<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, 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 402,510 shares outstanding at July 31, 1996.
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FIRST EVERGREEN CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Page
Numbers
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
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<TABLE>
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Condition
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED)
June 30, December 31,
ASSETS 1996 1995
--------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 63,117 $ 58,998
Federal funds sold 13,000 0
Available for sale securities 140,568 142,269
Held to maturity securities
U.S. Treasury obligations 175,491 251,116
U.S. Government agencies 415,065 411,858
Obligations of states and political subs. 170,120 151,295
Mortgage-backed securities 44,291 50,807
Collateralized mortgage obligations 212,013 208,345
Other securities 1,385 1,385
------------------------- ---------------------
Total held to maturity 1,018,365 1,074,806
(Market value of $1,031,139 in 1996
and $1,104,284 in 1995)
Loans 592,060 530,499
Less allowance for loan losses (3,546) (3,796)
------------------------- ----------------------
Net loans 588,514 526,703
Bank premises and equipment (net) 30,187 29,647
Accrued interest receivable 19,873 20,959
Goodwill and other intangibles (net) 4,703 5,124
Other assets 2,771 29,582
------------------------- ---------------------
$ 1,881,098 $ 1,888,088
LIABILITIES AND STOCKHOLDERS' EQUITY ========================= =====================
Liabilities
Demand deposits $ 177,977 $ 169,748
Savings deposits and NOW accounts 608,747 631,633
Money market accounts 99,739 97,174
Time deposits 786,251 763,391
------------------------- ---------------------
Total deposits 1,672,714 1,661,946
Federal funds purchased and Securities sold
under agreements to repurchase 13,745 15,070
Accrued interest and other liabilities 18,635 37,254
------------------------- ---------------------
Total liabilities 1,705,094 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 169,974 165,629
Net unrealized loss on Available for Sale Securities (1,850) 196
------------------------- ---------------------
183,760 181,461
Less treasury stock - at cost, 30,326 shares
in 1996 and 30,065 shares in 1995 (7,756) (7,643)
------------------------- ---------------------
Total stockholders' equity 176,004 173,818
------------------------- ---------------------
$ 1,881,098 $ 1,888,088
The accompanying notes are an integral part of these statements. ========================= =====================
</TABLE>
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<TABLE>
<CAPTION>
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED) Three months ended June 30
-------------------------------
1996 1995
<S> <C> <C>
Interest income
Interest and fees on loans $ 11,527 $ 10,010
Interest and dividends on investment securities
Taxable securities 14,669 15,767
Securities exempt from Federal taxes 2,316 2,257
Dividends 20 21
Interest on available for sale securities 1,808 2,243
Interest on Federal funds sold 554 535
---------- ----------
Total interest income 30,894 30,833
Interest expense ---------- ----------
Interest on deposits 15,907 15,838
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 133 122
---------- ----------
Total interest expense 16,040 15,960
---------- ----------
Net interest income 14,854 14,873
Provision for loan losses 0 0
Net interest income after provision ---------- ----------
for loan losses 14,854 14,873
---------- ----------
Other operating income
Service charges on deposit accounts 838 750
Trust department income 439 467
Other income 335 447
Net security gains (35) 1,090
--------- ----------
Total other operating income 1,577 2,754
Other operating expenses
Salaries and employee benefits 5,775 5,441
Net occupancy expense of bank premises 841 821
Equipment depreciation, rentals and maintenance 693 624
Insurance 66 1,021
Outside fees and services 450 503
Data processing 447 527
Other expenses 1,545 1,584
---------- ----------
Total other operating expenses 9,817 10,521
---------- ----------
Income before income tax expense 6,614 7,106
Income tax expense 1,652 1,774
---------- ----------
NET INCOME $ 4,962 $ 5,332
---------- ----------
Net income per share $12.32 $13.20
====== ------
Shares outstanding 402,605 404,501
The accompanying notes are an integral part of these statements. ------- -------
</TABLE>
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<TABLE>
<CAPTION>
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED) Six months ended June 30
-----------------------------
1996 1995
<S> <C> <C>
Interest income
Interest and fees on loans $ 22,369 $ 19,673
Interest and dividends on investment securities
Taxable securities 30,404 32,720
Securities exempt from Federal taxes 4,560 4,460
Dividends 41 41
Interest on available for sale securities 3,586 3,519
Interest on Federal funds sold 801 770
--------- ----------
Total interest income 61,761 61,183
Interest expense --------- ----------
Interest on deposits 32,062 30,466
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 270 239
--------- ----------
Total interest expense 32,332 30,705
--------- ----------
Net interest income 29,429 30,478
Provision for loan losses 0 0
--------- ----------
Net interest income after provision
for loan losses 29,429 30,478
--------- ----------
Other operating income
Service charges on deposit accounts 1,670 1,492
Trust department income 889 912
Other income 662 771
Net security gains 1,036 1,103
--------- ----------
Total other operating income 4,257 4,278
Other operating expenses
Salaries and employee benefits 11,427 11,159
Net occupancy expense of bank premises 1,717 1,606
Equipment depreciation, rentals and maintenance 1,390 1,218
Insurance 125 2,058
Outside fees and services 970 1,074
Data processing 919 1,042
Other expenses 3,171 3,214
--------- ----------
Total other operating expenses 19,719 21,371
--------- ----------
Income before income tax expense 13,967 13,385
Income tax expense 3,582 3,265
--------- ----------
NET INCOME $ 10,385 $ 10,120
========= ==========
Net income per share $25.79 $25.03
------ ------
Shares outstanding 402,648 404,250
------- -------
The accompanying notes are an integral part of these statements.
</TABLE>
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<TABLE>
<CAPTION>
FIRST EVERGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLARS IN THOUSANDS
(UNAUDITED)
Six months ended June 30
-------------------------
1996 1995
<S> <C> <C>
Cash flows from operating activities :
Net income $10,385 $10,120
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 1,776 1,651
Provision loan losses 0 0
Amortization of investment security discounts/premiums 4,378 6,136
Net gain on investment securities (1,036) (1,103)
Deferred income taxes (60) (31)
Decrease in accrued interest receivable 1,086 3,605
Decrease (increase) in other assets 27,969 (10,094)
Net (decrease) increase in accrued interest and other liabilities (18,619) 20,346
---------- -----------
Net cash provided by operating activities 25,879 30,630
Cash flows from investing activities :
Capital expenditures (1,894) (1,791)
Proceeds from maturity of securities held to maturity 172,595 161,986
Purchases of securities held to maturity (119,777) (109,373)
Proceeds from sales of securities available for sale 447,010 792,721
Purchases of securities available for sale (448,173) (798,354)
Net increase in loans (61,811) (16,678)
----------- ------------
Net cash (used for) provided by investing activities (12,050) 28,511
Cash flows from financing activities :
Net decrease in demand, money market, savings and NOW accounts (12,092) (138,899)
Net increase in time deposits 22,860 97,810
Net decrease in Federal funds purchased and Securities sold under
agreements to repurchase (1,325) (3,020)
Cash dividends paid (6,040) (5,260)
Acquisition of treasury stock (113) (380)
----------- ------------
Net cash provided by (used for) financing activities 3,290 (49,749)
---------- ------------
Increase in cash and cash equivalents 17,119 9,392
Cash and cash equivalents at beginning of period 58,998 68,713
---------- -----------
Cash and cash equivalents at end of period $76,117 $78,105
========== ===========
Supplemental disclosure of cash flow information :
Cash paid during the period for :
Interest $32,243 $29,105
Income taxes 3,650 2,760
The accompanying notes are an integral part of these statements.
</TABLE>
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FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 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.
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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 six month period ended June 30, 1996, the deposit base remained
stable, increasing $10,768 or .65%. The volume of demand deposits and money
market accounts increased by $8,229 and $2,565, respectively. Savings deposits
and NOW accounts decreased $22,886 as depositors continued to reposition their
funds into higher yielding time deposits, which grew by $22,860. During the
same 1995 period, the deposit base decreased $41,089. The savings and NOW
category declined by $113,645 as depositors moved their funds into time
deposits, which grew by $97,810. During the same period, the volume of demand
deposits and money market accounts decreased by $22,425 and $2,829,
respectively.
Interest earning assets increased by $16,419 during 1996. The held to maturity
portfolio declined by $56,441, led by a $75,625 decrease in U.S. Treasury
obligations. The loan portfolio and Federal Funds sold increased by $61,561
and $13,000, respectively, while available for sale securities declined by
$1,701.
For the six month period ended June 30, 1996, the average interest rate spread
expressed on a tax equivalent basis (net interest margin) decreased 26 basis
points to 3.07%, from 3.33% at June 30, 1995. During the same period, the
return on average earning assets decreased five basis points, while the average
cost of funds increased 21 basis points to 4.30%. 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 12.86% at June 30, 1995
to 11.99% 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 virtually unchanged, increasing one basis
point to 1.13%.
Total shareholders' equity increased $2,186 from $173,818 at December 31, 1995
to $176,004 at June 30, 1996. During this period, the net unrealized loss on
Available for Sale Securities increased $2,046, while treasury stock grew by
$113. 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 eight basis points from 9.10% at
December 31, 1995 to 9.18% on June 30, 1996, while the total risk-based capital
ratio decreased to 26.06%, as funds were repositioned from zero percent risk
weighted Treasuries into the loan portfolio, which carries higher risk weights.
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."
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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 June 30, 1996, First Evergreen's
sources of liquidity totalled $446,924, including $215,548 in held to maturity
securities maturing within one year, $13,000 in Federal Funds sold, $77,808 in
estimated mortgage backed security prepayments within the next year and
$140,568 in available for sale securities. Deposits totalled $1,672,714,
yielding a liquidity ratio of 26.72%.
Earning assets with maturities of less than one year, one to five years and in
excess of five years totalled 32.62%, 51.13% and 16.25%, respectively.
Similarly, approximately 54.19% of interest sensitive liabilities could be
repriced within one year, 19.96% within one to five years and 25.85% in excess
of five years.
Cash and cash equivalents increased $17,119 during the six months ended June
30, 1996, reaching $76,117. Operating activities contributed $25,879,
including $10,385 in net income and a net source of $9,350 from changes in
other assets and other liabilities resulting from recording the offset to
straddle security transactions at year end. Investing activities used $12,050,
primarily due to the increase in the loan portfolio. Financing activities
added $3,290 due to a $10,768 increase in the deposit base which was partially
offset by a $6,040 cash dividend paid.
As of June 30, 1996, the market value of the held to maturity investment
portfolio exceeded book value by $12,774. Management has the positive intent
and ability to hold these securities until final maturity.
RESULT OF OPERATIONS - Quarter Ended June 30, 1996 Compared to Quarter Ended
June 30, 1995.
Net interest income of $14,854 for the quarter ended June 30, 1996 represents a
$19 decrease from the same quarter last year. Net interest income (on a tax
equivalent basis) decreased $18 from the prior year's quarter. The average
volume of interest earning assets increased $19,595, while their yield
decreased six basis points to 7.37%. The average volume of interest sensitive
liabilities decreased $5,554, while the average cost of funds increased four
basis points to 4.27%. The net interest margin declined ten basis points to
3.10% with a corresponding eight point decrease in net yield on earning assets.
Other operating income decreased $1,177 from the second quarter of 1995. The
decrease is attributable to security gains of $1,090 realized during the 1995
quarter versus 1996 security losses of $35. Service charges on deposit
accounts increased $88 due to the implementation of a nominal charge for
customers' use of foreign ATMs, while Trust Department income and other income
showed little change.
Other operating expenses declined $704 due to a $955 decrease in insurance
expense. Insurance declined as the Federal Deposit Insurance Corporation
determined that the insurance fund had been recapitalized as of June 1, 1995
and, therefore, virtually eliminated premiums. Salaries and employee benefits
increased $334 due to increased medical insurance expense and annual salary
adjustments. Data processing expense decreased $80
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due to the execution of a contract which includes a more favorable contract
discount. Equipment expense rose $69 due to increased depreciation resulting
from equipment upgrades at several facilities and higher equipment repair
costs. Outside fees and services, other expenses and net occupancy of bank
premises saw little change.
Current period income tax decreased $122 due to a $492 decrease in pretax
income. The effective tax rate increased two basis points, from 24.96% in the
1995 period to 24.98% in 1996.
RESULT OF OPERATIONS - Six Months ended June 30, 1996 Compared to Six Months
Ended June 30, 1995.
Net interest income of $29,429 represents a $1,049 decline from the same 1995
period. Net interest income (on a tax equivalent basis) decreased $1,002 from
1995. The average volume of interest earning assets rose $17,382, while their
yield declined five basis points to 7.37%. The average volume of interest
sensitive liabilities declined $6,093, while the average cost of funds
increased 21 basis points to 4.30%. The net interest margin declined 26 basis
points to 3.07%, while the net yield on earning assets declined sixteen basis
points to 3.68%.
Other operating income decreased $21 from the same 1995 period. Service
charges on deposit accounts increased $178 due to the implementation of a
nominal charge for customers' use of foreign ATMs. Other income is down $109
due to 1995 gains on other real estate owned of $141 versus $5 in the current
period. Net security gains declined $67, while Trust Department income
reflects little change.
Other operating expenses declined $1,652 from 1995 due to a $1,933 decrease in
insurance expense related to the deposit insurance relief. Salaries and
employee benefits increased $268 due to annual salary adjustments and increased
medical expense. Equipment expense rose $172 due to the equipment upgrades and
repair costs. Net occupancy of bank premises increased $111 due to an increase
in the real estate tax accrual in anticipation of a township reassessment.
Data processing expense declined $123 due to a favorable contract extension,
and outside fees declined $104 due to decreases in correspondent bank
processing fees and ATM interchange expense. Other expenses showed little
change.
Current period income tax increased $317 due to a $582 additional pretax
income. The effective tax rate increased 126 basis points, from 24.39% in 1995
to 25.65% in 1996.
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
The Annual Meeting of Shareholders of the Registrant was held on
April 25, 1996, at which time 336,757 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.
(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 6, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 63,117,103
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 13,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 140,568,123
<INVESTMENTS-CARRYING> 1,018,364,548
<INVESTMENTS-MARKET> 1,031,139,373
<LOANS> 592,060,038
<ALLOWANCE> 3,546,237
<TOTAL-ASSETS> 1,881,090,020
<DEPOSITS> 1,672,714,331
<SHORT-TERM> 13,745,000
<LIABILITIES-OTHER> 18,634,024
<LONG-TERM> 0
<COMMON> 176,004,665
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,881,090,020
<INTEREST-LOAN> 22,368,889
<INTEREST-INVEST> 38,591,391
<INTEREST-OTHER> 800,691
<INTEREST-TOTAL> 61,760,971
<INTEREST-DEPOSIT> 30,061,384
<INTEREST-EXPENSE> 32,331,718
<INTEREST-INCOME-NET> 29,429,253
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 1,035,810
<EXPENSE-OTHER> 19,719,441
<INCOME-PRETAX> 13,967,380
<INCOME-PRE-EXTRAORDINARY> 10,385,380
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,385,380
<EPS-PRIMARY> 25.79
<EPS-DILUTED> 25.79
<YIELD-ACTUAL> 3.68
<LOANS-NON> 1,311,784
<LOANS-PAST> 2,673,228
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,600,554
<ALLOWANCE-OPEN> 3,795,947
<CHARGE-OFFS> 289,440
<RECOVERIES> 39,730
<ALLOWANCE-CLOSE> 3,546,237
<ALLOWANCE-DOMESTIC> 3,546,237
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 562,684
</TABLE>
