<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, 1996.
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
Indicated by check mark whether the registrant (1) has filed all reports 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 402,003 shares outstanding at October 31, 1996.
1
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FIRST EVERGREEN CORPORATION
---------------------------
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Page
Numbers
-------
Consolidated Statements of Condition . . . . . . . . . . . 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
2
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FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Condition
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
-----------------------------
<S> <C> <C>
Cash and due from banks $ 38,459 $ 58,998
Federal funds sold 28,500 0
Available for sale securities 141,972 142,269
Held to maturity securities
U.S. Treasury obligations 163,713 251,116
U.S. Government agencies 406,851 411,858
Obligations of states and political subs. 170,573 151,295
Mortgage-backed securities 41,396 50,807
Collateralized mortgage obligations 204,950 208,345
Other securities 1,385 1,385
------------ -------------
Total held to maturity 988,868 1,074,806
(Market value of $1,001,903 in 1996
and $1,104,284 in 1995)
Loans 605,579 530,499
Less allowance for loan losses (3,404) (3,796)
------------ -------------
Net loans 602,175 526,703
Bank premises and equipment (net) 30,910 29,647
Accrued interest receivable 23,606 20,959
Goodwill and other intangibles (net) 4,492 5,124
Other assets 2,774 29,582
------------ -------------
$ 1,861,756 $ 1,888,088
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $ 164,478 $ 169,748
Savings deposits and NOW accounts 589,764 631,633
Money market accounts 97,507 97,174
Time deposits 801,049 763,391
------------ -------------
Total deposits 1,652,798 1,661,946
Federal funds purchased and Securities sold
under agreements to repurchase 16,825 15,070
Accrued interest and other liabilities 10,729 37,254
------------ -------------
Total liabilities 1,680,352 1,714,270
============ =============
Stockholders' equity
Common stock - authorized, 2,000,000 shares
of $25 par value; issued, 432,842 shares
in 1996 and 1995 10,821 10,821
Surplus 4,815 4,815
Retained earnings 175,064 165,629
Unrealized gains (losses) on Available for sale
securities, net of income taxes (1,465) 196
------------ -------------
189,235 181,461
Less treasury stock - at cost, 30,839 shares
in 1996 and 30,065 shares in 1995 (7,831) (7,643)
------------ -------------
Total stockholders' equity 181,404 173,818
------------ -------------
$ 1,861,756 $ 1,888,088
============ =============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
<TABLE>
<Caption
(UNAUDITED) Three months ended September 30
-------------------------------
1996 1995
<S> <C> <C>
Interest income
Interest and fees on loans $ 12,051 $ 10,256
Interest and dividends on investment securities
Taxable securities 15,028 15,870
Securities exempt from Federal taxes 2,456 2,250
Dividends 21 21
Interest on available for sale securities 1,827 2,193
Interest on Federal funds sold 256 440
-------- --------
Total interest income 31,639 31,030
-------- --------
Interest expense
Interest on deposits 16,293 16,337
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 156 123
-------- --------
Total interest expense 16,449 16,460
-------- --------
Net interest income 15,190 14,570
Provision for loan losses 200 0
-------- --------
Net interest income after provision
for loan losses 14,990 14,570
-------- --------
Other operating income
Service charges on deposit accounts 865 748
Trust department income 466 385
Other income 367 343
Net security gains (losses) (73) 161
-------- --------
Total other operating income 1,625 1,637
Other operating expenses
Salaries and employee benefits 5,693 5,616
Net occupancy expense of bank premises 881 883
Equipment depreciation, rentals and maintenance 673 635
Insurance 70 (62)
Outside fees and services 460 492
Data processing 498 522
Other expenses 1,565 1,315
-------- --------
Total other operating expenses 9,840 9,401
-------- --------
Income before income tax expense 6,775 6,806
Income tax expense 1,684 1,672
-------- --------
NET INCOME $ 5,091 $ 5,134
======== ========
Net income per share $12.65 $12.73
------ ------
Weighted average number of shares outstanding 402,487 403,394
------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
4
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FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30
------------------------------
1996 1995
<S> <C> <C>
Interest income
Interest and fees on loans $ 34,420 $ 29,928
Interest and dividends on investment securities
Taxable securities 45,432 48,591
Securities exempt from Federal taxes 7,016 6,710
Dividends 62 62
Interest on available for sale securities 5,413 5,712
Interest on Federal funds sold 1,057 1,210
--------- --------
Total interest income 93,400 92,213
--------- --------
Interest expense
Interest on deposits 48,355 46,803
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 426 362
--------- --------
Total interest expense 48,781 47,165
--------- --------
Net interest income 44,619 45,048
Provision for loan losses 200 0
--------- --------
Net interest income after provision
for loan losses 44,419 45,048
--------- --------
Other operating income
Service charges on deposit accounts 2,535 2,240
Trust department income 1,355 1,298
Other income 1,029 1,114
Net security gains 963 1,264
--------- --------
Total other operating income 5,882 5,916
Other operating expenses
Salaries and employee benefits 17,120 16,775
Net occupancy expense of bank premises 2,598 2,490
Equipment depreciation, rentals and maintenance 2,063 1,853
Insurance 195 1,997
Outside fees and services 1,430 1,565
Data processing 1,417 1,564
Other expenses 4,736 4,529
--------- --------
Total other operating expenses 29,559 30,773
--------- --------
Income before income tax expense 20,742 20,191
Income tax expense 5,266 4,937
--------- --------
NET INCOME $ 15,476 $ 15,254
========= ========
Net income per share $ 38.44 $ 37.76
--------- --------
Weighted average number of shares outstanding 402,594 403,962
--------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
5
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FIRST EVERGREEN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLARS IN THOUSANDS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended September 30
------------------------------
1996 1995
<S> <C> <C>
Cash flows from operating activities :
Net income $ 15,476 $ 15,254
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 2,684 2,506
Provision for loan losses 200 0
Amortization of investment security discounts/premiums 6,084 8,568
Net security gains (963) (1,264)
Deferred income taxes (204) (138)
Increase in accrued interest receivable (2,647) (1,948)
Decrease (increase) in other assets 27,906 (9,288)
Net (decrease) increase in accrued interest and other liabilities (26,525) 19,714
--------- ---------
Net cash provided by operating activities 22,011 33,404
Cash flows from investing activities :
Capital expenditures (3,516) (2,842)
Proceeds from maturity of securities held to maturity 234,151 202,612
Purchases of securities held to maturity (153,273) (152,188)
Proceeds from sales of securities available for sale 501,366 972,131
Purchases of securities available for sale (503,685) (979,050)
Net Increase in loans (75,472) (31,497)
--------- ---------
Net cash (used for) provided by investing activities (429) 9,166
Cash flows from financing activities :
Net Decrease in demand, money market, savings and NOW accounts (46,806) (132,608)
Net Increase in time deposits 37,658 102,924
Net Increase in Federal funds purchased and Securities sold under
agreements to repurchase 1,755 1,225
Cash dividends paid (6,040) (5,260)
Acquisition of treasury stock (188) (615)
--------- ---------
Net cash used for financing activities (13,621) (34,334)
--------- ---------
Increase in cash and cash equivalents 7,961 8,236
Cash and cash equivalents at beginning of period 58,998 68,713
--------- ---------
Cash and cash equivalents at end of period $66,959 $ 76,949
========= =========
Supplemental disclosure of cash flow information :
Cash paid during the period for :
Interest $ 48,525 $ 45,256
Income taxes 5,000 4,510
</TABLE>
The accompanying notes are an integral part of these statements.
6
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FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
September 30, 1996
Unaudited - Dollars in Thousands
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 1995 Annual Report and Form 10-K and should be read
in conjunction herewith.
In the opinion of management, all adjustments necessary for fair presentation
of the financial position and the results of operations for the interim
periods, all of which were recurring and normal, have been made. The results
of operations for the interim period are not necessarily indicative of results
that may be expected for the entire fiscal year.
NOTE B
The preparation of financial statements in conformance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
7
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Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in Thousands Except Share Data)
FINANCIAL CONDITION
Through the nine month period ended September 30, 1996, the deposit base
remained stable, decreasing $9,148 or .55%. Savings deposits and NOW accounts
decreased $41,869 as depositors continued to reposition their funds into higher
yielding time deposits, which grew by $37,658. Demand deposits declined by
$5,270, while money market accounts increased by $333. During the same 1995
period, the deposit base decreased by $29,684. 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, while the savings/NOW category declined by $126,952. During the
same period, the volume of demand deposits and money market accounts decreased
by $4,905 and $751, respectively.
Interest earning assets increased by $17,345 during 1996. The held to maturity
portfolio declined by $85,938, led by an $87,403 decrease in U.S. Treasury
obligations. The loan portfolio and Federal Funds sold increased by $75,080
and $28,500, respectively, while available for sale securities declined by
$297.
For the nine month period ended September 30, 1996, the average interest rate
spread expressed on a tax equivalent basis (net interest margin) decreased 14
basis points to 3.09%, from 3.23% at September 30, 1995. During the same
period, the return on average earning assets increased one basis point, while
the average cost of funds increased 15 basis points to 4.31%. 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 12.58% at September 30, 1995 to
11.73% in 1996. 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 unchanged at 1.10%.
Total shareholders' equity increased $7,586 from $173,818 at December 31, 1995
to $181,404 at September 30, 1996. During this period, the net unrealized loss
on Available for Sale Securities increased $1,661, while treasury stock grew by
$188. On January 8, 1996, a $15.00 per share dividend totaling $6,040 was paid
to stockholders of record as of January 3, 1996.
The Tier I leveraged capital ratio increased 85 basis points from 9.10% at
December 31, 1995 to 9.95% on September 30, 1996, while the total risk-based
capital ratio increased to 27.50%, as equity continued to grow. 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."
8
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LIQUIDITY
The objective of liquidity management is to ensure that First Evergreen can
meet its cash flow requirements and capitalize on opportunities on a timely
basis. Liquidity is secured by managing the mix of items on the balance sheet
and expanding sources of liquidity. At September 30, 1996, First Evergreen's
sources of liquidity totalled $480,153, including $249,105 in held to maturity
securities maturing within one year, $28,500 in Federal Funds sold, $60,576 in
estimated mortgage backed security prepayments within the next year and
$141,972 in available for sale securities. Deposits totalled $1,652,798,
yielding a liquidity ratio of 29.05%.
Earning assets with maturities of less than one year, one to five years and in
excess of five years totaled 28.55%, 52.15% and 19.3%, respectively.
Similarly, approximately 47.49% of interest sensitive liabilities could be
repriced within one year, 26.71% within one to five years and 25.80% in excess
of five years.
Cash and cash equivalents increased $7,961 during the nine months ended
September 30, 1996, reaching $66,959. Operating activities contributed $22,011
primarily due to net income of $15,476. Investing activities used $429,
primarily due to the increase in the loan portfolio and a decrease in the held
to maturity investment portfolio. Financing activities used $13,621 due to a
$9,148 decrease in deposits and a $6,040 cash dividend paid.
As of September 30, 1996, the market value of the held to maturity investment
portfolio exceeded book value by $13,035. Management has the positive intent
and ability to hold these securities until final maturity.
RESULT OF OPERATIONS - Quarter Ended September 30, 1996 Compared to Quarter
Ended September 30, 1995.
Net interest income, before provision for loan losses, of $15,190 for the
quarter ended September 30, 1996 represents a $620 increase from the same
quarter last year. Net interest income (on a tax equivalent basis) increased
$729 from the prior year's quarter. The average volume of interest earning
assets increased $29,219, while their yield increased seven basis points to
7.41%. The average volume of interest sensitive liabilities decreased $7,894,
while the average cost of funds remained constant at 4.31%. The net interest
margin increased seven basis points to 3.10% with a corresponding nine point
increase in net yield on earning assets.
Other operating income decreased $12 from the third quarter of 1995. The
decrease is attributable to security gains of $161 realized during the 1995
quarter versus 1996 security losses of $73. Service charges on deposit
accounts increased $117 due to the implementation of a nominal charge for
customers' use of foreign ATMs, while Trust Department income rose $81 and
other income showed little change.
Other operating expense increased $439. Other expense increased $250 due to
increases in armored services, printed forms and several other categories.
Insurance expense increased $132 due to the 1995 FDIC insurance rebate.
Salaries and employee benefits increased $77 due to increased medical insurance
expense and annual salary adjustments. Equipment
9
<PAGE> 10
expense rose $38 due to increased depreciation resulting from equipment
upgrades at several facilities and higher equipment repair costs. Outside fees
and services, data processing and bank premises saw little change.
Current period income tax increased $12, from $1,672 to $1,684. The effective
tax rate was 24.86% for the 1996 period.
RESULT OF OPERATIONS - Nine Months ended September 30, 1996 Compared to Nine
Months Ended September 30, 1995.
Net interest income, before provision for loan losses, of $44,619 represents a
$429 decline from the same 1995 period. Net interest income (on a tax
equivalent basis) decreased $273 from 1995. The average volume of interest
earning assets rose $21,339, while their yield increased one basis point to
7.40%. The average volume of interest sensitive liabilities declined $3,195,
while the average cost of funds increased 15 basis points to 4.31%. The net
interest margin declined 14 basis points to 3.09%, while the net yield on
earning assets declined seven basis points to 3.69%.
Other operating income decreased $34 from the same 1995 period. Service
charges on deposit accounts increased $295 due to the implementation of a
nominal charge for customers' use of foreign ATMs. Other income is down $85
due to 1995 gains on other real estate owned of $143 versus $5 in the current
period. Net security gains declined $301, while Trust Department income
reflects modest change.
Other operating expenses declined $1,214 from 1995 due to a $1,802 decrease in
insurance expense related to the deposit insurance relief. Salaries and
employee benefits increased $345 due to annual salary adjustments and increased
medical expense. Equipment expense rose $210 due to the equipment upgrades and
repair costs. Net occupancy of bank premises increased $108 due to an increase
in the real estate tax accrual in anticipation of a township reassessment.
Data processing expense declined $147 due to a favorable contract extension,
and outside fees declined $135 due to decreases in correspondent bank
processing fees and ATM interchange expense. Other expenses increased $207 due
to increases in armored services, printed forms and several other categories.
Current period income tax increased $329 due to a $551 increase in pretax
income. The effective tax rate increased 94 basis points, from 24.45% in 1995
to 25.39% in 1996.
10
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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 4, 1996 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-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 38,459,422
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 28,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 141,972,046
<INVESTMENTS-CARRYING> 988,868,256
<INVESTMENTS-MARKET> 1,001,903,000
<LOANS> 605,579,442
<ALLOWANCE> 3,404,274
<TOTAL-ASSETS> 1,861,756,310
<DEPOSITS> 1,652,798,011
<SHORT-TERM> 16,825,000
<LIABILITIES-OTHER> 10,729,282
<LONG-TERM> 0
<COMMON> 181,404,017
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,861,756,310
<INTEREST-LOAN> 34,419,899
<INTEREST-INVEST> 58,979,672
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 93,399,571
<INTEREST-DEPOSIT> 48,354,812
<INTEREST-EXPENSE> 48,780,562
<INTEREST-INCOME-NET> 44,419,009
<LOAN-LOSSES> 200,000
<SECURITIES-GAINS> 963,279
<EXPENSE-OTHER> 29,558,841
<INCOME-PRETAX> 20,741,767
<INCOME-PRE-EXTRAORDINARY> 15,475,767
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,475,767
<EPS-PRIMARY> 38.44
<EPS-DILUTED> 38.44
<YIELD-ACTUAL> 3.69
<LOANS-NON> 1,424,297
<LOANS-PAST> 3,142,428
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,216,388
<ALLOWANCE-OPEN> 3,795,947
<CHARGE-OFFS> 648,174
<RECOVERIES> 56,501
<ALLOWANCE-CLOSE> 3,404,274
<ALLOWANCE-DOMESTIC> 3,404,274
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 135,853
</TABLE>
