<PAGE> 1
ORIGINAL
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
---------
(Mark One)
X Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
--- Act of 1934.
(Fee Required)
For the fiscal year ended December 31, 1996.
or
___ Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. (No Fee Required)
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
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of common stock outstanding held by nonaffiliates of
the registrant as of March 15, 1997, (based upon the closing price as of such
date) was approximately $121,800,000. Shares of common stock held by Directors
and executive officers of the registrant and by each person who owns 5% or more
of the outstanding common stock have been excluded.
The number of shares outstanding of the registrant's common stock, $25.00 par
value, as of March 15, 1997, was 401,567.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to stockholders for the year ended December 31,
1996 are incorporated by reference into Part I and Part II.
Portions of the proxy statement for the annual stockholders meeting to be held
April 24, 1997, are incorporated by reference into Part III.
<PAGE> 2
PART I
ITEM 1 - BUSINESS
FIRST EVERGREEN CORPORATION
First Evergreen Corporation ("First Evergreen") is a bank holding company
organized in 1977 under the laws of the State of Delaware. First Evergreen
owns all the outstanding common stock of First National Bank of Evergreen Park
("Evergreen Bank"), a national banking association organized in 1948 under the
laws of the United States. First Evergreen does not engage in any activities
other than providing administrative services for and acting as a holding
company for its subsidiary bank.
SUBSIDIARY BANK
Evergreen Bank provides a complete range of retail banking services to
individuals and small and medium-size businesses at each of its six banking
locations--Evergreen Park (main office), Evergreen Bank-Oak Lawn Office,
Evergreen Bank-Clearing Office, Evergreen Bank-Orland Park Office, Evergreen
Bank-Physician's Pavilion, and Evergreen Bank-Auburn/Highland Office. These
services include checking, savings, NOW and Money Market deposit accounts,
business loans, personal loans, residential mortgage loans, home improvement
loans, loans for education, other consumer oriented financial services
including IRA and Keogh accounts, and safe deposit and night depository
facilities. Additionally, Evergreen Bank provides 24-hour banking services to
its customers.
Evergreen Bank's Trust Department offers fiduciary, investment management
and advisory services to individuals and small corporations. It also
administers (as trustee and in other fiduciary and representative capacities)
pension, profit-sharing and other employee benefit plans and personal trusts
and estates.
Evergreen Bank employs 577 people on a full time equivalent basis and
provides a variety of employment benefits. Management believes that
relationships with employees are good.
SUPERVISION AND REGULATION
FIRST EVERGREEN
First Evergreen is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended (the "Act"), and is registered as
such with the Board of Governors of the Federal Reserve System (the "Federal
Reserve"). The Act requires every bank holding company to obtain prior
approval of the Federal Reserve before merging with or consolidating into
another bank holding company, acquiring substantially all the assets of any
bank or acquiring direct or indirect ownership or control of more than 5% of
the voting shares of any bank. However, the Federal Reserve may not approve any
acquisition if it is prohibited by State law.
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The Illinois Bank Holding Company Act of 1957, as amended, permits bank
holding companies located in states other than Illinois to acquire banks and
bank holding companies in Illinois, if such other states have passed
legislation granting similar privileges to Illinois banks and bank holding
companies. On the federal level, in September 1994 Congress passed the
Interstate Banking and Branching Efficiency Act, which authorizes after
September 29, 1995, a bank holding company to acquire a bank located outside of
its home state so long as certain criteria are satisfied. After June 1, 1997,
this enactment authorizes the merger of banks located in different states so
long as certain criteria are satisfied. States are currently evaluating the
ramifications and issues which arise from the enactment of this law. Moderate
activity by out-of-state entities has occurred in First Evergreen's market
area.
The Act also prohibits a bank holding company, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company which is not a bank and from engaging in any
business other than that of banking, managing and controlling banks or
furnishing services to banks and their subsidiaries. Bank holding companies,
however, may engage in, and may own shares of companies engaged in certain
businesses determined by the Federal Reserve to be so closely related to
banking or managing or controlling banks as to be properly incident thereto.
The Act does not place territorial restrictions on the activities of bank
holding companies or their non-bank subsidiaries.
Under the Act, First Evergreen is required to file annual reports of its
operations and such additional information as the Federal Reserve may require
and is subject, along with its subsidiary, to examination by the Federal
Reserve. The Federal Reserve has jurisdiction to regulate the terms of certain
debt issues of bank holding companies, including the authority to impose
reserve requirements.
SUBSIDIARY BANK
Evergreen Bank is a national bank and is a member of the Federal Deposit
Insurance Corporation ("FDIC"), and as such, is subject to the provisions of
the Federal Deposit Insurance Act. All national banks are members of the
Federal Reserve System and are subject to applicable provisions of the Federal
Reserve Act. Evergreen Bank is subject to regulation and regular examination
by the Comptroller of the Currency.
The federal and state laws and regulations generally applicable to banks
regulate, among other things, the scope of their business, their investments,
their reserves against deposits, the nature and amount of collateral for loans,
and include restrictions on the number of banking offices and activities which
may be performed at such offices.
Subsidiary banks of bank holding companies are subject to certain
restrictions under the Federal Reserve Act and the Federal Deposit Insurance
Act on loans and extensions of credit to the bank holding company or to its
other subsidiaries, investments in the stock or other securities of the bank
holding company or its other subsidiaries, or advances to any borrower
collateralized by such stock or other securities.
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GOVERNMENTAL MONETARY POLICIES
Revenue of Evergreen Bank, and therefore a majority of First Evergreen's
revenue, is affected by general economic conditions and also by the fiscal and
monetary policies of the Federal Government and its agencies, particularly the
Federal Reserve. The Federal Reserve regulates the reserve requirements of
member and non-member banks and the discount rate on bank borrowings. Its
policies have a direct effect on the amount of bank loans and deposits and
interest rates charged and paid thereon. Consequently, federal regulations
have a significant impact on banking revenue.
First Evergreen cannot fully predict the nature or the extent of any
effect which such fiscal and monetary policies may have on its business and
earnings.
COMPETITION
Evergreen Bank encounters intense competition in all aspects of its
business. Evergreen Bank competes vigorously with other financial institutions
in its local communities, and banks in downtown Chicago. The historical
restrictions in Illinois applicable to the ability of an Illinois located bank
to establish bank offices have been virtually eliminated. Accordingly, any
bank capable of doing business in Illinois has the legal right to establish an
office in Evergreen Bank's market area. Thus, banking competition has
increased, and will continue to increase, within First Evergreen's market.
DIVIDENDS
First Evergreen uses funds derived primarily from payment of dividends by
Evergreen Bank for, among other things, the cost of operations and payment of
dividends to its stockholders. Various contractual and statutory limitations
exist with respect to the ability of Evergreen Bank to pay dividends to First
Evergreen. Under certain circumstances, Evergreen Bank would need the approval
of the Comptroller of the Currency to pay dividends. All dividends are
restricted by capital adequacy requirements imposed by federal regulations.
FINANCIAL INFORMATION
Disclosure of financial information, including assets, revenue and operating
gain or loss, on pages 3 and 4 of the annual report to stockholders for the
year ended December 31, 1996, is incorporated herein by reference.
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ITEM 2 - PROPERTIES
First Evergreen owns no properties and requires minimal office space in
one of the facilities of Evergreen Bank. All but one of the facilities of
Evergreen Bank are owned. Evergreen Bank's sole leased facility, which
accounts for less than 2% of total deposits, is leased through May, 2001. Each
facility is sufficient to meet its operations and is periodically remodeled to
meet and exceed customer service demands.
<TABLE>
<CAPTION>
OFFICE LOCATION OWNERSHIP SQUARE FOOTAGE
----- -------- --------- --------------
<S> <C> <C> <C>
Main Office 3101 W. 95th Street Owned 64,000
Evergreen Park, Illinois
Oak Lawn 9400 S. Cicero Avenue Owned 85,000
Oak Lawn, Illinois
4900 W. 95th Street Owned 24,000
Oak Lawn, Illinois
9430 S. Cicero Avenue Owned 8,500
Oak Lawn, Illinois
Chicago 5235 W. 63rd Street Owned 23,000
Chicago, Illinois
8140 S. Ashland Avenue Owned 6,450
Chicago, Illinois
Orland Park 15330 S. Harlem Ave. Owned 15,000
Orland Park, Illinois
Physician's 4400 W. 95th Street Leased 1,700
Pavilion Oak Lawn, Illinois
</TABLE>
ITEM 3 - LEGAL PROCEEDINGS
There are no material legal proceedings pending against First Evergreen.
However, as Evergreen Bank acts as a depository of funds, it is named as a
defendant in numerous lawsuits (such as garnishment proceedings) involving
claims to the ownership of funds in particular accounts. Evergreen Bank is
also involved in litigation brought by it to collect delinquent loans and
enforce collateral provisions of security documents. All such litigation is in
the ordinary course of business. Management of the bank believes that no
litigation is threatened which will materially affect the bank's financial
position as presented herein.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(DURING THE FOURTH QUARTER OF 1996)
None
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PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Common Stock Information and Dividends on page 21 of the annual report to
stockholders for the year ended December 31, 1996 is incorporated herein by
reference.
ITEM 6 - SELECTED FINANCIAL DATA
Financial Review and Selected Financial Data on pages 21 and 22 of the
annual report to stockholders for the year ended December 31, 1996, are
incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 23 through 30 of the annual report to stockholders for the
year ended December 31, 1996, are incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements and Notes thereto on pages 3 through 20
of the annual report to stockholders for the year ended December 31, 1996, are
incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Information concerning the appointment of Ernst & Young LLP as independent
auditors on page four of the proxy statement for the annual stockholders'
meeting to be held on April 24, 1997 is incorporated herein by reference.
6
<PAGE> 7
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Directors of the Registrant on page two of the
proxy statement for the annual stockholders' meeting to be held on April 24,
1997 is incorporated herein by reference.
EXECUTIVE OFFICERS
KENNETH J. OZINGA
Mr. Ozinga has been President and a Director of First Evergreen since 1985
and President of First National Bank of Evergreen Park since 1985.
Additionally, Mr. Ozinga has served as a Director of First National Bank of
Evergreen Park or a subsidiary bank since 1982. Mr. Ozinga is 45 years old.
STEPHEN M. HALLENBECK
Mr. Hallenbeck is Secretary/Treasurer and Chief Financial Officer of First
Evergreen. Additionally, he is an Executive Vice President of First National
Bank of Evergreen Park since 1985, and Secretary/Director of First National
Bank of Evergreen Park. Mr. Hallenbeck joined First Evergreen as a Director of
a subsidiary bank in 1979. Mr. Hallenbeck is 55 years old.
ROBERT C. WALL
Mr. Wall is Vice President of First Evergreen. Additionally, he is an
Executive Vice President of First National Bank of Evergreen Park and a
Director of First National Bank of Evergreen Park since 1975. Mr. Wall joined
First National Bank of Evergreen Park in 1977. Mr. Wall is 61 years old.
RICHARD H. BROWN
Mr. Brown is Executive Vice President of First National Bank of Evergreen
Park. Mr. Brown joined First National Bank of Evergreen Park in 1986. Mr.
Brown is 42 years old.
ITEM 11 - EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
A director who is an employee of Evergreen Bank is not compensated for
service as a member of First Evergreen's Board of Directors or any committee of
the Board. During 1996, the two outside directors each received retainers
totaling $19,000.
The following "Summary of Compensation Table" provides shareholders a
concise, comprehensive overview of compensation awarded, earned and paid in the
reporting period.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Principal Position Year Salary All Other Compensation *
--------------------------- ---- ------ -------------------------
<S> <C> <C> <C>
Kenneth J. Ozinga 1996 $575,000 $21,098
Chief Executive Officer 1995 $552,500 $21,931
1994 $502,900 $21,477
Stephen M. Hallenbeck 1996 $373,500 $21,098
Secretary/Treasurer 1995 $334,750 $21,931
1994 $265,600 $21,477
Robert C. Wall 1996 $334,750 $21,098
Vice President 1995 $309,750 $21,931
1994 $265,600 $21,477
Richard H. Brown 1996 $143,900 $21,750
Executive Vice President 1995 $133,000 $19,950
(subsidiary) 1994 $107,000 $16,050
</TABLE>
* Other annual compensation received by Messrs. Ozinga, Hallenbeck, Wall and
Brown represent company contributions to a defined contribution plan.
Messrs. Ozinga, Hallenbeck, Wall and Brown are compensated by Evergreen
Bank and not First Evergreen. Compensation considerations include, but are not
limited to, industry standards and practices as well as practical issues such
as affordability and financial impact. Compensation of the Chief Executive
Officer also follows industry standards and practices and is not directly
correlated with First Evergreen's or Evergreen Bank's financial performance.
Neither First Evergreen nor Evergreen Bank provides an equity incentive
program.
COMPENSATION INTERLOCKS AND INSIDER PARTICIPATION
First Evergreen has no compensation committee or committees performing the
functions of such. The entire Board of Directors of First Evergreen engages in
the process and is responsible for setting compensation of First Evergreen's
Chief Executive Officer. The directors of First Evergreen during 1996 were
Alfred E. Bleeker, Jerome J. Cismoski, Stephen M. Hallenbeck, Kenneth J. Ozinga
and Martin F. Ozinga. Kenneth J. Ozinga was, during 1996, the President, Chief
Executive Officer and Chairman of the Board of Directors of First Evergreen.
Stephen M. Hallenbeck was, during 1996, the Secretary and Treasurer of First
Evergreen. The entire Board of Directors of Evergreen Bank engages in the
process of, and is responsible for, setting the compensation of Messrs.
Hallenbeck, Wall and Brown. The directors of Evergreen Bank, during 1996, were
Davis Boyd, Daniel Butler, Jr., James R. Cismoski, Jerome J. Cismoski, Stephen
M. Hallenbeck, Kenneth J. Ozinga, Martin F. Ozinga, Ronald W. Ozinga, Thomas
Palmisano and Robert C. Wall. Kenneth J. Ozinga was, during 1996, the
President and Chairman of the Board of Evergreen Bank. Stephen M. Hallenbeck,
during 1996, was the Secretary and Executive Vice President of Evergreen Bank.
Robert C. Wall, during 1996, was a Vice President of First Evergreen and an
Executive Vice President of Evergreen Bank. Martin F. Ozinga, during 1996, was
a Sr. Vice President of Evergreen Bank.
8
<PAGE> 9
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information concerning Security Ownership of Certain Beneficial Owners and
Management of the Registrant on page 3 of the proxy statement for the annual
stockholders' meeting to be held on April 24, 1997 is incorporated herein by
reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors and officers of First Evergreen and their associates were
customers of and had transactions with First Evergreen and Evergreen Bank in
the ordinary course of business during 1996. It is anticipated that similar
transactions may occur in the future. Such transactions in 1996 included
payments by First Evergreen and Evergreen Bank for services furnished and were
not material relative to the gross revenues of either First Evergreen or the
directors' companies. In management's opinion, all loans and commitments
included in such transactions were made at substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than normal
risk of collectibility or present any unfavorable features.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
1.(a) The following exhibits are filed as part of this report:
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
First Evergreen Corporation
We have audited the accompanying consolidated statement of condition of
First Evergreen Corporation and subsidiary as of December 31, 1996, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
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<PAGE> 10
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of First
Evergreen Corporation and subsidiary at December 31, 1996, and the consolidated
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
January 28, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of First Evergreen Corporation:
We have audited the accompanying consolidated statement of condition of
First Evergreen Corporation (a Delaware corporation) and subsidiary as of
December 31, 1995, and the related consolidated statements of income, changes
in stockholders' equity and cash flows for each of the two years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Evergreen Corporation and subsidiary as of December 31, 1995, and the results
of their operations and their cash flows for each of the two years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Chicago, Illinois
January 24, 1996
1.(b) The following consolidated financial statements of First Evergreen and
subsidiary, included in the annual report of the Registrant to its stockholders
for the year ended December 31, 1996, are incorporated by reference in Item 8:
Consolidated statements of condition - December 31, 1996 and 1995
Consolidated statements of income - Years ended December 31, 1996,
1995 and 1994
Consolidated statements of changes in stockholders' equity - Years
ended December 31, 1994, 1995 and 1996
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Consolidated statements of cash flows - Years ended December 31, 1996,
1995 and 1994
Notes to consolidated financial statements - December 31, 1996, 1995 and
1994
2. Schedules to the consolidated financial statements required by Article 9 of
Regulation S-X are omitted because they are either not applicable or the
required information is shown in the financial statements or notes thereto.
3. Exhibits
Exhibit 13 - Annual report to stockholders for the year ended December 31,
1996
Exhibit 27 - Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the Village of
Evergreen Park, State of Illinois, on March 18, 1997.
First Evergreen Corporation
(The Registrant)
<TABLE>
<S> <C>
/s/ KENNETH J. OZINGA
__________________________ Chairman of the Board of Directors and President
Kenneth J. Ozinga (Principal Executive Officer)
/s/ STEPHEN M. HALLENBECK
__________________________ Secretary/Treasurer
Stephen M. Hallenbeck (Principal Financial and Accounting Officer)
/s/ ALFRED E. BLEEKER
__________________________ Director
Alfred E. Bleeker
/s/ JEROME J. CISMOSKI
__________________________ Director
Jerome J. Cismoski
/s/ MARTIN F. OZINGA
__________________________ Director
Martin F. Ozinga
</TABLE>
Being a majority of the Registrant's Board of Directors
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<PAGE> 1
EXHIBIT 13
First Evergreen Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF CONDITION
Dollars in thousands except share data
<TABLE>
<CAPTION>
December 31
ASSETS 1996 1995
<S> <C> <C>
Cash and due from banks (Note B) $55,654 $58,998
Federal funds sold 53,200 0
Available for sale securities (Notes A and C) 142,625 142,269
Held to maturity securities (Notes A and C)
U.S. Treasury obligations 133,514 251,116
U.S. Government agencies 403,056 411,858
Obligations of states and political subdivisions 173,090 151,295
Mortgage-backed securities 83,719 50,807
Collateralized mortgage obligations 190,443 208,345
Other securities 1,385 1,385
---------- ----------
Total held to maturity securities 985,207 1,074,806
(Market value of $999,696 in 1996 and $1,104,284 in 1995)
Loans -- net (Notes A and D) 615,653 526,703
Bank premises and equipment (Notes A and E) 31,729 29,647
Accrued interest receivable 15,999 20,959
Goodwill and other intangibles -- net (Note A) 4,281 5,124
Other assets (Note A) 5,665 29,582
---------- ----------
$1,910,013 $1,888,088
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $181,115 $169,748
Savings deposits and NOW accounts 588,572 631,633
Money market accounts 97,965 97,174
Time deposits (Note F) 828,195 763,391
---------- ----------
Total deposits 1,695,847 1,661,946
Federal funds purchased and securities sold under
agreements to repurchase (Note G) 17,235 15,070
Accrued interest and other liabilities 10,491 37,254
---------- ----------
Total liabilities 1,723,573 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 (Note J) 180,280 165,629
Unrealized gains (losses) on AFS securities, net of tax (Note A) (1,318) 196
---------- ----------
194,598 181,461
Less treasury stock -- at cost, 31,205 shares in 1996
and 30,065 shares in 1995 (8,158) (7,643)
---------- ----------
Total stockholders' equity 186,440 173,818
---------- ----------
$1,910,013 $1,888,088
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
-3-
<PAGE> 2
First Evergreen Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
Dollars in thousands except share data
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Interest income
Interest and fees on loans (Note A) $ 46,694 $ 40,600 $ 36,540
Interest and dividends on investment securities
Taxable securities 59,822 65,177 66,099
Securities exempt from federal taxes 9,510 8,958 7,853
Dividends 83 83 83
Interest on available for sale securities 7,308 7,188 5,959
Interest on federal funds sold 1,815 1,435 536
-------- -------- --------
Total interest income 125,232 123,441 117,070
-------- -------- --------
Interest expense
Interest on deposits (Note F) 64,931 63,224 54,075
Interest on federal funds purchased and securities
sold under agreements to repurchase (Note G) 611 520 118
Interest on note payable 0 0 7
-------- -------- --------
Total interest expense 65,542 63,744 54,200
-------- -------- --------
Net interest income 59,690 59,697 62,870
Provision for loan losses (Note D) 400 0 0
-------- -------- --------
Net interest income after provision
for loan losses 59,290 59,697 62,870
-------- -------- --------
Other operating income
Service charges on deposit accounts 3,403 2,977 2,952
Trust department income (Note A) 1,946 1,726 1,651
Other income 1,386 1,329 1,239
Net security gains (losses) 1,194 1,968 (1,372)
-------- -------- --------
Total other operating income 7,929 8,000 4,470
-------- -------- --------
Other operating expenses
Salaries and employee benefits (Note I) 22,692 22,441 20,269
Net occupancy expense of bank premises (Note A) 3,505 3,308 3,028
Equipment depreciation, rentals and maintenance (Note A) 2,767 2,548 2,221
Insurance 265 2,212 4,186
Outside fees and services 1,956 2,059 2,252
Data processing 1,913 2,070 1,932
Other expenses 6,419 6,256 5,603
-------- -------- --------
Total other operating expenses 39,517 40,894 39,491
-------- -------- --------
Income before income tax expense 27,702 26,803 27,849
Income tax expense (Notes A and H) 7,010 6,573 7,434
-------- -------- --------
Net income $ 20,692 $ 20,230 $ 20,415
======== ======== ========
Net income per share (Note A) $ 51.42 $ 50.11 $ 50.29
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
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First Evergreen Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
Dollars in thousands except share data
<TABLE>
<CAPTION>
Years Ended December 31, 1994, 1995 and 1996
Common Retained Unrealized Gains Treasury
Stock Surplus Earnings (Losses) on Stock Total
AFS Securities
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $10,821 $4,815 $135,530 $ 0 $(6,140) $145,026
Net income 0 0 20,415 0 0 20,415
Cash dividends ($13 per share) 0 0 (5,286) 0 0 (5,286)
Acquisition of 2,029 shares
of treasury stock 0 0 0 0 (764) (764)
Change in unrealized gains (losses)
on AFS securities 0 0 0 (1,927) 0 (1,927)
------- ------ -------- ------- ------- -------
Balance at December 31, 1994 10,821 4,815 150,659 (1,927) (6,904) 157,464
Net income 0 0 20,230 0 0 20,230
Cash dividends ($13 per share) 0 0 (5,260) 0 0 (5,260)
Acquisition of 1,807 shares
of treasury stock 0 0 0 0 (739) (739)
Change in unrealized gains (losses)
on AFS securities 0 0 0 2,123 0 2,123
------- ------ -------- ------- ------- -------
Balance at December 31, 1995 10,821 4,815 165,629 196 (7,643) 173,818
Net income 0 0 20,692 0 0 20,692
Cash dividends ($15 per share) 0 0 (6,041) 0 0 (6,041)
Acquisition of 1,140 shares
of treasury stock 0 0 0 0 (515) (515)
Change in unrealized gains (losses)
on AFS securities 0 0 0 (1,514) 0 (1,514)
------- ------ -------- ------- ------- -------
Balance at December 31, 1996 $10,821 $4,815 $180,280 $ (1,318) $(8,158) $186,440
======= ====== ======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE> 4
First Evergreen Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands
<TABLE>
<CAPTION>
` Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $20,692 $20,230 $20,415
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation and amortization 3,589 3,369 3,114
Provision for loan losses 400 0 0
Amortization of investment security discounts/premiums 7,626 11,083 23,803
Net (gains) losses on investment securities (1,194) (1,968) 1,372
Deferred income taxes 361 437 256
(Increase) decrease in accrued interest receivable 4,960 3,525 (497)
(Increase) decrease in other assets 24,371 (26,684) 1,360
Net increase (decrease) in accrued interest and other liabilities (26,763) 30,460 1,090
-------- -------- --------
Net cash provided by operating activities 34,042 40,452 50,913
Cash flows from investing activities:
Capital expenditures (4,828) (3,712) (4,891)
Proceeds from maturity of securities held to maturity 353,373 294,322 327,668
Purchases of securities held to maturity (270,261) (242,992) (280,561)
Proceeds from sales of securities available for sale 642,829 1,449,220 278,132
Purchases of securities available for sale (645,459) (1,458,453) (286,897)
Net increase in loans (89,350) (51,791) (62,335)
-------- -------- --------
Net cash used by investing activities (13,696) (13,406) (28,884)
Cash flows from financing activities:
Net decrease in demand, money market,
savings and NOW accounts (30,903) (152,287) (195,699)
Net increase in time deposits 64,804 119,616 172,245
Net increase in federal funds purchased and
securities sold under agreements to repurchase 2,165 1,910 13,160
Cash dividends paid (6,041) (5,260) (5,286)
Principal payments on note payable 0 0 (2,000)
Acquisition of treasury stock (515) (739) (764)
-------- -------- --------
Net cash provided (used) by financing activities 29,510 (36,760) (18,344)
-------- -------- --------
Increase (decrease) in cash and cash equivalents 49,856 (9,714) 3,685
Cash and cash equivalents at beginning of year 58,998 68,712 65,027
-------- -------- --------
Cash and cash equivalents at end of year $108,854 $58,998 $68,712
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $64,905 $61,943 $53,233
Income taxes 6,500 6,160 7,625
</TABLE>
The accompanying notes are an integral part of these statements
6
<PAGE> 5
First Evergreen Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in thousands
December 31, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of First Evergreen Corporation and
subsidiary conform to generally accepted accounting principles and to general
practice within the banking industry. Certain reclassifications have been made
to the 1995 financial statements to conform with the 1996 presentation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of First Evergreen
Corporation ("First Evergreen") and its wholly-owned subsidiary, First National
Bank of Evergreen Park (the "Bank"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
NATURE OF OPERATIONS
First Evergreen is a bank holding company whose principal asset is its
investment in the Bank subsidiary. First Evergreen, through its subsidiary
bank, operates in a single segment engaging in the general retail and
commercial banking business, primarily in the southwestern suburbs of Chicago.
The services offered include demand, savings and time deposits, commercial
lending products--such as commercial loans and mortgages, and personal lending
products--such as residential mortgages, home equity lines and installment
loans. The subsidiary bank also provides trust services. The Bank operates six
facilities in Evergreen Park, Oak Lawn, Orland Park and Chicago. An additional
facility in Orland Park is planned to open in late 1997. First Evergreen
generates the majority of its revenues from interest earned on investment
securities and loans.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENT
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 these estimates.
INVESTMENT SECURITIES
First Evergreen maintains a held to maturity portfolio recorded at cost
adjusted for amortization of premiums and accretion of discounts in accordance
with management's positive intent and ability to hold these securities to final
maturity. Securities not classified as held to maturity are designated as
available for sale and are reported in the Statement of Condition at fair value
with unrealized gains and losses credited or charged, net of tax effect,
directly to stockholders' equity. Premiums and discounts on held to maturity
securities are amortized (deducted) and accreted (added), respectively, to
interest income using the level yield method over the period from acquisition
to maturity, or earlier call date, of the related securities. Realized gains
and losses on securities are determined on a specific identification method.
LOANS
Loans are stated at the principal amount outstanding, net of unearned fees and
discounts, if any. Interest on commercial, real estate and installment loans is
accrued and credited to interest income based upon the principal amount
outstanding. Unearned income on discount loans is credited to interest income
over the term of the loan on the sum-of-the-months-digits method, which does
not differ significantly from the effective interest method.
Loan origination fees and direct loan origination costs are deferred and
amortized into interest income over the life of the loan as an adjustment to
the yield using the effective interest method. Indirect loan origination costs
are charged to expense as incurred.
Accrual of interest is discontinued on loans past due ninety days or more when
management believes, after considering economic and business conditions and
collection efforts, the borrower's financial condition is such that collection
of interest is doubtful. Interest income from such loans is recognized on the
cash basis. Past due loans that are well secured and in the process of
collection are not placed in a nonaccrual status.
7
<PAGE> 6
Note A - Summary of Significant Accounting Policies - continued
In May 1993, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan. The Statement requires that a creditor measure impairment
of a loan based on the present value of expected future cash flows, discounted
at the loan's original effective rate. As a practical expedient, impairment may
be measured at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. Commercial credits that are
covered by the Statement are evaluated on an individual basis. Smaller balance
homogeneous loans such as residential real estate and consumer installment
which are not covered by the Statement are aggregated for evaluation.
Nonaccrual loans covered by the Statement are classified as impaired but may
not require a valuation allowance. Any shortfall in the estimated value of an
impaired loan compared with the recorded investment in the loan is identified
as a portion of the allowance for loan losses. Payments on loans classified as
impaired are recorded as reductions of principal. Interest is recorded on the
cash basis after all principal has been repaid. First Evergreen adopted the
standard in 1995. The adoption of this Statement did not have a material effect
on the consolidated financial statements and no additional allowance for loan
losses was required as a result of the adoption.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is based on estimates of an amount that
management believes is adequate to absorb losses on existing loans that may
become uncollectible, although ultimate losses may vary from the current
estimates. These estimates are reviewed quarterly and are based on evaluations
of collectibility of loans and prior loan loss experience. As adjustments
become necessary, they are reported in earnings in the periods in which they
become known. Evaluations take into consideration such factors as changes in
the nature and volume of the loan portfolio, overall portfolio quality, review
of specific problem loans and current economic conditions that may affect the
borrower's ability to pay. Loans are charged off when management determines
there has been permanent impairment of the related carrying values. Recoveries
on loans previously charged off are credited directly to the allowance for loan
losses.
IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the FASB issued SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of. The Statement
covers long-lived assets and certain identifiable intangibles and requires a
review for impairment whenever events or circumstances indicate that the
carrying value of the assets may not be recoverable. First Evergreen adopted
the standard in 1996. The adoption of the Statement did not have a material
effect on the consolidated financial statements.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally on the straight-line method over the
estimated useful lives of the assets (Bank premises 10-50 years; furniture and
equipment 3-10 years). Maintenance and repairs are charged to expense when
incurred; improvements are capitalized. Gains and losses on routine
disposition, which are not significant, are reflected in current operations.
OTHER REAL ESTATE OWNED
Other real estate owned consists of properties acquired in partial or total
satisfaction of debt and is stated at the lower of cost or fair value. Losses
arising at acquisition are charged against the allowance for loan losses.
Write-downs to reflect reductions in fair value subsequent to acquisition are
recorded in other expense in the consolidated statements of income, while any
gains that are realized on the disposition of such properties are included in
other income. Other real estate owned included in other assets in 1996 and 1995
is approximately $176 and $224 respectively.
INTANGIBLE ASSETS
Goodwill, representing the investment in subsidiaries in excess of the value of
net assets acquired, is amortized on a straight-line basis over ten years.
First Evergreen recorded $8,400 in goodwill from the acquisition of Oak Lawn
Trust on February 11, 1992. As of December 31, 1996 and 1995, accumulated
amortization of goodwill totalled $4,119 and $3,276 respectively. In
management's opinion, no events or circumstances have occurred that would
warrant revision or place doubt on the stated recovery of the balance.
8
<PAGE> 7
Note A - Summary of Significant Accounting Policies - continued
TRUST DEPARTMENT INCOME
Trust department income is recognized on the cash basis, which is not
significantly different from amounts that would have been recognized on the
accrual basis.
INCOME TAXES
First Evergreen files a consolidated federal income tax return with its
subsidiary. The Bank pays to or receives from First Evergreen the amount of
federal income taxes it would have paid or received had the Bank filed a
separate federal income tax return.
NET INCOME PER SHARE
Net income per share is computed by dividing net income by the weighted average
number of shares outstanding during the year. The weighted average number of
shares outstanding for the years ended December 31, 1996, 1995 and 1994 was
402,444; 403,727 and 405,940 respectively.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks and federal funds sold.
TRANSFERS OF SERVICING FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES
In June, 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, which
requires an entity to recognize the financial and servicing assets it controls
and the liabilities it has incurred and to derecognize financial assets when
control has been surrendered in accordance with the criteria provided in the
Statement. SFAS No. 125 is effective for transactions occurring after December
31, 1996, however the FASB has issued an amendment that would delay until 1998
the effective date of some of the Statement's provisions. Management believes
the adoption of the Statement will not have a material effect on the
consolidated financial statements.
NOTE B - CASH AND CASH EQUIVALENTS
The Federal Reserve requires the Bank to maintain certain average reserve
balances. These average reserves approximated $7,979 during 1996 and $9,397 in
1995.
NOTE C - SECURITIES
The amortized cost and approximate fair value of held-to-maturity securities
are as follows at December 31:
<TABLE>
<CAPTION>
1996 1995
Gross Gross Approximate Gross Gross Approximate
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury obligations $133,514 $ 856 ($377) $133,993 $ 251,116 $ 2,469 ($461) $ 253,124
U.S. Government agencies 403,056 8,372 (653) 410,775 411,858 17,602 (164) 429,296
Obligations of states &
political subdivisions 173,090 7,426 (437) 180,079 151,295 8,677 (147) 159,825
Mortgage-backed securities 83,719 841 (1,697) 82,863 50,807 1,036 (658) 51,185
Collateralized mortgage
obligations 190,443 832 (674) 190,601 208,345 1,468 (344) 209,469
Other securities 1,385 0 0 1,385 1,385 0 0 1,385
-------- ------- ------- -------- ---------- ------- ------- ----------
Total $985,207 $18,327 ($3,838) $999,696 $1,074,806 $31,252 ($1,774) $1,104,284
======== ======= ======= ======== ========== ======= ======= ==========
</TABLE>
9
<PAGE> 8
Note C - Investment Securities -- continued
The amortized cost and approximate fair value of available for sale securities
are as follows at December 31:
<TABLE>
<CAPTION>
1996 1995
Gross Gross Approximate Gross Gross Approximate
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury obligations $144,654 $ 0 ($2,029) $142,625 $138,725 $186 ($23) $138,888
Collateralized mortgage
obligations 0 0 0 0 3,244 137 0 3,381
-------- ------- ------- -------- ---------- ------- ------- ----------
Total $144,654 $ 0 ($2,029) $142,625 $141,969 $323 ($23) $142,269
======== ======= ======= ======== ========== ======= ======= ==========
</TABLE>
The amortized cost and approximate fair value of securities at December 31,
1996, by contractual maturity, are shown in the chart below.
<TABLE>
<CAPTION>
HTM AFS
Amortized Approximate Amortized Approximate
Cost Fair Value Cost Fair Value
<S> <C> <C> <C> <C>
Due in one year or less $255,090 $257,584 $ 23,594 $ 23,346
Due after one year through five years 568,826 577,373 121,060 119,279
Due after five years through ten years 92,366 95,144 0 0
Due after ten years 68,925 69,595 0 0
-------- -------- -------- --------
Total maturities $985,207 $999,696 $144,654 $142,625
======== ======== ======== ========
</TABLE>
Held to maturity securities carried at approximately $99,083 and $85,391 at
December 31, 1996 and 1995 respectively, were pledged to secure public and
trust deposits and for other purposes as required or permitted by law.
Net realized security gains in 1996 totalled $1,194. Gross realized gains and
losses were $1,648 and ($454) respectively. Unrealized available for sale
portfolio losses increased by ($2,329) during 1996 and were recorded on the
Statement of Condition utilizing an asset valuation account and as a component
of stockholders' equity, net of tax. Net realized security gains in 1995
totalled $1,968. Gross realized gains and losses were $3,178 and ($1,210)
respectively. Unrealized available for sale portfolio gains increased by $3,263
during the period. In 1994, net realized security losses totalled ($1,372).
Gross realized gains and losses were $172 and ($1,544) respectively, while
unrealized available for sale portfolio losses increased by ($2,808) during the
period. Federal income taxes (benefit) on net security gains (losses) for the
years ending December 31, 1996, 1995 and 1994 were $418, $689 and ($480)
respectively.
In the fourth quarter of 1995, concurrent with the adoption of its
implementation guide on SFAS No. 115, the Financial Accounting Standards Board
allowed a one-time reassessment of the SFAS No. 115 classifications of all
securities currently held. Any reclassifications would be accounted for at fair
value in accordance with SFAS No. 115 and any reclassifications from the held
to maturity portfolio that resulted from this one-time reassessment would not
call into question the intent of the Company to hold other debt securities to
maturity in the future. First Evergreen used the opportunity under this
one-time reassessment to reclassify $4,400 U.S. Government Agency securities
and $3,500 collateralized mortgage obligations from held to maturity to the
available for sale portfolio. In connection with this reclassification, gross
unrealized gains of $88 were recorded in available for sale securities and in
stockholders' equity (on a net-of-tax basis).
10
<PAGE> 9
NOTE D - LOANS
<TABLE>
Major classifications of loans were as follows at December 31: 1996 1995
<S> <C> <C>
Commercial and industrial $ 97,408 $ 78,181
Real estate -- residential 377,368 332,293
Real estate -- commercial 108,484 91,353
Real estate -- construction 10,920 4,290
Installment 24,528 24,404
-------- --------
618,708 530,521
Unearned discount (13) (22)
Allowance for loan losses (3,042) (3,796)
------- -------
Total $615,653 $526,703
======== ========
</TABLE>
Loans in a nonaccrual status amounted to approximately $688, $1,619 and $414 at
December 31, 1996, 1995 and 1994 respectively. If interest on nonaccrual loans
had been accrued, such income would have approximated $130, $52 and $21 in
1996, 1995 and 1994 respectively. The amount of interest income recorded on
these loans was $50 in 1996, $25 in 1995 and $22 in 1994.
<TABLE>
Changes in the allowance for loan losses were as follows:
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $3,796 $3,852 $3,764
Provision for loan losses 400 0 0
Recoveries on loans previously charged off 102 201 269
Loans charged off (1,256) (257) (181)
------ ------ ------
Balance at end of year $3,042 $3,796 $3,852
====== ====== ======
</TABLE>
As of December 31, the Bank's recorded investment in impaired loans and
the related valuation allowance are as follows:
<TABLE>
<CAPTION>
1996 1995
Recorded Valuation Recorded Valuation
Investment Allowance Investment Allowance
<S> <C> <C> <C> <C>
Valuation allowance required $ 0 $ 0 $ 156 $100
No valuation allowance required 512 0 1,261 0
---- --- ------ ----
Total impaired loans $512 $ 0 $1,417 $100
==== === ====== ====
</TABLE>
For the years ended December 31, 1996 and 1995, the average recorded investment
in impaired loans was $531 and $766 respectively. Interest income on these
loans was recorded on a cash basis and amounted to $13 and $8, in 1996 and 1995
respectively.
11
<PAGE> 10
NOTE E - BANK PREMISES AND EQUIPMENT
<TABLE>
The following is a summary of bank premises and equipment at December 31:
Accumulated Net Book
Cost Depreciation Value
1996
<S> <C> <C> <C>
Land $ 5,444 $ 0 $ 5,444
Bank premises 29,442 8,653 20,789
Furniture and equipment 12,151 6,655 5,496
------- ------- -------
Total $47,037 $15,308 $31,729
======= ======= =======
1995
Land $ 4,688 $ 0 $ 4,688
Bank premises 26,875 7,704 19,171
Furniture and equipment 10,646 4,858 5,788
------- ------- -------
Total $42,209 $12,562 $29,647
======= ======= =======
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1995 and 1994
amounted to approximately $2,746, $2,527 and $2,272 respectively.
NOTE F - TIME DEPOSITS
Maturities of time certificates of deposit of $100 or more are summarized as
follows at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Three months or less $ 45,759 $ 53,322
Over three through six months 30,818 34,049
Over six through twelve months 46,528 25,308
Over twelve months 31,884 25,947
--------- --------
Total $154,989 $138,626
========= ========
</TABLE>
Interest expense on time certificates of $100 or more totalled $7,896, $7,342
and $3,651 in 1996, 1995 and 1994 respectively. Maturities of time certificates
with original maturities in excess of one year at December 31, 1996, are
summarized as follows:
<TABLE>
<CAPTION>
Years Less than $100 $100 or more
<S> <C> <C>
1 to 2 $ 96,411 $14,367
2 to 3 46,622 9,361
3 to 4 51,917 6,720
4 to 5 16,632 1,328
over 5 50 107
-------- --------
Total $211,632 $31,883
======== ========
</TABLE>
12
<PAGE> 11
NOTE G - SHORT-TERM BORROWINGS
Federal funds purchased and securities sold under agreement to repurchase
averaged $15,323, $10,666 and $3,823 during the years ending December 31, 1996,
1995 and 1994 respectively. The average interest rate was 3.99% in 1996, 4.88%
in 1995 and 4.00% in 1994. The year-end balances were $17,235, $15,070 and
$13,160, while the year end rates were 4.20% in 1996, 3.67% in 1995 and 5.07%
in 1994. The highest month-end balances in 1996, 1995 and 1994 were $20,410,
$15,355 and $13,160 respectively. Federal funds purchased require no collateral
while securities sold under agreement to repurchase are collateralized by U.S.
Treasury obligations held at Harris Trust and Savings Bank.
NOTE H - INCOME TAXES
The components of federal income tax expense for 1996, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current $6,649 $6,136 $7,178
Deferred 361 437 256
------- -------- --------
Total $7,010 $6,573 $7,434
======= ======== ========
</TABLE>
First Evergreen and subsidiary had no state income tax expense in the above
periods, and have accumulated approximately $200 million in net operating
losses for state income tax purposes that will begin to expire in 2002.
The table below reconciles First Evergreen's deferred tax assets and
liabilities under SFAS No. 109 on December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS
Deferred loan fees ($1,020) ($1,208)
Allowance for loan losses (1,065) (1,328)
Unrealized security losses (711) (711)
Other assets (380) (220)
------- --------
Gross deferred tax assets (3,176) (2,756)
------- --------
LIABILITIES
Fair market value of assets acquired 744 760
Depreciation 859 783
Investment accretion 591 581
Unrealized security gains 0 104
------- --------
Gross deferred tax liabilities 2,194 2,228
------- --------
Net deferred tax assets ($982) ($528)
======= ========
</TABLE>
Management has determined that a valuation allowance is not required at
December 31, 1996 or 1995.
13
<PAGE> 12
Note H - Income Taxes - continued
The table below reconciles the statutory federal income tax rate with the
effective income tax as a percent of pretax income.
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Statutory income tax rate 35.0% 35.0% 35.0%
Change in taxes resulting from
Tax-exempt interest (11.0) (10.8) (9.4)
Other - net 1.3 .3 1.1
------- -------- --------
Effective income tax rate 25.3% 24.5% 26.7%
======= ======== ========
</TABLE>
Accumulated net deferred income taxes included in other assets or accrued
interest and other liabilities in the accompanying consolidated statements of
condition and currently payable income taxes are as follows at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Current payable $353 $204
Deferred asset, net (982) (528)
------- --------
Net receivable ($629) ($324)
======= ========
</TABLE>
NOTE I - EMPLOYEE BENEFIT PLANS
First Evergreen has a contributory profit sharing plan for virtually all
employees. Employees begin vesting after two years of net credited service and
become fully vested after seven years of net credited service. Contributions
are voluntary and at the discretion of the Board of Directors. Annual
contributions cannot exceed 15% of participants' earnings. Contributions were
approximately $2,139, $2,227 and $1,980 for the years ended December 31, 1996,
1995 and 1994 respectively.
NOTE J - DIVIDEND RESTRICTIONS
Banking regulations limit the amount of dividends that may be paid to First
Evergreen by its bank subsidiary without prior approval of the Bank's
regulatory agencies. Based upon these limitations, the Bank could have declared
approximately $40,300 of dividends at December 31, 1996 without prior approval.
Additionally, the Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory--and possibly additional
discretionary--actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
reclassification are also subject to qualitative judgements by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
following table) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes, as of December 31, 1996, that
the Bank meets all capital adequacy requirements to which it is subject.
14
<PAGE> 13
Note J - Dividend Restrictions - continued
As of December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leveraged ratios as set forth in the table. There are no conditions
or events since that notification that management believes have changed the
Bank's category.
<TABLE>
<CAPTION>
To be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(less than (less than
or equal to) or equal to)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital
(to Risk Weighted Assets) $186,519 24.55% $60,786 8.0% $75,983 10.0%
Tier I Capital
(to Risk Weighted Assets) $183,477 24.15% $30,393 4.0% $45,590 6.0%
Tier I Capital
(to Average Assets) $183,477 9.70% $56,731 3.0% $94,551 5.0%
As of December 31, 1995:
Total Capital
(to Risk Weighted Assets) $172,294 26.85% $51,400 8.0% $64,171 10.0%
Tier I Capital
(to Risk Weighted Assets) $168,498 26.26% $25,700 4.0% $38,503 6.0%
Tier I Capital
(to Average Assets) $168,498 9.10% $55,500 3.0% $92,538 5.0%
</TABLE>
NOTE K - CONTINGENCIES
There are legal proceedings pending against the Bank that arise in the ordinary
course of business. Based upon opinions of legal counsel, management believes
that liabilities arising from these proceedings, if any, would not have a
material adverse effect on the consolidated financial position or results of
operations of First Evergreen Corporation and subsidiary.
15
<PAGE> 14
NOTE L - CONSOLIDATED SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The unaudited quarterly results of operations for the years ended December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
December 31 September 30 June 30 March 31
<S> <C> <C> <C> <C>
1996
Interest income $31,832 $31,639 $30,894 $30,867
Net interest income 15,071 15,190 14,854 14,575
Provision for loan loss 200 200 0 0
Net security gains (losses) 231 (73) (35) 1,071
Other non-interest income 1,816 1,698 1,612 1,609
Non-interest expense 9,958 9,840 9,817 9,902
Income tax expense 1,744 1,684 1,652 1,930
Net income 5,216 5,091 4,962 5,423
Income per share $12.98 $12.65 $12.32 $13.47
1995
Interest income $31,228 $31,030 $30,833 $30,350
Net interest income 14,649 14,570 14,873 15,605
Provision for loan loss 0 0 0 0
Net security gains 704 161 1,089 14
Other non-interest income 1,381 1,476 1,665 1,510
Non-interest expense 10,122 9,401 10,521 10,850
Income tax expense 1,636 1,672 1,774 1,491
Net income 4,976 5,134 5,332 4,788
Income per share $12.44 $12.73 $13.20 $11.74
</TABLE>
NOTE M - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
First Evergreen has, through its subsidiary bank, financial instruments with
off-balance-sheet risk made in the normal course of business to meet the
financing needs of its customers. These financial instruments include
commitments to extend credit, letters of credit and financial guarantees. These
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the consolidated statements of
condition.
Exposure to credit loss in the event of nonperformance of the other party to
the financial instrument for commitments to extend credit, letters of credit
and financial guarantees is represented by the contractual amount of those
instruments. The same credit policies are used in making commitments as those
used for on-balance-sheet instruments. Collateral or other security is
generally required to support financial instruments with off-balance-sheet
credit risk, however, credit risk is controlled through credit approvals,
limits and monitoring procedures.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Because a portion of the commitment is expected to
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Each customer's credit
worthiness is evaluated on a case-by-case basis. The amount of collateral
obtained, if deemed necessary, upon extension of credit is based on
management's credit evaluation of the counterparty. Collateral held varies, but
may include accounts receivable, inventory, property, plant and equipment, and
real estate. Commitments to extend credit at December 31, 1996 and 1995 are
approximately $91,364 and $78,345 respectively. Rates on these commitments
ranged from 6.50% to 15% in 1996 and 6.375% to 15% in 1995.
16
<PAGE> 15
Note M - Financial Instruments with Off-Balance-Sheet Risk - continued
Letters of credit and financial guarantees are issued to guarantee the
performance of a customer to a third party. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending other
credits to customers. Collateral is held to support these commitments as deemed
necessary. At December 31, 1996 and 1995, outstanding letters of credit
totalled approximately $5,608 and $7,623 respectively.
NOTE N - CONCENTRATIONS OF CREDIT RISK
According to SFAS No. 105, Disclosure of Information about Financial
Instruments with Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risk, group concentrations of credit risk exist if a
number of borrowers or other counterparties are engaged in similar activities
and have similar economic characteristics that would cause their ability to
meet contractual obligations to be similarly affected by economic or other
conditions. Management is of the opinion that both its investment and loan
portfolios are well diversified. However, at December 31, 1996 and 1995,
substantially all outstanding loans are with borrowers located in Cook County
and the surrounding area. In addition, at December 31, 1996 and 1995,
approximately 61% and 69% of the obligations of states and political
subdivisions were issued by municipalities located in Cook County. Also,
approximately 11.40% and 12.29% of total outstanding loans as of December 31,
1996 and 1995, respectively, have been issued to the construction industry.
These commitments include financing to construction suppliers, contractors and
developers. Management monitors these concentrations on a regular basis and is
of the opinion that the concentrations are not significant.
NOTE O - FIRST EVERGREEN CORPORATION (PARENT COMPANY)
The Parent Company's condensed financial information, which follows, conforms
with the accounting policies described in the preceding notes.
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CONDITION
December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash at subsidiary bank $ 785 $ 499
Investment in banking subsidiary 185,580 173,229
Other assets 75 90
-------- --------
Total assets $186,440 $173,818
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities $ 0 $ 0
Stockholders' equity 186,440 173,818
-------- --------
Total liabilities and stockholders' equity $186,440 $173,818
======== ========
</TABLE>
17
<PAGE> 16
Note O - First Evergreen Corporation (Parent Company) - continued
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Operating income
Dividends from the Bank (Note A) $6,981 $5,907 $8,592
Operating expenses
Interest expense 0 0 7
Other expenses 230 268 139
------ ------ ------
Total operating expenses 230 268 146
====== ====== ======
Income before federal income tax benefit and equity
in undistributed income of subsidiary bank 6,751 5,639 8,446
Federal income tax benefit 76 90 48
------ ------ ------
Income before equity in undistributed
income of subsidiary bank 6,827 5,729 8,494
Equity in undistributed income of subsidiary bank 13,865 14,501 11,921
------ ------ ------
Net income $20,692 $20,230 $20,415
====== ====== ======
CONDENSED STATEMENTS OF CASH FLOWS Years Ended December 31,
1996 1995 1994
Cash flows from operating activities:
Net income $20,692 $20,230 $20,415
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed income of subsidiary bank (13,865) (14,501) (11,921)
(Increase) decrease in other assets 15 (32) 104
Decrease in other liabilities 0 0 (47)
------ ------ ------
Total adjustments (13,850) (14,533) (11,864)
Net cash provided by operating activities 6,842 5,697 8,551
====== ====== ======
Cash flows from financing activities:
Principal payment on note payable 0 0 (2,000)
Acquisitions of treasury stock (515) (739) (764)
Dividends paid (6,041 (5,260) (5,286)
------ ------ ------
Net cash used for financing activities (6,55) (5,999) (8,050)
------ ------ ------
Increase (decrease) in cash 286 (302) 501
Cash at beginning of year 499 801 300
------ ------ ------
Cash at end of year $785 $499 $801
====== ====== ======
Supplemental disclosures of cash flow information
Cash paid (received) during the year for:
Interest $0 $0 $55
Income taxes (net of reimbursements
from subsidiary bank) $(90) $(48) $(97)
</TABLE>
18
<PAGE> 17
NOTE P - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summarizes the carrying value and estimated fair value of
financial instruments as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
<S> <C> <C> <C> <C>
Financial Assets
Cash and cash equivalents $108,854 $108,854 $58,998 $58,998
Securities held to maturity 985,207 999,696 1,074,806 1,104,284
Securities available for sale 142,625 142,625 142,269 142,269
Net loans 615,653 627,642 526,703 544,702
Interest receivable 15,999 15,999 20,959 20,959
Financial Liabilities
Deposits 1,695,847 1,697,950 1,661,946 1,668,008
Federal funds purchased and securities
sold under agreements to repurchase 17,235 17,235 15,070 15,070
Interest payable 6,531 6,531 5,894 5,894
Off-Balance-Sheet Financial Instruments
Commitments to extend credit and
standby letters of credit 0 520 0 502
</TABLE>
Where readily available, quoted market prices were utilized. If quoted market
prices were not available, fair values were based on estimates using present
value calculations. As this method is significantly affected by assumptions
used, such as the discount rate and estimates of future cash flows, the
estimates cannot be substantiated by comparison to independent markets, and, in
many cases, could not be realized upon immediate settlement of the instruments.
Certain financial instruments and all nonfinancial assets and liabilities have
been omitted. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of First Evergreen. The following methods and
assumptions were used in estimating the fair value for financial instruments.
CASH AND CASH EQUIVALENTS
The fair values reported for cash and cash equivalents were estimated to be
their carrying value as they are highly liquid and short
term in nature.
SECURITIES HELD TO MATURITY AND SECURITIES AVAILABLE FOR SALE
Fair values of securities held to maturity and available for sale are
determined by reference to quoted market prices, if available.
If quoted market prices are not available, fair value is estimated using quoted
prices for similar securities.
LOANS
Fair value of the loan portfolio was estimated by discounting anticipated
future cash flows using current rates at which similar loans would be made with
the same remaining maturity. Credit risk was incorporated in the anticipated
cash flows by considering the historical loss experience for each major
category of loans. The cash flows of non-performing loans are reduced based
upon estimates of loan management.
ACCRUED INTEREST RECEIVABLE
Due to its short term nature, the fair value of accrued interest receivable was
estimated at carrying value.
19
<PAGE> 18
Note P - Fair Value of Financial Instruments-- continued
DEPOSITS
The fair value of deposits with no stated maturities is estimated to be the
carrying value. Fair value of fixed maturity certificates is estimated by
discounting future cash flows using rates currently offered for deposits of
similar remaining maturities.
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
As these instruments are short term in nature, their fair value is estimated to
be their carrying value.
INTEREST PAYABLE
Due to its short-term nature, the fair value of accrued interest payable was
estimated at carrying value.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of instruments with off-balance-sheet risk is determined by
estimating the amount First Evergreen would have to pay a third party to assume
these instruments.
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND STOCKHOLDERS
FIRST EVERGREEN CORPORATION
We have audited the accompanying consolidated statement of condition of First
Evergreen Corporation and subsidiary as of
December 31, 1996, and the related consolidated statements of income, changes
in stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The consolidated financial statements of First Evergreen Corporation
and subsidiary as of December 31, 1995, and for each of the two years in the
period ended December 31, 1995, were audited by other auditors whose report
dated January 24, 1996, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above represent fairly, in
all material respects, the consolidated financial position of First Evergreen
Corporation and subsidiary at December 31, 1996, and the consolidated results
of their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
Chicago, Illinois
January 28, 1997
20
<PAGE> 19
COMMON STOCK INFORMATION AND DIVIDENDS
The common stock of First Evergreen, held by 491 stockholders of record on
December 31, 1996, is not traded on any national or regional exchange or in the
over-the-counter market. First Evergreen, due to the absence of a readily
accessible market, with certain limitations, offers to purchase shares that a
stockholder cannot otherwise sell. Such transactions are subject to a stated
policy that defines the price per share as equal to the "book value" as last
established by the Board of Directors [rounded up or down to the nearest
twenty-five cents] and further defines "book value" as an amount equal to the
amount of stockholders' equity divided by the number of outstanding shares and
adjusted by adding to it the amount per outstanding share of the allowance for
loan losses of the Bank [net of the statutory federal tax rate of 35%].
Individual purchases by First Evergreen in excess of 500 shares in a
twelve-month period are made at a declining percentage of "book value" and any
shares purchased by First Evergreen are subject to a one-year holding period by
the stockholder. Federal Reserve regulations place limitations on a bank
holding company's purchase and redemption of its own stock without prior notice
to the Federal Reserve and its approval thereof. The following table sets forth
the high and low price by quarter for trades known to First Evergreen.
<TABLE>
<CAPTION>
1996 Fourth Third Second First
<S> <C> <C> <C> <C>
High $467.25 $451.25 $438.00 $433.25
Low $456.25 $443.00 $431.75 $422.75
1995 Fourth Third Second First
High $433.25 $418.75 $408.00 $387.75
Low $433.25 $408.00 $397.00 $382.50
</TABLE>
For the year ended December 31, 1996, there were, to the knowledge of First
Evergreen, 19 trades involving 1,140 shares. For the year ended December 31,
1995, there were 27 trades involving 1,807 shares. See Selected Financial Data
for information relating to dividend payments. In January 1997, a $17 per share
cash dividend was declared to stockholders of record on January 2, 1997. Future
dividend payments on common stock will depend upon such factors as cash
position, earnings and capital requirements.
FINANCIAL REVIEW
The following Selected Financial Data are not covered by the report of
independent auditors and should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations, which
follows, and the financial statements and notes of First Evergreen appearing
elsewhere in this report. As average daily balances for all reported figures
were not available, monthly average balances were used in preparation of some
average consolidated amounts presented. In the opinion of First Evergreen's
management, the use of monthly averages would not be substantially different
from the use of daily averages.
21
<PAGE> 20
SELECTED FINANCIAL DATA
In Thousands of Dollars Except Per Share Data
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Total interest income $125,232 $123,441 $117,070 $120,417 $120,392
Total interest expense 65,542 63,744 54,200 59,954 68,187
-------- -------- -------- -------- --------
Net interest income 59,690 59,697 62,870 60,463 52,205
Provision for loan losses 400 0 0 0 231
-------- -------- -------- -------- --------
Net interest income after
provision for loan losses 59,290 59,697 62,870 60,463 51,974
Other income 7,929 8,000 4,470 6,288 6,092
Other expenses 39,517 40,894 39,491 36,627 32,923
-------- -------- -------- -------- --------
Income before income tax expense 27,702 26,803 27,849 30,124 25,143
Applicable income taxes 7,010 6,573 7,434 8,154 6,184
-------- -------- -------- -------- --------
Net income $20,692 $20,230 $20,415 $21,970 $18,959
======== ======== ======== ======== ========
DIVIDENDS
Cash dividends declared $6,041 $5,260 $5,286 $3,691 $3,320
Stock dividends declared 0 0 0 0 0
PER SHARE DATA
Net income $51.42 $50.11 $50.29 $53.77 $45.95
Cash dividends declared 15.00 13.00 13.00 9.00 8.00
SELECTED BALANCES - END OF YEAR
Total assets $1,910,013 $1,888,088 $1,872,035 $1,870,758 $1,790,033
Total investments 1,127,832 1,217,075 1,265,022 1,331,347 1,273,899
Total loans 618,695 530,499 478,764 416,341 388,056
Total deposits 1,695,847 1,661,946 1,694,617 1,718,071 1,653,371
Stockholders' equity 186,440 173,818 157,464 145,026 127,912
RATIOS
Net income to:
Average total deposits 1.25% 1.22% 1.20% 1.30% 1.27%
Average total assets 1.11 1.10 1.10 1.19 1.17
Average stockholders' equity 11.58 12.29 13.68 16.17 15.83
Cash dividends to net income 29.19 26.00 25.89 16.80 17.51
Average loans to average deposits 35.50 30.06 26.54 22.71 26.62
Average equity to average assets 9.57 8.91 8.00 7.39 7.39
</TABLE>
22
<PAGE> 21
Management's Discussion and Analysis
FINANCIAL CONDITION & RESULTS OF OPERATIONS
LIQUIDITY
Liquidity is the ability to meet deposit withdrawals, provide for customers'
credit needs, acquire and develop technologies to deliver customer services and
service First Evergreen's financial obligations when due. Principal sources of
liquidity are cash and assets that can be readily converted to cash. Such
assets include interest bearing deposits in banks, federal funds sold,
securities available for sale and the maturity of loans and securities held to
maturity. Historically, First Evergreen's strong earnings flow has provided a
solid source of liquidity as well. An additional source of liquidity used by
First Evergreen is the purchase of federal funds. The need for liquidity has
become more important in the banking industry in recent years as the growth in
interest bearing transaction accounts has increased the amount of deposit
liabilities that are interest rate sensitive and have maturities of less than
one year. Additionally, the maturity of certificates of deposit at Evergreen
Bank are primarily in the less than one year category. First Evergreen and its
subsidiary bank are able to meet the funding gap between earning assets and
interest sensitive liabilities with their relatively stable core base of demand
and savings deposits. The maintenance of a proper balance between earning
assets and interest sensitive liabilities is the primary function of asset and
liability management. First Evergreen intends to continue its objective of
matching maturities of deposit liabilities with maturities of earning assets as
closely as possible.
In the opinion of First Evergreen's management, First Evergreen's market does
not demonstrate any evolving trends, nor does First Evergreen have any
commitments that currently would require actions to place First Evergreen in a
position of greater liquidity. First Evergreen's consolidated statements of
cash flows should be read in conjunction with any assessment of liquidity.
INTEREST RATE SENSITIVITY
Interest rate sensitivity is closely related to liquidity. Interest
sensitivity gaps result from maturity mismatches between earning assets and
interest sensitive liabilities. First Evergreen continues to be at risk from
rising interest rates due to the systematic negative gap. Management minimizes
the effect of that risk by simulation modeling, through gap analysis and
monitoring portfolio duration.
Total liabilities maturing or repricing within one year exceeded assets
maturing or repricing within one year by $208 million and
$399 million at December 31, 1996 and 1995 respectively. The negative gap
position in the one year or less period is the result of
depositors' continued repositioning of funds in shorter-term, interest bearing
instruments. Repricing of certain categories of assets and liabilities is
subject to market conditions and other influences that are beyond the Company's
control. As a result, certain assets and
liabilities indicated above as maturing or repricing within a stated period may
in fact mature or reprice in other periods or at different volumes.
Additionally, 60% of First Evergreen's total assets are in marketable,
highly-liquid securities with laddered maturities to reduce
the effect of interest rate changes.
The table which appears on the next page, sets forth the balances in the major
categories of interest earning assets and interest sensitive liabilities (in
thousands) as of December 31, 1996. This data is at a particular point in time;
significant changes can occur daily in the sensitivity relationships.
Footnote for chart on following page
* Although savings and NOW accounts do not reprice on a pre-established
contract, they are subject to immediate withdrawal. It has been First
Evergreen's experience that a portion of these deposits are relatively
insensitive to interest rates and generally behave like deposits with
longer maturities. To recognize this, historic core deposits are
reported in the over five years category. Funds considered to be
non-core have been distributed ratably based on a look back period of
eighteen months.
23
<PAGE> 22
<TABLE>
Remaining Maturity or Earliest Possible Repricing
0 - 3 4 - 12 1 Year to Over
Months Months 5 Years 5 Years Total
<S> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Securities $45,177 $233,259 $688,105 $161,291 $1,127,832
Loans 115,641 88.064 201,400 213,590 618,695
Federal funds sold 53,200 0 0 0 53,200
------- -------- -------- -------- ----------
Total interest earning assets 214,018 321,323 889,505 374,881 1,799,727
------- -------- -------- -------- ----------
Percent of interest earning assets 11.89% 17.85% 49.42% 20.83% 100.00%
INTEREST SENSITIVE LIABILITIES
Money market accounts $97,965 $0 $0 $0 $97,965
Time deposits of $100 or more 45,759 77,346 31,777 107 154,989
All other time deposits 138,575 306,276 211,582 50 656,483
Savings deposits and NOW accounts* 15,000 45,658 145,559 398,929 605,146
Securities sold under
agreements to repurchase 17,235 0 0 0 17,235
------- -------- -------- -------- ----------
Total interest sensitive liabilities 314,534 429,280 388,918 399,086 1,531,818
------- -------- -------- -------- ----------
Percent of interest sensitive liabilities 20.53% 28.02% 25.39% 26.05% 100.00%
Interest sensitivity gap $(100,516) $(107,957) $500,587 $(24,205) $267,909
Cumulative interest sensitivity gap (100,516) (208,473) 292,114 267,909 267,909
Ratio of interest earning assets
to interest sensitive liabilities 0.68 0.75 2.29 0.94 1.17
</TABLE>
FINANCIAL CONDITION
The deposit base, the main source for funds employed in earning assets,
increased modestly in 1996. Total deposits increased by $33,901 from December
31, 1995 to $1,695,847 at December 31, 1996. Rates on time deposits gradually
increased throughout the year, while the savings rate remained at 3%. Deposit
customers continued the trend of shifting savings funds into shorter-term time
deposits. As a result, the volume of time deposits increased by $64,804, while
the savings/NOW category declined by $43,061. Over the same period, demand
deposits and money market accounts also increased by $11,367 and $791
respectively. Additional funding was provided by securities sold under
agreements to repurchase which increased $2,165. In 1995, total deposits
declined by $32,671. Rates on time deposits declined during the period, while
the savings rate also remained at 3%. As a result, the volume of time deposits
increased by $119,616, while the savings/NOW, demand and money market
categories all declined by $140,168, $8,277 and $3,842 respectively. Additional
funding was provided by securities sold under agreements to repurchase which
increased by $1,910.
Management closely monitors the rates being offered on all its deposit products
in response to changes in the short-term markets. During 1996, earning assets
increased by $52,153. Due to continued demand, the loan portfolio increased by
nearly 17% or $88,196. This increase was funded by a decline in the held to
maturity investment portfolio which decreased by $89,599. Also during the same
period, the available for sale portfolio grew by $356 and federal funds sold
increased $53,200. In 1996, the average interest rate spread expressed on a
tax-equivalent basis (net interest margin) declined 11 basis points to 3.06%.
In the period, the return on average earning assets increased 1 basis point,
while the average cost of funds increased 12 basis points. Net interest margins
related to 1995 and 1994 were 3.17% and 3.42% respectively.
24
<PAGE> 23
Return on average equity declined to 11.58% from 1995 and 1994 levels of 12.29%
and 13.68% respectively. Earnings continue to be strong; however, this ratio
has declined due to the bank's earnings retention trend. Return on average
assets increased from 1.10% to 1.11%. In 1994, the return was also 1.10%. Total
stockholders' equity increased $12,622 from $173,818 at December 31, 1995. A
cash dividend of $15 per share ($6,041) was paid to stockholders of record on
January 4, 1996. A dividend of $13 per share ($5,260) was paid during 1995.
Capital ratios are strong and remain well above regulatory guidelines. First
Evergreen's tier-one leveraged capital ratio increased 60 basis points,
reaching 9.70%, while the ratio for total risk-based capital decreased 230
basis points, reaching 24.55%. This decline in the risk-based capital ratio
relates to the shift in earning assets from the investment portfolio to the
loan portfolio. Regulations require greater reserves for loan extensions than
for Government securities.
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED TO 1995 AND 1994
In 1996 and 1995, net interest income of nearly $59,700 was earned. In 1994,
net interest totalling $62,870 was realized as a result of a stronger net
interest margin. During 1996, the average balance of earning assets increased
$26,415 or 1.5%, while their yield (on a tax- equivalent basis) increased by
one basis point reaching 7.39%. In 1994, this tax equivalent yield was 6.91%.
Interest income on a tax-equivalent basis increased $2,074 and $6,999 in 1996
and 1995 respectively.
In 1996, the average volume in interest-bearing liabilities increased less than
1% or $1,622. Also in 1996, the increase of $1,798 in interest expense
continues to highlight the trend of deposits which were repositioned throughout
the year into higher-yielding products. In 1995 and 1994, interest expense
increased $9,545 and decreased $5,755 respectively.
In 1996, after a three-year absence, management provided an additional $400 to
the loan loss reserve. Overall quality of the loan portfolio continues to be
good. On a regular basis, management reviews the loan portfolio to identify
probable losses inherent in the portfolio and to determine the appropriate
level for the loan loss reserve. Strong loan growth in 1995 and 1996 totalling
nearly $140 million will likely require additional funding for reserves in
future periods. The volume of loans charged off as a percentage of average
loans outstanding in 1996 was .20%, still well below the Company's peers. In
1995 and 1994, this ratio was .01% and -.02% respectively.
Total other operating income, excluding securities gains and losses, increased
$703 in 1996 due to additional ATM fees generated and fees earned from trust
services. Net security gains of $1,194 were realized in 1996. Management
continues to closely monitor the Bank's available for sale portfolio and
repositions securities based on market conditions. Again in 1996, corporate
profits were strong, benefitting from low interest rates and inflation. Bond
market yields and the equity markets once again showed strength.
Total other operating expenses declined $1,377 due to a $1,947 decrease in FDIC
insurance costs. Beginning in January 1997, insured institutions will begin to
pay an assessment of 1.296 basis points on Financing Corporation (FICO) bonds.
Based on current deposit levels, this assessment will not be material to the
Bank. Employee salaries and benefits increased by1.1% or $251 in 1996. The
salaries component of this calculation increased a modest 2.1%. The number of
employees expressed on a full-time equivalent basis increased by 12 reaching
577. Equipment and net occupancy expenses increased $219 and $197 respectively.
Equipment increases relate to the Bank's commitment to customer service
technologies. Increased occupancy expenses relate to assessed real estate
taxes. Management has been proactive in this area to minimize these increases.
Data processing expense and outside fees and services declined $157 and $103
respectively. The declines reflect favorable contract extensions, reduced
correspondent bank fees and lower ATM network expense. Other expenses increased
$163 due to increases in printed forms and supplies, advertising and charitable
contributions.
First Evergreen's management is currently performing a review of all system
applications to ensure a smooth data processing transition into the year 2000.
Management is confident that compliance by M&IData Services, the Company's
major service provider, will be completed by the end of 1998. Compliance costs
incurred by First Evergreen will not be material. In 1995, total other
operating expenses increased $1,403. Employee salaries and benefits increased
$2,172 or 10.7% primarily due to higher salary expense. The number of employees
expressed on a full-time equivalent basis declined in 1995 by 16, reaching 565.
Insurance expense dropped sharply due to the near elimination of FDIC insurance
costs. Total other expenses increased $653 due to increases in advertising and
contribution expenses.
25
<PAGE> 24
First Evergreen Corporation and Subsidiary
SELECTED STATISTICAL INFORMATION
Dollars in thousands
Unaudited
<TABLE>
<CAPTION>
SECURITIES HELD TO MATURITY
BOOK VALUES
December 31,
1996 1995 1994
<S> <C> <C> <C>
U.S. Treasury obligations $133,514 $251,116 $395,070
U.S. Government agencies and mortgage-backed securities 486,775 462,665 480,677
Obligations of states and political subdivisions 173,090 151,295 131,657
Collateralized mortgage obligations 190,443 208,345 127,651
Other securities 1,385 1,385 1,385
-------- ---------- ----------
Total $985,207 $1,074,806 $1,136,440
======== ========== ==========
<CAPTION>
SECURITIES AVAILABLE FOR SALE
CARRYING VALUES
December 31,
1996 1995 1994
<S> <C> <C> <C>
U.S. Treasury obligations $142,625 $138,888 $128,582
Collateralized mortgage obligations 0 3,381 0
-------- ---------- ----------
$142,625 $142,269 $128,582
======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
SECURITIES HELD TO MATURITY
REMAINING MATURITY AND AVERAGE YIELD
December 31, 1996
One Year or Less One to Five Years Five to Ten Years Over Ten Years
Book Yield Book Yield Book Yield Book Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury obligations $61,954 4.86% $71,560 6.58% $ 0 .00% $ 0 .00%
U.S. Government agencies
and mortgage-backed securities 148,171 8.20 267,937 7.42 17,456 6.23 53,211 7.08
Obligations of states and
political subdivisions (2) 17,655 5.78 71,767 5.82 73,706 5.62 9,962 6.23
Other securities (1) 27,310 6.06 157,562 6.92 1,204 8.39 5,752 7.48
-------- -------- ------- -------
Total maturities (3) $255,090 $568,826 $92,366 $68,925
</TABLE>
(1) Includes Federal Reserve Bank
stock.
(2) The interest on non-taxable
investment securities has been adjusted and
is calculated on a tax-equivalent basis using
a federal tax rate of 35%.
(3) No securities of any issuer
are held, exclusive of U.S. Treasury
obligations and
U.S. Government agencies, which exceed 10% of
stockholders' equity.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
REMAINING MATURITY AND AVERAGE YIELD
December 31, 1996
One Year or Less One to Five Years Five to Ten Years Over Ten Years
Carrying Value Yield Carrying Value Yield Carrying Value Yield Carrying Value Yield
U.S. Treasury obligations $23,346 4.83% $119,279 5.23% $0 0.00% $0 0.00%
</TABLE>
26
<PAGE> 25
Selected Statistical Information -- continued
<TABLE>
<CAPTION>
LOANS
TYPES OF LOANS December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Commercial and industrial $ 97,408 $ 78,181 $ 73,051 $ 62,542 $ 59,006
Real estate -- residential 377,368 332,293 286,587 233,544 208,487
Real estate -- commercial 108,484 91,353 81,344 76,198 68,669
Real estate -- construction 10,920 4,290 714 3,006 3,832
Installment 24,528 24,404 37,116 41,149 48,293
------- ------- ------- ------- -------
618,708 530,521 478,812 416,439 388,287
Unearned discount (13) (22) (48) (98) (231)
Allowance for loan losses (3,042) (3,796) (3,852) (3,764) (3,906)
-------- -------- -------- -------- --------
Total $615,653 $526,703 $474,912 $412,577 $384,150
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES December 31, 1996
1 Year 1 to 5 Over
or Less Years 5 Years Total
<S> <C> <C> <C> <C>
Commercial and industrial $60,984 $29,588 $6,836 $ 97,408
Real estate - construction 4,115 6,805 0 10,920
------- ------ ------ ------
Total $65,099 $36,393 $6,836 $108,328
======= ======= ====== ========
</TABLE>
<TABLE>
<CAPTION>
INTEREST SENSITIVITIES
LOANS MATURING IN ONE YEAR AND OVER 1 to 5 Over
Years 5 Years Total
<S> <C> <C> <C>
Fixed rate $28,876 $6,001 $34,877
Floating rate 7,517 835 8,352
------- ------ -------
Total $36,393 $6,836 $43,229
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
NONPERFORMING ASSETS (1)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Nonaccrual loans (2) $ 688 $1,619 $ 414 $1,316 $3,247
Past due 90 days or more (3) 3,316 2,351 1,852 1,337 1,444
Restructured loans (4) 0 0 0 0 0
Other real estate owned 176 224 1,256 3,564 2,928
</TABLE>
(1) Adoption of SFAS No. 114 in 1995 does not materially impact the
comparability of this disclosure.
(2) Loans accounted for on a nonaccrual basis. (See Note A for further
information.)
(3) Accruing loans that are contractually past due 90 days or more as
to principal or interest payments.
(4) Loans not included above that are "troubled debt restructurings" as
defined in SFAS No. 15, Accounting by Debtors and Creditors for
Troubled Debt Restructurings.
Nonperforming assets decreased slightly to $4,180 at December 31, 1996, from
$4,194 in 1995. The economic outlook for 1997 has not changed from the previous
quarters. The rise in consumer debt and personal bankruptcies pose a concern
for 1997. These factors have the capability of adversely affecting loan quality
and portfolio growth, however no changes are anticipated in the near term.
27
<PAGE> 26
Selected Statistical Information -- continued
Consolidated Average Statements of Condition, Analysis of Interest Earnings
and Interest Differential Analysis
<TABLE>
<CAPTION>
1996 1995
Average Average
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Federal funds sold $ 34,051 $ 1,815 5.33% $ 24,344 $ 1,435 5.89%
Taxable investment securities 989,874 67,213 6.79 1,072,922 72,448 6.75
Non-taxable investment securities (l) 163,022 14,630 8.97 144,388 13,782 9.54
IDR bonds/non-taxable loans (2) 6,085 554 9.10 6,443 592 9.19
Loans (3) 573,421 46,334 8.08 491,941 40,215 8.17
--------- ------ ---- ---------- ------- ----
Total interest-earning assets 1,766,453 130,546 7.39 1,740,038 128,472 7.38
--------- ------- ---- ---------- ------- ----
Other Assets:
Cash and due from banks 45,179 46,363
Less allowance for loan losses (3,562) (3,862)
Bank premises and equipment 30,545 29,179
Accrued interest receivable 21,805 22,402
Other real estate owned 177 844
Goodwill and intangibles 4,727 5,568
Other assets 1,872 3,548
---------- ----------
Total Assets $1,867,196 $1,844,080
========== ==========
Interest-Bearing Liabilities:
Interest-bearing transaction deposits $205,438 6,169 3.00 $209,247 6,488 3.10
Savings deposits 525,294 15,780 3.00 613,993 18,953 3.09
Time deposits of $100 or more 143,283 7,885 5.50 133,413 7,342 5.50
Other time deposits 625,722 35,097 5.61 546,119 30,441 5.57
Federal funds purchased, securities
sold under agreements to repurchase
and borrowed funds 15,323 611 3.99 10,666 520 4.88
--------- ------ ---- --------- ------ ----
Total interest-bearing liabilities 1,515,060 65,542 4.33 1,513,438 63,744 4.21
--------- ------ ---- --------- ------ ----
Net interest margin 3.06% 3.17%
==== ====
Other Liabilities and Stockholders' Equity:
Demand deposits 166,384 154,988
Accrued interest and other liabilities 7,031 11,409
Stockholders' equity 178,721 164,245
------- -------
Total liabilities and stockholders' equity $1,867,196 $1,844,080
========== ==========
- ------------------------------------------------------------------------------------------------------
Net interest earnings $65,004 $64,728
======= =======
- ------------------------------------------------------------------------------------------------------
Net yield on interest-earning assets 3.68% 3.72%
==== ====
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) The interest on non-taxable securities has been adjusted and is
calculated on a tax-equivalent basis using a federal tax rate of 35%.
(2) The interest on non-taxable industrial development bonds and other
non-taxable loans (included in loans for financial purposes) has been
adjusted and is calculated on a tax-equivalent basis using a federal
tax rate of 35%.
(3) Average balance includes nonaccrual loans; their impact is included
in the rate component.
(4) Changes due to both rate and volume are allocated based on the
percentage of each to the total.
28
<PAGE> 27
<TABLE>
<CAPTION>
1994 1996 Compared to 1995 1995 Compared to 1994
Average Change Attributable to Change Attributable to
Balance Interest Rate Volume Rate Total (4) Volume Rate Total (4)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 12,579 $ 536 4.26% $ 528 $ (148) $ 380 $ 638 $ 261 $ 899
1,171,476 72,142 6.16 (5,637) 402 (5,235) (6,342) 6,648 306
121,724 12,080 9.92 1,706 (858) 848 2,178 (476) 1,702
5,408 500 9.25 (33) (5) (38) 95 (3) 92
446,319 36,215 8.11 6,589 (470) 6,119 3,728 272 4,000
- ---------- -------- ---- ------- ------ ------ ------ ----- -----
1,757,506 $121,473 6.91 3,153 $(1,079) 2,074 297 6,702 6,999
46,616
(3,842)
27,323
25,483
2,898
6,407
1,795
- ---------
1,864,186
=========
$ 214,332 6,253 2.92 (117) (202) (319) (151) 386 235
828,802 23,336 2.82 (2,676) (497) (3,173) (6,473) 2,090 (4,383)
82,617 3,655 4.42 543 (0) 543 2,640 1,047 3,687
421,693 20,830 4.94 4,464 192 4,656 6,696 2,915 9,611
3,823 125 3.27 198 (107) 91 310 85 395
- --------- ------ ---- ---- ---- ----- ----- ----- -----
1,551,267 54,199 3.49 2,412 (614) 1,798 3,022 6,523 9,545
- --------- ------ ---- ----- ---- ----- ----- ----- -----
3.42%
====
154,837
8,881
149,201
$1,864,186 $ 741 $(465) $ 276 $(2,725) $ 179 $(2,546)
========== ====== ===== ====== ====== ====== =======
- --------------------------------------------------------------------------
67,274
======
- --------------------------------------------------------------------------
3.83%
====
- --------------------------------------------------------------------------
</TABLE>
29
<PAGE> 28
Selected Statistical Information -- continued
POTENTIAL PROBLEM LOANS
Effective December 31, 1996, the Company had $4,468 in domestic commercial
loans for which payments presently are presently current, but the borrowers
are currently experiencing financial difficulties. These loans are closely
monitored by management on a regular basis.
FOREIGN LOANS OUTSTANDING
There were no loans to foreign countries outstanding for the reported
periods.
<TABLE>
<CAPTION>
SUMMARY OF LOAN LOSS EXPERIENCE
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES Years Ended December 31
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Average total loans $579,506 $498,384 $451,727 $385,014 $397,206
======== ======== ======== ======== ========
Total loans at year end $618,695 $530,499 $478,764 $416,341 $388,056
======== ======== ======== ======== ========
Allowance for loan losses
at beginning of year $ 3,796 $ 3,852 $ 3,764 $ 3,906 $ 3,925
Loans charged off:
Commercial and industrial 1,010 187 117 306 852
Real estate -- mortgage 4 0 4 137 582
Installment 242 70 60 100 463
-------- -------- -------- -------- --------
Total $ 1,256 $ 257 $ 181 $ 543 $ 1,897
-------- -------- -------- -------- --------
Recoveries of loans previously charged off:
Commercial and industrial 33 131 83 321 229
Real estate -- mortgage 23 0 63 0 0
Installment 46 70 123 80 132
-------- -------- -------- -------- --------
Total 102 201 269 401 361
-------- -------- -------- -------- --------
Net loans charged off 1,154 56 (88) 142 1,536
Provision for loan losses 400 0 0 0 231
Allowance of acquired entity 0 0 0 0 1,286
-------- -------- -------- -------- --------
Allowance for loan losses at year end $ 3,042 $ 3,796 $ 3,852 $ 3,764 $ 3,906
======== ======== ======== ======== ========
As a percent of average loans:
Net loans charged off 0.20% 0.01% -0.02% 0.04% 0.39%
Provision for loan losses 0.07 0.00 0.00 0.00 0.06
Allowance balance as a percent
of year-end loans 0.49% 0.72% 0.80% 0.90% 1.01%
</TABLE>
The allowance for loan losses has been allocated to the amount deemed to be
reasonably necessary to provide for the probable losses being incurred within
the following categories at December 31,
<TABLE>
<CAPTION>
Allocation of allowance
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Commercial and industrial $1,346 $1,363 $1,089 $813 $1,624
Real estate -- construction 5 6 4 6 6
Real estate -- residential 800 837 796 360 323
Real estate -- commercial 579 439 435 196 177
Installment 312 236 196 683 709
Unallocated 0 915 1,332 1,706 1,067
------ ------ ------ ------ ------
$3,042 $3,796 $3,852 $3,764 $3,906
====== ====== ====== ====== ======
<CAPTION>
Percent of loans in each category to total loans
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Commercial and industrial 15.74% 14.74% 15.26% 15.00% 15.20%
Real estate -- construction 1.77 0.81 0.15 0.70 1.00
Real estate -- residential 60.99 62.63 59.85 57.95 55.61
Real estate -- commercial 17.53 17.22 16.99 16.45 15.79
Installment 3.97 4.60 7.75 9.90 12.40
Unallocated n/a n/a n/a n/a n/a
------ ------ ------ ------ ------
100.00% 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ====== ======
</TABLE>
30
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 55,654,445
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 53,200,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 142,624,997
<INVESTMENTS-CARRYING> 985,207,440
<INVESTMENTS-MARKET> 999,696,459
<LOANS> 618,695,059
<ALLOWANCE> 3,041,637
<TOTAL-ASSETS> 1,910,013,315
<DEPOSITS> 1,695,846,772
<SHORT-TERM> 17,235,000
<LIABILITIES-OTHER> 10,491,406
<LONG-TERM> 0
0
186,440,137
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 186,440,137
<INTEREST-LOAN> 46,693,809
<INTEREST-INVEST> 76,722,863
<INTEREST-OTHER> 1,815,057
<INTEREST-TOTAL> 125,231,729
<INTEREST-DEPOSIT> 64,930,642
<INTEREST-EXPENSE> 65,541,911
<INTEREST-INCOME-NET> 59,689,818
<LOAN-LOSSES> 400,000
<SECURITIES-GAINS> 1,193,781
<EXPENSE-OTHER> 39,516,282
<INCOME-PRETAX> 27,702,075
<INCOME-PRE-EXTRAORDINARY> 20,692,075
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,692,075
<EPS-PRIMARY> 51.42
<EPS-DILUTED> 51.42
<YIELD-ACTUAL> 3.68
<LOANS-NON> 687,943
<LOANS-PAST> 3,316,237
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,468,053
<ALLOWANCE-OPEN> 4,195,947
<CHARGE-OFFS> 1,256,474
<RECOVERIES> 102,164
<ALLOWANCE-CLOSE> 3,041,637
<ALLOWANCE-DOMESTIC> 3,041,637
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS OF FIRST EVERGREEN CORPORATION
MEETING DATE: APRIL 24, 1997
The Annual Meeting of Stockholders of First Evergreen Corporation ("First
Evergreen") will be held at the Evergreen Park facility of the First National
Bank of Evergreen Park located at 3101 West 95th Street in Evergreen Park,
Illinois, on Thursday, April 24, 1997 at 2:00 p.m., Central Daylight Savings
Time, for the following purposes:
1. TO ELECT A BOARD OF DIRECTORS, each Director to hold office until the
next Annual Meeting of the Stockholders and until a successor shall be
elected and shall qualify;
2. TO RATIFY THE SELECTION OF ERNST & YOUNG LLP as independent auditors for
First Evergreen; and
3. TO TRANSACT ANY OTHER BUSINESS that properly may be brought before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 18, 1997 as the
record date for the determination of Stockholders entitled to notice of and a
vote at the Meeting. If you are unable to attend the Meeting in person, please
sign the enclosed proxy form and mail it promptly in the envelope provided.
By Order of the Board of Directors
Dated: March 18, 1997
/s/ STEPHEN M. HALLENBECK
- ----------------------------------------------
Stephen M. Hallenbeck, Secretary/Treasurer
IMPORTANT NOTICE:
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN
THE ENCLOSED PROXY IN ORDER THAT THERE MAY BE PROPER REPRESENTATION AT THE
MEETING. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU ATTEND
THE MEETING, YOU MAY REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE> 2
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of First Evergreen
Corporation ("First Evergreen"), a Delaware corporation, for use at the Annual
Meeting of Stockholders to be held on April 24, 1997 (the "Meeting") at 2:00
p.m., Central Daylight Savings Time, at the Evergreen Park facility of the
First National Bank of Evergreen Park, 3101 West 95th Street in Evergreen Park,
Illinois. All expenses of this solicitation will be paid by First Evergreen.
A proxy may be revoked by delivering a written notice of revocation to First
Evergreen's office or in person at the Meeting at any time prior to the voting
thereof.
Stockholders of record at the close of business on March 18, 1997 are entitled
to notice of and to vote at the Meeting. Each share of Common Stock of First
Evergreen outstanding on the record date is entitled to one vote. (See VOTING
RIGHTS) At the close of business on Tuesday, March 18, 1997, 401,567 shares of
Common Stock of First Evergreen were outstanding.
The proxy statement and the accompanying proxy are first being mailed to First
Evergreen Stockholders on or about April 1, 1997.
The proxy also may be voted with discretionary authority in any other matters
properly presented before the Meeting unless a contrary specification is made.
ANNUAL REPORT TO STOCKHOLDERS
The First Evergreen Annual Report to Stockholders will be mailed on or about
April 1, 1997.
VOTING RIGHTS
All voting rights are vested in the Stockholders of First Evergreen Common
Stock, each share being entitled to one vote. There are no cumulative voting
rights in the election of directors.
ELECTION OF DIRECTORS
At the Meeting, First Evergreen Stockholders will be asked to elect a Board of
five (5) Directors for a term extending until the 1998 Annual Meeting of First
Evergreen Stockholders, and their respective successors are elected and shall
qualify. The following individuals have been nominated for election to the
First Evergreen Board of Directors:
Alfred E. Bleeker
Jerome J. Cismoski
Stephen M. Hallenbeck
Kenneth J. Ozinga
Martin F. Ozinga
<PAGE> 3
The following table contains certain information with respect to each of the
nominees:
Name, age, year became a Director of Common Stock of First Evergreen
First Evergreen or a Subsidiary Bank, beneficially owned as of
principal occupation during last five years March 18, 1997
<TABLE>
<CAPTION>
OTHER DIRECTORSHIPS: NUMBER OF PERCENT OF
SHARES CLASS
<S> <C> <C>
1. ALFRED E. BLEEKER, 88 31,474 7.84%
Director of First Evergreen or a Subsidiary
Bank since 1951; Proprietor, Bleeker's Bowling
Lanes, a bowling and restaurant establishment.
2. JEROME J. CISMOSKI, 48 4,434 (1) 1.10%
Director of First Evergreen or a Subsidiary
Bank since 1976; President, Val-A Chicago,
Inc., distributors of agricultural products.
3. STEPHEN M. HALLENBECK, 55 16,783 (2) 4.18%
Director of First Evergreen or a Subsidiary
Bank since 1979; Executive Vice President of First
National Bank of Evergreen Park (6) since 1985;
Secretary/Treasurer of First Evergreen since 1991.
4. KENNETH J. OZINGA, 45 (5) 15,120 (3) 3.77%
Director of First Evergreen or a Subsidiary
Bank since 1982; Chairman and President,
First Evergreen and First National Bank of
Evergreen Park. (6)
5. MARTIN F. OZINGA, 55 (5) 4,827 (4) 1.20%
Director of First Evergreen or a Subsidiary
Bank since 1984; Senior Vice President of First
National Bank of Evergreen Park; Director of
First National Bank of Evergreen Park since 1987. (6)
</TABLE>
(1) Includes 3,341 shares held jointly with Mr. Cismoski's wife;
142 shares held by Mr. Cismoski's wife; 453 shares held in trust for
the benefit of Mr. Cismoski; and 62 shares held by Mr. Cismoski's minor
children.
(2) Includes 3,051 shares held jointly with Mr. Hallenbeck's
wife; 10,276 shares held by Mr. Hallenbeck's wife; and 3,416 shares
held by Mr. Hallenbeck's children.
(3) Includes 10,690 shares held jointly with Mr. Ozinga's wife.
(4) Includes 2,773 shares held jointly with Mr. Ozinga's wife.
(5) Messrs. Kenneth J. Ozinga and Martin F. Ozinga are cousins.
(6) First National Bank of Evergreen Park is a subsidiary bank of First
Evergreen.
<PAGE> 4
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of ten meetings during the
year ended December 31, 1996. No director attended less than seventy-five
percent of the meetings.
One director of the Company, Jerome J. Cismoski, is a member of the Internal
Audit Committee of First National Bank of Evergreen Park, the Company's sole
subsidiary. The Committee is comprised of two other non-employee subsidiary
directors and met six times during 1996. The Audit Committee recommends
engagement of the Company's independent auditors and is primarily responsible
for the scope and adequacy of the Company's internal control functions.
The Board of Directors has no nominating or compensation committee or
committees performing the functions of such.
OWNERSHIP OF FIRST EVERGREEN COMMON STOCK BY CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth all persons known to First Evergreen to be the
beneficial owner of more than five percent of First Evergreen Common Stock as
of March 18, 1997. Beneficial ownership of securities generally means the
power to vote or dispose of securities, regardless of any economic interest.
<TABLE>
<CAPTION>
Number of Shares
and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership of Class
<S> <C> <C>
Alfred E. Bleeker 31,474 7.84%
9514 South Springfield Avenue
Evergreen Park, Illinois 60805
Daniel Butler, Jr. 23,036 (1) 5.74%
340 Lakeland Drive
Palos Park, Illinois 60464
First National Bank of Evergreen Park 39,668 (2) 9.88%
(a subsidiary of First Evergreen)
in various fiduciary capacities
3101 West 95th Street
Evergreen Park, Illinois 60805
All directors and officers as a group 73,801 18.38%
(six persons)
</TABLE>
Notes (1) and (2) appear on the following page
<PAGE> 5
NOTES FROM PRECEDING PAGE - BENEFICIAL OWNERSHIP
(1) Includes 11,254 shares held jointly with Mr. Butler's wife,
8,051 shares held by Mr. Butler's wife, 71 shares and 259 shares held
in trust for the benefit of Mr. Butler and his wife, respectively, and
3,205 shares held by Mr. Butler's minor children.
(2) First National Bank of Evergreen Park's Trust Department
does not exercise voting power over any of these shares. No single
beneficiary accounts for more than five percent of First Evergreen
Common Stock. Excludes 800 shares controlled by beneficial owners
herein listed.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends the appointment of Ernst & Young LLP to
express an independent opinion on the financial statements and controls over
financial reporting of First Evergreen in 1997. The public accounting firm of
Arthur Andersen LLP was engaged through 1995. During Arthur Andersen's
engagement, there were no disagreements on any matter of accounting principles
or practices, financial statement disclosures, or audit scope or procedure.
Consequently, Arthur Andersen LLP has not issued an adverse or qualified
opinion or disclaimer of opinion. It is anticipated that a representative of
Ernst & Young LLP will be present at the Meeting. If present, that
representative will have an opportunity to make a statement on behalf of the
accounting firm, if it desires, and will be available to respond to appropriate
questions. In the absence of contrary directions from our stockholders, the
proxies will be voted in favor of the election of Ernst & Young LLP as
independent auditors of First Evergreen in 1997.
PROPOSALS OF STOCKHOLDERS
Proposals of Stockholders intended to be presented at the 1998 Annual
Stockholders Meeting must be received by First Evergreen's President prior to
January 6, 1998 for inclusion in the 1998 proxy statement and form of proxy.
GENERAL
The Board of Directors knows of no other matters to be acted upon at the
Meeting. However, if any other matter is lawfully brought before the Meeting,
the shares covered by your proxy will be voted thereon in accordance with the
best judgement of the persons acting under such proxy.
First Evergreen is filing with the Securities and Exchange Commission Form 10-K
for the year ended December 31, 1996. Copies of First Evergreen's Form 10-K
will be sent to Stockholders without charge upon written request. That request
should be directed to:
Chairman
FIRST EVERGREEN CORPORATION
3101 West 95th Street
Evergreen Park, IL 60805
<PAGE> 6
PROXY
This proxy is solicited by First Evergreen Corporation ("First Evergreen"),
Evergreen Park, Illinois, for the Annual Meeting of Stockholders of First
Evergreen to be held on the 24th day of April, 1997, at 2:00 p.m. Central
Daylight Savings Time, at the First National Bank of Evergreen Park, located at
3101 West 95th Street, Evergreen Park, Illinois.
The undersigned hereby appoints Ronald J. Homa and Robert C. Wall, with full
power of substitution and revocation, to vote all the stock of First Evergreen
owned by the undersigned and entitled to vote at the Annual Meeting of
Stockholders of First Evergreen on the 24th day of April, 1997, or any
adjournment thereof, as effectively as the undersigned could so do if
personally present.
1. Election of Directors
[ ] FOR all nominees listed below (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(Instruction: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
Alfred E. Bleeker, Jerome J. Cismoski, Stephen M. Hallenbeck.
Kenneth J. Ozinga, Martin F. Ozinga
2. Proposal to approve the appointment of Ernst & Young LLP as independent
auditors for First Evergreen.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned Stockholder. If no direction is made, this proxy will be
voted for Proposal No. 1, Proposal No. 2, and Proposal No. 3, above.
______________________________________
______________________________________
______________________________________
Dated ________________________________
Please sign exactly as your names appear on the First Evergreen stock
certificates. When signing as attorney, executor, administrator, trustee,
etc., please give full title as such.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY, USING THE ENVELOPE
PROVIDED.
