<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 June 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 60642
(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 403,612 shares outstanding at July 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>
June 30, December 31,
1995 1994
--------------- ---------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 50,105,173 $ 68,711,783
Securities available for sale
(carried at market value) 137,425,050 128,581,562
Federal funds sold 28,000,000 0
Securities held to maturity
(carried at amortized cost)
U.S. Treasury obligations 286,150,965 395,069,714
U.S. Government agencies 427,868,458 445,233,900
Obligations of states and political subs. 146,930,959 131,657,144
Mortgage-backed securities 44,525,164 35,442,348
Collateralized mortgage obligations 171,327,303 127,651,180
Other securities 1,385,400 1,385,400
--------------- ---------------
Total Held to Maturity 1,078,188,249 1,136,439,686
(Market value of $1,099,878,000 in 1995
and $1,117,807,000 in 1994)
Loans 495,437,108 478,764,434
Less allowance for loan losses (3,846,984) (3,852,390)
--------------- ---------------
Net loans 491,590,124 474,912,044
Bank premises and equipment (net) 29,022,343 28,461,567
Accrued interest receivable 20,879,152 24,484,116
Goodwill and other intangibles (net) 5,544,773 5,965,895
Other assets 13,691,399 4,478,504
--------------- ---------------
$ 1,854,446,263 $ 1,872,035,157
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $ 155,599,965 $ 178,025,251
Savings deposits and NOW accounts 658,156,303 771,800,903
Money market accounts 98,186,709 101,015,611
Time deposits 741,584,660 643,775,088
--------------- ---------------
Total deposits 1,653,527,637 1,694,616,853
Federal funds purchased and securities sold under
agreements to repurchase 10,140,000 13,160,000
Accrued interest and other liabilities 27,140,104 6,794,518
--------------- ---------------
Total liabilities 1,690,807,741 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 155,519,274 150,658,871
Unrealized loss - AFS (232,409) (1,926,440)
--------------- ---------------
170,922,887 164,368,453
Less treasury stock - at cost, 29,215 shares
in 1995 and 28,258 shares in 1994 (7,284,365) (6,904,667)
--------------- ---------------
Total stockholders' equity 163,638,522 157,463,786
--------------- ---------------
$ 1,854,446,263 $ 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 June 30
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Interest income
Interest and fees on loans $ 10,009,764 $ 9,054,167
Interest and dividends on investment securities
Taxable securities 15,767,055 16,545,382
Securities exempt from Federal taxes 2,257,232 1,918,941
Dividends 20,706 20,706
Interest on available for sale securities 2,242,926 1,463,722
Interest on Federal funds sold 535,572 131,008
------------ ------------
Total interest income 30,833,255 29,133,926
------------ ------------
Interest expense
Interest on deposits 15,837,692 13,261,652
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 122,424 0
------------ ------------
Total interest expense 15,960,116 13,261,652
------------ ------------
Net interest income 14,873,139 15,872,274
Provision for loan losses 0 0
Net interest income after provision
for loan losses 14,873,139 15,872,274
------------ ------------
Other operating income
Service charges on deposit accounts 749,999 751,728
Trust department income 467,151 402,402
Other income 447,080 331,824
Net security gains (losses) 1,089,442 (299,949)
------------ ------------
Total other operating income 2,753,672 1,186,005
Other operating expenses
Salaries and employee benefits 5,441,379 5,078,974
Net occupancy expense of bank premises 821,234 734,182
Equipment depreciation, rentals and maintenance 624,183 521,812
Insurance 1,020,504 1,048,026
Outside fees and services 503,231 478,303
Data processing 526,557 489,325
Other expenses 1,583,540 1,370,829
------------ ------------
Total other operating expenses 10,520,628 9,721,451
------------ ------------
Income before income tax expense 7,106,183 7,336,828
Income tax expense 1,774,000 2,077,000
------------ ------------
NET INCOME $5,332,183 $5,259,828
============ ============
Net income per share $13.20 $12.95
------ ------
Weighted average shares outstanding 404,002 406,261
------- -------
</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>
Six months ended June 30
----------------------------------
1995 1994
------------- ---------------
<S> <C> <C>
Interest income
Interest and fees on loans $ 19,672,872 $ 17,764,349
Interest and dividends on investment securities
Taxable securities 32,720,169 32,429,288
Securities exempt from Federal taxes 4,460,135 3,803,902
Dividends 41,412 41,412
Interest on available for sale securities 3,519,172 2,752,323
Interest on Federal funds sold 769,573 210,355
------------- -------------
Total interest income 61,183,333 57,001,629
------------- -------------
Interest expense
Interest on deposits 30,466,570 26,146,313
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 238,850 0
Interest on note payable 0 6,973
------------- -------------
Total interest expense 30,705,420 26,153,286
------------- -------------
Net interest income 30,477,913 30,848,343
Provision for loan losses 0 0
------------- -------------
Net interest income after provision
for loan losses 30,477,913 30,848,343
------------- -------------
Other operating income
Service charges on deposit accounts 1,492,089 1,450,830
Trust department income 911,756 800,921
Other income 771,271 689,167
Net security gains (losses) 1,103,005 (1,311,770)
------------- -------------
Total other operating income 4,278,121 1,629,148
Other operating expenses
Salaries and employee benefits 11,158,508 9,960,171
Net occupancy expense of bank premises 1,606,409 1,516,231
Equipment depreciation, rentals and maintenance 1,218,347 1,083,432
Insurance 2,058,483 2,094,594
Outside fees and services 1,073,503 930,087
Data processing 1,042,289 975,072
Other expenses 3,213,501 2,707,628
------------- -------------
Total other operating expenses 21,371,040 19,267,215
------------- -------------
Income before income tax expense 13,384,994 13,210,276
Income tax expense 3,265,000 3,474,000
------------- -------------
NET INCOME $ 10,119,994 $ 9,736,276
============= =============
Net income per share $25.03 $23.96
------ ------
Weighted average shares outstanding 404,250 406,404
------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
FIRST EVERGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Six Months Ended
June 30
-----------------------------
1995 1994
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $10,119,994 $9,736,276
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 1,651,327 1,535,681
Amortization of investment security discounts/premiums 6,136,329 13,728,766
Net (gain) loss on investment securities (1,103,005) 1,311,770
Deferred income taxes (30,633) (85,855)
Decrease (increase) in accrued interest receivable 3,604,964 (549,086)
Increase in other assets (10,094,433) (74,732)
Increase in accrued interest and other liabilities 20,345,586 2,249,094
------------- -------------
Net cash provided by operating activities 30,630,129 27,851,914
Cash flows from investing activities:
Capital expenditures (1,790,981) (2,769,750)
Proceeds from maturity of securities held to maturity 161,985,632 201,871,168
Purchases of securities held to maturity (109,372,839) (140,769,078)
Proceeds from sales of securities available for sale 792,721,658 212,848,486
Purchases of securities available for sale (798,353,623) (220,670,781)
Net increase in loans (16,678,080) (42,532,937)
------------- --------------
Net cash provided by investing activities 28,511,767 7,977,108
Cash flows from financing activities:
Net decrease in demand, money market, savings and
NOW accounts (138,898,788) (51,433,701)
Net increase in time deposits 97,809,572 34,703,356
Net decrease in Federal funds purchased and
securities sold under agreements to repurchase (3,020,000) 0
Cash dividends paid (5,259,592) (5,285,787)
Principal payments on note payable 0 (2,000,000)
Acquisition of treasury stock (379,698) (159,743)
------------- -------------
Net cash used by financing activities (49,748,506) (24,175,875)
------------- -------------
Increase in cash and cash equivalents 9,393,390 11,653,147
Cash and cash equivalents at beginning of period 68,711,783 65,027,016
------------- -------------
Cash and cash equivalents at end of period $78,105,173 $76,680,163
============= =============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $29,014,776 $25,772,407
Income taxes 2,760,000 3,200,000
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 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 for 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 June 30, 1995, the Bank's recorded 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 six
months ended June 30 was $233,000. Payments received on impaired loans are
recorded as reductions of principal. First Evergreen did not recognize any
interest on impaired loans in the six months ended June 30, 1995.
7
<PAGE> 8
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
Through the six month period ended June 30, 1995, the deposit base decreased by
$41,089,000. Rates on short term time deposits rose 23 basis points to 5.05%
during the period, while the rate paid on savings deposits remained at 3.00%.
Accordingly, the volume of time deposits increased by $97,810,000, while the
savings/NOW category declined by $113,645,000. During the same period, the
volume of demand deposits and Money Market Accounts decreased by $22,425,000
and $2,829,000, respectively. In the same 1994 period, total deposits
decreased by $16,730,000. As rates available on short term time deposits
exceeded the savings rate, the volume of time deposits increased $34,703,000,
while the savings/NOW category experienced a $44,354,000 decline. In the same
period, the volume of Money Market deposits increased $6,394,000, while demand
deposits declined by $13,473,000.
Due to the decline in deposits, interest earning assets decreased by
$21,408,000 during 1995. The held to maturity portfolio declined by
$58,251,000, lead by a $108,919,000 decrease in U.S. Treasury obligations.
Securities available for sale and Federal Funds sold increased by $8,843,000
and $28,000,000, respectively.
For the six month period ended June 30, 1995, the average interest rate spread
expressed on a tax equivalent basis (net interest margin) decreased seven basis
points to 3.33%, from 3.40% at June 30, 1994. Also, through the six month
period ending June 30, 1995, the return on average earning assets and average
cost of funds increased 64 and 71 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 for
deposits.
Annual return on average equity decreased from 13.52% at June 30, 1994 to
12.86% in 1995. The slight reduction is due to increased average equity
resulting from First Evergreen's continuing trend of equity growth. The
annualized return on average assets increased during this period from 1.05% at
June 30, 1994 to 1.12% in 1995 due to a 3.94% increase in net income.
Total shareholders' equity increased $6,175,000 from $157,464,000 at December
31, 1994 to $163,639,000 at June 30, 1995. During this period, the reserve for
unrealized losses - available for sale securities decreased $1,694,000, while
Treasury stock grew by $380,000. 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
8.65% on June 30, 1995, while the total risked based capital ratio declined to
27.18% due to the decrease in Treasury obligations, which are assigned a risk
weight of zero. Both capital ratios are monitored by Federal agencies which
require minimums of 5% for Tier I leveraged ratio and 10% for total risked
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 28.43%,
54.89% and 16.68% of total earning assets.
Similarly, a significant portion of interest sensitive liabilities are priced
at market rates or have short term maturities. Approximately 51.03% of
interest sensitive liabilities could be repriced within one year, 23.32% within
one to five years and 25.65% in excess of five years.
As of June 30, 1995, the market value of the held to maturity investment
portfolio exceeded book value by $21,690,000. Management has the positive
intent and ability to hold these securities until final maturity.
RESULTS OF OPERATIONS - Quarter ended June 30, 1995 Compared to Quarter Ended
June 30, 1994.
Net interest income of $14,873,000 for the quarter ended June 30, 1995
represents a $990,000 decrease from the same quarter last year. Interest income
(on a tax equivalent basis) decreased $781,000 from the prior year's quarter.
The average volume of interest earning assets decreased $32,478,000, while
their yield climbed 56 basis points to 7.43%. The average volume of interest
sensitive liabilities declined $47,680,000, while the average cost of funds
increased 82 basis points to 4.23%. The increased cost of funds resulted in an
11 basis point decline in net yield on earning assets, reaching 3.75% as of
June 30, 1995.
Other operating income increased $1,568,000 from the second quarter of 1994.
The increase is attributable to security gains of $1,089,000 realized during
the 1995 quarter and 1994 security losses of $300,000 resulting from a decline
in the bond market during a period of rising
9
<PAGE> 10
rates and accelerated prepayments on collateralized mortgage obligations.
Other income increased $115,000 due to gains realized on the sale of other real
estate. Income realized from service charges on deposit accounts and Trust
Department income reflect little change.
Other operating expenses increased $799,000 in the second quarter of 1995.
Employee salaries and benefits increased $362,000 or 7.13% 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 18 to 583. Other
expenses increased $213,000, lead by increases in contribution and related
expenses due to expanded community involvement.
Current period income tax expense decreased $303,000 due to the increased
volume of municipal interest. Accordingly, the effective income tax rate
decreased from 28.31% in 1994 to 24.96% in 1995.
RESULTS OF OPERATIONS - Six Months ended June 30, 1995 Compared to the Six
Months Ended June 30, 1994.
Net interest income of $30,478,000 for the six months ended June 30, 1995
represents a $370,000 decrease from the same 1994 period. The average
volume of interest earning assets decreased $26,271,000 to $1,732,120,000. The
return on these assets (on a tax equivalent basis) increased 64 basis points to
7.42%. Interest income (on a tax equivalent basis) increased $4,555,000 over
the same 1994 period.
The average volume of interest sensitive liabilities decreased by $44,335,000,
while the cost of funds increased by 71 basis points, reaching 4.09%. Net
yield on earning assets remained relatively constant, increasing six basis
points to 3.84%.
Other operating income increased $2,649,000 from the 1994 period. The increase
is due to security gains of $1,103,005 in 1995 versus 1994 losses of $1,312,000
due to a weak bond market and high volume of collateralized mortgage obligation
prepayments. Trust Department income, service charges on deposit accounts and
other income reflect little change.
Current period income tax expense declined $209,000 due to the increased volume
of municipal interest. Accordingly, the effective income tax rate decreased
from 26.30% in the 1994 period to 24.39 % in 1995.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Registrant was held on April 27,
1995, at which time 350,569 shares were cast in favor of re-electing the
Board of Directors in its entirety. Each director shall hold office until
the next Annual Meeting of Stockholders and until his successor shall be
elected and shall qualify.
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: August 9, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 50,105,173
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 28,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 137,425,050
<INVESTMENTS-CARRYING> 1,078,188,249
<INVESTMENTS-MARKET> 1,099,878,000
<LOANS> 495,437,108
<ALLOWANCE> 3,846,984
<TOTAL-ASSETS> 1,854,446,263
<DEPOSITS> 1,653,527,637
<SHORT-TERM> 10,140,000
<LIABILITIES-OTHER> 27,140,104
<LONG-TERM> 0
<COMMON> 163,638,522
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,854,446,263
<INTEREST-LOAN> 19,672,872
<INTEREST-INVEST> 40,740,888
<INTEREST-OTHER> 769,573
<INTEREST-TOTAL> 61,183,333
<INTEREST-DEPOSIT> 30,466,570
<INTEREST-EXPENSE> 30,705,420
<INTEREST-INCOME-NET> 30,477,913
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 1,103,005
<EXPENSE-OTHER> 21,371,040
<INCOME-PRETAX> 13,384,994
<INCOME-PRE-EXTRAORDINARY> 13,384,994
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,119,994
<EPS-PRIMARY> 25.03
<EPS-DILUTED> 25.03
<YIELD-ACTUAL> 3.84
<LOANS-NON> 581,372
<LOANS-PAST> 1,834,525
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,845,166
<ALLOWANCE-OPEN> 3,852,390
<CHARGE-OFFS> 80,408
<RECOVERIES> 75,002
<ALLOWANCE-CLOSE> 3,846,984
<ALLOWANCE-DOMESTIC> 3,846,984
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,302,747
</TABLE>
