<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 March 31, 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 402,675 shares outstanding at April 30, 1996.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
2
<PAGE> 3
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Condition
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
-----------------------------
<S> <C> <C>
Cash and due from banks $ 54,295 $ 58,998
Federal funds sold 35,000 0
Available for sale securities 141,499 142,269
Held to maturity securities
U.S. Treasury obligations 219,806 251,116
U.S. Government agencies 394,219 411,858
Obligations of states and political subs. 155,138 151,295
Mortgage-backed securities 47,605 50,807
Collateralized mortgage obligations 206,239 208,345
Other securities 1,385 1,385
---------- ----------
Total held to maturity 1,024,392 1,074,806
(Market value of $1,042,177 in 1996
and $1,104,284 in 1995)
Loans 548,387 530,499
Less allowance for loan losses (3,745) (3,796)
---------- ----------
Net loans 544,642 526,703
Bank premises and equipment (net) 29,975 29,647
Accrued interest receivable 25,492 20,959
Goodwill and other intangibles (net) 4,913 5,124
Other assets 2,600 29,582
---------- ----------
$1,862,808 $1,888,088
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $ 165,020 $ 169,748
Savings deposits and NOW accounts 623,148 631,633
Money market accounts 104,861 97,174
Time deposits 769,561 763,391
---------- ----------
Total deposits 1,662,590 1,661,946
Federal funds purchased and Securities sold
under agreements to repurchase 13,165 15,070
Accrued interest and other liabilities 15,601 37,254
---------- ----------
Total liabilities 1,691,356 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 165,011 165,629
Equity reserve - Available for sale securities (1,511) 196
---------- ----------
179,136 181,461
Less treasury stock - at cost, 30,167 shares
in 1996 and 30,065 shares in 1995 (7,684) (7,643)
---------- ----------
Total stockholders' equity 171,452 173,818
---------- ----------
$1,862,808 $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
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31
---------------------------
1996 1995
<S> <C> <C>
Interest income
Interest and fees on loans $ 10,842 $ 9,663
Interest and dividends on investment securities
Taxable securities 15,735 16,953
Securities exempt from Federal taxes 2,244 2,203
Dividends 21 21
Interest on available for sale securities 1,778 1,276
Interest on Federal funds sold 247 234
-------- --------
Total interest income 30,867 30,350
-------- --------
Interest expense
Interest on deposits 16,155 14,629
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 137 116
-------- --------
Total interest expense 16,292 14,745
-------- --------
Net interest income 14,575 15,605
Provision for loan losses 0 0
-------- --------
Net interest income after provision
for loan losses 14,575 15,605
-------- --------
Other operating income
Service charges on deposit accounts 832 742
Trust department income 450 445
Other income 327 324
Net security gains 1,071 13
-------- --------
Total other operating income 2,680 1,524
Other operating expenses
Salaries and employee benefits 5,652 5,717
Net occupancy expense of bank premises 876 785
Equipment depreciation, rentals and maintenance 697 594
Insurance 59 1,038
Outside fees and services 520 570
Data processing 472 516
Other expenses 1,626 1,630
-------- --------
Total other operating expenses 9,902 10,850
-------- --------
Income before income tax expense 7,353 6,279
Income tax expense 1,930 1,491
-------- --------
NET INCOME $ 5,423 $ 4,788
======== ========
Net income per share $ 13.47 $ 11.84
======== ========
Weighted Average Shares Outstanding 402,691 404,501
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
FIRST EVERGREEN CORPORATION
Consolidated Statements of Cash Flows
DOLLARS IN THOUSANDS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31
---------------------------
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,423 $ 4,788
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 879 809
Provision loan losses 0 0
Amortization of investment security discounts/premiums 2,372 3,574
Net gain on investment securities (1,071) (14)
Deferred income taxes (60) (15)
Increase in accrued interest receivable (4,533) (3,788)
(Increase) decrease in other assets 27,962 (662)
Net increase (decrease) in accrued interest and other liabilities (21,653) 2,490
--------- ---------
Net cash provided by operating activities 9,319 7,182
Cash flows from investing activities:
Capital expenditures (996) (822)
Proceeds from maturity of securities held to maturity 79,188 82,550
Purchases of securities held to maturity (30,612) (36,170)
Proceeds from sales of securities available for sale 419,212 275,208
Purchases of securities available for sale (420,532) (276,621)
Net Increase in loans (17,939) (3,552)
--------- ---------
Net cash provided by investing activities 28,321 40,593
Cash flows from financing activities:
Net Decrease in demand, money market, savings and NOW accounts (5,526) (112,995)
Net Increase in time deposits 6,170 58,931
Net Decrease in Federal funds purchased and Securities sold under
agreements to repurchase (1,905) (2,225)
Cash dividends paid (6,041) (5,260)
Acquisition of treasury stock (41) (139)
--------- ---------
Net cash used by financing activities (7,343) (61,688)
--------- ---------
(Decrease) increase in cash and cash equivalents 30,297 (13,913)
Cash and cash equivalents at beginning of period 58,998 68,712
--------- ---------
Cash and cash equivalents at end of period $ 89,295 $ 54,799
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 16,111 $ 13,978
Income taxes 0 0
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 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.
6
<PAGE> 7
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in Thousands Except Share Data)
FINANCIAL CONDITION
Through the three month period ended March 31, 1996, the deposit base remained
stable, increasing $644 or .04%. The volume of demand deposits and the
savings/NOW category decreased $4,728 and $8,485, respectively, while money
market accounts and time deposits grew by $7,687 and $6,170, respectively.
During the same 1995 period, the deposit base decreased by $54,064. Rates
available on short term time deposits reached 5.65%, while the rate paid on
savings deposits remained at 3.00%. Accordingly, time deposits grew by $58,931
as depositors repositioned their funds from the savings/NOW category, which
declined by $85,449. During the same period, money market accounts increased
by $739, while demand deposits declined $28,285, primarily due to the beginning
of the period falling on a weekend at which time the Federal Reserve does not
present on us items for payment. Also in 1995, Federal Funds purchased and
securities sold under agreements to repurchase declined by $2,225.
Interest earning assets increased by $1,704 during 1996. The held to maturity
portfolio declined by $50,414, lead by a $31,310 decrease in U.S. Treasury
obligations. The loan portfolio and Federal Funds sold increased by $17,888
and $35,000, respectively, while available for sale securities declined by
$770.
For the three month period ended March 31, 1996, the average interest rate
spread expressed on a tax equivalent basis (net interest margin) decreased 36
basis points to 3.08%, from 3.44% at March 31, 1995. During the same period,
the return on average earning assets and average cost of funds increased 9 and
45 basis points, respectively. 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 increased from 12.35% during the quarter ended
March 31, 1995 to 12.94% in the first quarter of 1996. The increase is due to
a $1,058 increase in security gains and the virtual elimination of deposit
insurance. The annualized return on average assets increased 14 basis points,
reaching 1.20% at March 31, 1996.
Total shareholders' equity decreased $2,366 from $173,818 at December 31, 1995
to $171,452 at March 31, 1996. During this period, the Reserve for Unrealized
Losses - Available for Sale Securities increased $1,707, while treasury stock
grew by $41. On January 8, 1996, a $15.00 per share dividend totaling $6,041
was paid to stockholders of record as of January 3, 1996.
The Tier I leveraged capital ratio decreased 14 basis points from 9.10% at
December 31, 1995 to 8.96% on March 31, 1996, while the total risk-based
capital ratio remained constant at 26.85%, as the previously mentioned
reduction in zero percent weighted Treasuries was offset by a similar decrease
in the 100% risk weight category. 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."
7
<PAGE> 8
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 March 31, 1996, First Evergreen's
sources of liquidity totalled $490,349, including $247,887 in held to maturity
securities maturing within one year, $35,000 in Federal Funds sold, $65,712 in
estimated mortgage backed security prepayments within the next year and
$141,750 in available for sale securities. Deposits totalled $1,662,590,
yielding a liquidity ratio of 29.49%.
Earning assets with maturities of less than one year, one to five years and in
excess of five years totalled 30.33%, 52.82% and 16.85%. respectively.
Similarly, approximately 53.68% of interest sensitive liabilities could be
repriced within one year, 20.45% within one to five years and 25.87% in excess
of five years.
Cash and cash equivalents increased $30,297 during the three months ended March
31, 1996, reaching $89,295. Operating activities contributed $9,319, including
$5,423 in net income and a net source of $6,309 from changes in other assets
and other liabilities resulting from recording the offset to straddle security
transactions at year end. Investing activities added $28,321, primarily due
to the decrease in the held to maturity portfolio. Financing activities used
$7,343 due to a $6,041 cash dividend paid and minor fluctuations in the volumes
of deposits and Federal Funds purchased and securities sold under agreements to
repurchase.
As of March 31, 1996, the market value of the held to maturity investment
portfolio exceeded book value by $17,785. Management has the positive intent
and ability to hold these securities until final maturity.
RESULT OF OPERATIONS - Quarter Ended March 31, 1996 Compared to Quarter Ended
March 31, 1995.
Net interest income of $14,575 for the quarter ended March 31, 1996 represents
a $1,030 decrease from the same quarter last year. Interest income (on a tax
equivalent basis) increased $536 from the prior year's quarter. The average
volume of interest earning assets increased $15,165, while their yield climbed
nine basis points to 7.48%. The average volume of interest sensitive
liabilities declined $6,265, while the average cost of funds increased 45 basis
points to 4.40%. The increased cost of funds resulted in a 26 basis point
decline in net yield on earning assets, reaching 3.68% as of March 31, 1996.
Other operating income increased $1,156 from the first quarter of 1995. The
increase is attributable to security gains of $1,071 realized during the 1996
quarter versus 1995 security gains of $13. Service charges on deposit accounts
increased $90, while Trust Department income and other income showed little
change.
Other operating expenses declined $948 due to a $979 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
decreased $65 due to a $146 decrease in medical insurance and modest decreases
in many other benefit categories, which more than offset
8
<PAGE> 9
a three percent rise in salary expense. Net occupancy of bank premises rose
$91 due to increases in real estate taxes, building repairs, depreciation and
utilities. Equipment expense rose $103 due to increased depreciation resulting
from equipment upgrades at several facilities and higher equipment repair
costs. Outside fees and services dropped $50 due to reductions in ATM
interchange expense, consulting services and correspondent bank processing
fees. Data processing expense decreased $44 due to the execution of a contract
extension which includes a more favorable contract discount. Other expenses
remained relatively unchanged, decreasing $4.
Current period income tax increased $439 due to a $1,074 increase in pretax
income. The effective tax rate increased 2.50%, from 23.75% to 26.25%, as the
growth in tax exempt income did not keep pace with the growth in pretax income.
9
<PAGE> 10
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: May 3, 1996 BY: /s/ Stephen M. Hallenbeck
---------------------------------------
Stephen M. Hallenbeck
Secretary/Treasurer
Signing on behalf of the Registrant and
as Principal Financial Officer.
10
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 54,295,112
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 35,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 141,499,294
<INVESTMENTS-CARRYING> 1,024,391,612
<INVESTMENTS-MARKET> 1,042,177,355
<LOANS> 548,387,421
<ALLOWANCE> 3,745,135
<TOTAL-ASSETS> 1,862,807,579
<DEPOSITS> 1,662,590,424
<SHORT-TERM> 13,165,000
<LIABILITIES-OTHER> 15,600,235
<LONG-TERM> 0
<COMMON> 171,451,920
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 171,451,920
<INTEREST-LOAN> 10,841,537
<INTEREST-INVEST> 19,778,664
<INTEREST-OTHER> 246,581
<INTEREST-TOTAL> 30,866,782
<INTEREST-DEPOSIT> 16,154,965
<INTEREST-EXPENSE> 16,292,187
<INTEREST-INCOME-NET> 14,574,595
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 1,070,982
<EXPENSE-OTHER> 9,901,600
<INCOME-PRETAX> 7,353,191
<INCOME-PRE-EXTRAORDINARY> 7,353,191
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,423,191
<EPS-PRIMARY> 13.47
<EPS-DILUTED> 13.47
<YIELD-ACTUAL> 3.68
<LOANS-NON> 1,616,932
<LOANS-PAST> 4,013,551
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,385,265
<ALLOWANCE-OPEN> 3,795,947
<CHARGE-OFFS> 67,799
<RECOVERIES> 16,987
<ALLOWANCE-CLOSE> 3,745,135
<ALLOWANCE-DOMESTIC> 3,745,135
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 791,096
</TABLE>
