $10,041,000 and $20,000,000,
respectively.
For the nine month period ended September 30, 1995, the average interest rate
spread expressed on a tax equivalent basis (net interest margin) decreased 19
basis points to 3.22%, from 3.41% at September 30, 1994. During the same
period, the return on average earning assets and average cost of funds
increased 54 and 73 basis points, respectively. The increased return on
earning assets is primarily due to reduced collateralized mortgage obligation
premium amortization in response to lengthened average lives, while the rise in
cost of funds is due to the upward trend in rates paid on time deposits.
Financial market conditions generally dictate the return realized on average
earning assets and the rates paid to depositors. However, management has a
discretionary influence on the investment of assets and rates paid on deposits.
Annual return on average equity decreased from 13.90% at September 30, 1994 to
12.58% in 1995. The reduction is due to increased average equity resulting
from First Evergreen's continuing trend of equity growth. The annualized
return on average assets remained constant, decreasing one basis point to 1.10%
in 1995.
Total shareholders' equity increased $10,969,000 from $157,464,000 at December
31, 1994 to $168,433,000 at September 30, 1995. During this period, the
reserve for unrealized losses - available for sale securities decreased
$1,590,000, while Treasury stock grew by $615,000. On January 11, 1995, a
$13.00 per share cash dividend totalling $5,260,000 was paid to stockholders of
record as of January 4, 1995.
8
<PAGE> 9
The Tier I leveraged capital ratio increased from 8.27% at December 31, 1994 to
8.87% on September 30, 1995, while the total risk based capital ratio declined
to 27.36% due to the decreased volume of U.S. Treasury Securities, which carry
a risk weight of zero percent. Both capital ratios are monitored by Federal
agencies which require minimums of 5% for Tier I leveraged ratio and 10% for
total risk based ratio to receive the highest classification of "well
capitalized."
LIQUIDITY
The daily management of funds continues in a manner consistent with established
policy, seeking to avoid fluctuating net interest margins and enhance
consistent growth of net interest income through periods of changing interest
rates. The major element of this policy includes making security investments
of high quality which mature within a short period of time or have good
marketability characteristics. This allows the corporation to effectively
manage its interest rate risk and meet liquidity demands. The policy is
reflected in the earning asset maturities of less than one year, one to five
years and in excess of five years, which represented approximately 28.11%,
55.17% and 16.18% of total earning assets.
Similarly, a significant portion of interest sensitive liabilities are priced
at market rates or have short term maturities. Approximately 51.74% of
interest sensitive liabilities could be repriced within one year, 22.55% within
one to five years and 25.71% in excess of five years.
As of September 30, 1995, the market value of the held to maturity investment
portfolio exceeded book value by $16,258,000. Management has the positive
intent and ability to hold these securities until final maturity.
RESULT OF OPERATIONS - Quarter Ended September 30, 1995 Compared to Quarter
Ended September 30, 1994.
Net interest income of $14,570,000 for the quarter ended September 30, 1995
represents a $1,469,000 decrease from the same quarter last year. Interest
income (on a tax equivalent basis) increased $1,388,000 from the prior year's
quarter. The average volume of interest earning assets decreased $12,468,000,
while their yield climbed 38 basis points to 7.34%. The average volume of
interest sensitive liabilities declined $28,240,000, while the average cost of
funds increased 78 basis points to 4.31%. The increased cost of funds resulted
in a 26 basis point decline in net yield on earning assets, reaching 3.60% as
of September 30, 1995.
Other operating income increased $100,407 from the third quarter of 1994. The
increase is attributable to security gains of $161,000 realized during the 1995
quarter and 1994 security losses of $18,000 resulting from a decline in the
bond market during a period of rising rates and accelerated prepayments on
collateralized mortgage obligations. Trust Department income declined
modestly, while service charges on deposit accounts and other income reflect
little change.
9
<PAGE> 10
Other operating expenses declined $395,000 due to a $1,107,000 decrease in
insurance expense. Insurance declined as the Federal Deposit Insurance
Corporation determined that the insurance fund had been recapitalized as of
June 1 and, therefore, refunded the overpaid premiums for the period of June 1,
1995 through September 30, 1995 in the amount of $1,039,000. Salaries and
employee benefits increased $560,000 due to annual salary adjustments, an
increase in health care costs and an increase in the number of employees
expressed on a full time equivalent basis by 16 to 577. Net occupancy of bank
premises rose $142,000 due to increases in repairs, utilities and real estate
taxes. Equipment expense, outside fees and services and other expenses showed
little change.
Current period income tax expense decreased $484,000 due to a $974,000 decline
in pretax income and increased volume of municipal interest. Accordingly, the
effective income tax rate decreased from 27.71% in 1994 to 24.57% in 1995.
RESULTS OF OPERATIONS - Nine Months Ended September 30, 1995 Compared to the
Nine Months Ended September 30, 1994.
Net interest income of $45,048,000 for the nine months ended September 30, 1995
represents a $1,840,000 decrease from the same 1994 period. The average volume
of interest earning assets decreased $21,620,000 to $1,736,745,000. The return
on these assets (on a tax equivalent basis) increased 54 basis points to 7.39%.
Interest income (on a tax equivalent basis) increased $5,943,000 over the same
1994 period.
The average volume of interest sensitive liabilities decreased by $40,333,000,
while the cost of funds increased by 73 basis points, reaching 4.16%. Net
yield on earning assets remained relatively constant, decreasing five basis
points to 3.76%.
Other operating income increased $2,749,000 from the 1994 period, primarily due
to securities gains of $1,264,000 in the 1995 period versus 1994 losses of
$1,330,000 due to a weak bond market and high volume of collateralized mortgage
obligation prepayments. Other income, service charges on deposit accounts and
Trust Department income also reflect modest increases.
Other operating expenses increased $1,709,000 in 1995. Salaries and employee
benefits increased $1,759,000 due to salary adjustments, rising health care
costs and greater staffing levels. Other expenses increased $443,000 due to
increases in advertising and contribution expense resulting from expanded
community involvement. Net occupancy of bank premises increased $233,000 due
to higher repairs, utilities and real estate taxes. Equipment depreciation,
rentals and maintenance, data processing and outside fees and services also
experienced modest increases. Insurance expense declined $1,143,000 due to the
$1,039,000 FDIC insurance refund.
Current period income tax expense declined $693,000 due to a $799,000 decrease
in pretax income and increased volume of municipal interest. Accordingly, the
effective income tax rate decreased from 26.82% in the 1994 period to 24.57% in
1995.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Financial Data Schedule - Article 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Evergreen Corporation
Dated: November 8, 1995 BY: /s/ Stephen M. Hallenbeck
-----------------------------------
Stephen M. Hallenbeck
Secretary/Treasurer
Signing on behalf of the Registrant
and as Principal Financial Officer.
11
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 56,948,740
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 20,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 138,622,205
<INVESTMENTS-CARRYING> 1,078,034,978
<INVESTMENTS-MARKET> 1,094,293,000
<LOANS> 510,248,626
<ALLOWANCE> 3,839,382
<TOTAL-ASSETS> 1,874,259,603
<DEPOSITS> 1,664,932,696
<SHORT-TERM> 14,385,000
<LIABILITIES-OTHER> 26,508,603
<LONG-TERM> 0
<COMMON> 168,433,304
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,874,259,603
<INTEREST-LOAN> 29,928,414
<INTEREST-INVEST> 61,075,051
<INTEREST-OTHER> 1,210,007
<INTEREST-TOTAL> 92,213,472
<INTEREST-DEPOSIT> 46,803,533
<INTEREST-EXPENSE> 47,165,786
<INTEREST-INCOME-NET> 45,047,686
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 1,263,817
<EXPENSE-OTHER> 30,772,202
<INCOME-PRETAX> 20,191,227
<INCOME-PRE-EXTRAORDINARY> 20,191,227
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,254,227
<EPS-PRIMARY> 37.76
<EPS-DILUTED> 37.76
<YIELD-ACTUAL> 3.76
<LOANS-NON> 956,977
<LOANS-PAST> 2,948,485
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,447,491
<ALLOWANCE-OPEN> 3,852,390
<CHARGE-OFFS> 111,082
<RECOVERIES> 98,074
<ALLOWANCE-CLOSE> 3,839,382
<ALLOWANCE-DOMESTIC> 3,839,382
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,119,094
</TABLE>
