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ORIGINAL
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934.
For the period ended March 31, 1997.
Transition Report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934.
For the transition period from ___________ to ___________.
Commission file number 2-94209
FIRST EVERGREEN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-2952700
- -------- ----------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
3101 W. 95th Street, Evergreen Park, Illinois 60805
- --------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 422-6700
--------------
Indicated by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing for the
past 90 days.
Yes X No __
Indicate the number of shares outstanding of each issuer's class of common
stock, as of the latest practicable date.
Common Stock - $25.00 par value, 2,000,000 shares authorized, 432,842 shares
issued and 401,497 shares outstanding at April 29, 1997.
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FIRST EVERGREEN CORPORATION
---------------------------
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
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Page
Numbers
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Consolidated Statements of Condition .......... 3
Consolidated Statements of Income ............. 4
Consolidated Statements of Cash Flows ......... 5
Notes to Consolidated Financial Statements .... 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS ......... 7
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K ............. 10
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<TABLE>
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FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Condition
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED)
March 31, December 31,
ASSETS 1997 1996
-----------------------------
<S> <C> <C>
Cash and due from banks $ 47,833 $ 55,654
Federal funds sold 24,400 53,200
Available for sale securities 141,669 142,625
Held to maturity securities
U.S. Treasury obligations 116,888 133,514
U.S. Government agencies 438,251 403,056
Obligations of states and political subsidiaries 172,592 173,090
Mortgage-backed securities 111,060 83,719
Collateralized mortgage obligations 178,537 190,443
Other securities 1,385 1,385
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Total held to maturity 1,018,713 985,207
(Market value of $1,023,139 in 1997
and $999,696 in 1996)
Loans - net 622,538 615,653
Bank premises and equipment (net) 31,964 31,729
Accrued interest receivable 23,125 19,145
Goodwill and other intangibles (net) 4,071 4,281
Other assets 2,329 2,519
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$ 1,916,642 $ 1,910,013
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $ 167,801 $ 181,115
Savings deposits and NOW accounts 586,084 588,572
Money market accounts 100,056 97,965
Time deposits 844,916 828,195
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Total deposits 1,698,857 1,695,847
Federal funds purchased and Securities sold
Under agreements to repurchase 19,560 17,235
Accrued interest and other liabilities 14,608 10,491
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Total liabilities 1,733,025 1,723,573
Stockholders' equity =========== ===========
Common stock - authorized, 2,000,000 shares
of $25 par value; issued, 432,842 shares
in 1997 and 1996 10,821 10,821
Surplus 4,815 4,815
Retained earnings 177,979 180,280
Unrealized gains (losses) on Available for sale
securities, net of income taxes (1,804) (1,318)
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191,811 194,598
Less treasury stock - at cost, 31,284 shares
in 1997 and 31,205 shares in 1996 (8,194) (8,158)
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Total stockholders' equity 183,617 186,440
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$ 1,916,642 $ 1,910,013
=========== ===========
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The accompanying notes are an integral part of these statements.
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<TABLE>
<CAPTION>
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED) Three months ended March 31
-----------------------------
1997 1996
<S> <C> <C>
Interest income
Interest and fees on loans $ 12,468 $ 10,842
Interest and dividends on investment securities
Taxable securities 14,485 15,735
Securities exempt from Federal taxes 2,479 2,244
Dividends 21 21
Interest on available for sale securities 1,854 1,778
Interest on Federal funds sold 445 247
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Total interest income 31,752 30,867
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Interest expense
Interest on deposits 16,548 16,155
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 182 137
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Total interest expense 16,730 16,292
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Net interest income 15,022 14,575
Provision for loan losses 150 0
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Net interest income after provision
for loan losses 14,872 14,575
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Other operating income
Service charges on deposit accounts 795 832
Trust department income 573 450
Other income 347 327
Net security gains (losses) (39) 1,071
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Total other operating income 1,676 2,680
Other operating expenses
Salaries and employee benefits 6,175 5,652
Net occupancy expense of bank premises 970 876
Equipment depreciation, rentals and maintenance 697 697
Insurance 121 59
Outside fees and services 466 520
Data processing 547 472
Other expenses 1,703 1,626
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Total other operating expenses 10,679 9,902
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Income before income tax expense 5,869 7,353
Income tax expense 1,343 1,930
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NET INCOME $ 4,526 $ 5,423
========= =========
Net income per share $11.27 $13.47
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Weighted average number of shares outstanding 401,617 402,691
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The accompanying notes are an integral part of these statements.
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FIRST EVERGREEN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLARS IN THOUSANDS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31
---------------------------------
1997 1996
Cash flows from operating activities :
<S> <C> <C>
Net income $4,526 $5,423
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 922 879
Provision for loan losses 150 0
Amortization of investment security discounts/premiums 1,603 2,372
Net security losses (gains) 39 (1,071)
Deferred income taxes (53) (60)
Increase in accrued interest receivable (3,980) (4,533)
Decrease in other assets 505 27,962
Net increase (decrease) in accrued interest and other liabilities 4,117 (21,653)
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Net cash provided by operating activities 7,829 9,319
Cash flows from investing activities :
Capital expenditures (947) (996)
Proceeds from maturity of securities held to maturity 40,587 79,188
Purchases of securities held to maturity (75,530) (30,612)
Proceeds from sales of securities available for sale 4,964 419,212
Purchases of securities available for sale (4,960) (420,532)
Net Increase in loans (7,035) (17,939)
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Net cash (used for) provided by investing activities (42,921) 28,321
Cash flows from financing activities :
Net decrease in demand, money market, savings and NOW accounts (13,711) (5,526)
Net increase in time deposits 16,721 6,170
Net increase (decrease) in Federal funds purchased and Securities
sold under agreements to repurchase 2,325 (1,905)
Cash dividends paid (6,828) (6,041)
Acquisition of treasury stock (36) (41)
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Net cash used for financing activities (1,529) (7,343)
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(Decrease) increase in cash and cash equivalents (36,621) 30,297
Cash and cash equivalents at beginning of period 108,854 58,998
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Cash and cash equivalents at end of period $72,233 $89,295
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Supplemental disclosure of cash flow information :
Cash paid during the period for :
Interest $16,645 $45,256
Income taxes 0 4,510
</TABLE>
The accompanying notes are an integral part of these statements.
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FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1997
Unaudited - Dollars in Thousands
NOTE A
The unaudited interim consolidated financial statements of First Evergreen
Corporation ("First Evergreen") include the accounts of First Evergreen and its
subsidiary bank, First National Bank of Evergreen Park.
The unaudited interim consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and reporting
practices. The more significant policies are incorporated in the Notes to
Financial Statements in the 1996 Annual Report and Form 10-K and should be read
in conjunction herewith.
In the opinion of management, all adjustments necessary for fair presentation
of the financial position and the results of operations for the interim
periods, all of which were recurring and normal, have been made. The results
of operations for the interim period are not necessarily indicative of results
that may be expected for the entire fiscal year.
NOTE B
The preparation of financial statements in conformance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE C
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. The adoption of the
Statement did not have a material effect on the consolidated financial
statements.
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Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in Thousands Except Share Data)
FINANCIAL CONDITION
During the three month period ended March 31, 1997, the deposit base remained
stable, increasing $3,010 or .18%. There was little change within the
categories, with time deposits and money market accounts increasing $16,721 and
$2,091, respectively, while demand deposits decreased by $13,314 and the
savings/NOW category declined by $2,488. During the same 1996 period, deposits
increased $644, or .04%. The volume of demand deposits and the savings/NOW
category decreased $4,728 and $8,485, respectively, while money market accounts
and time deposits grew by $7,687 and $6,170, respectively.
Interest earnings assets increased by $10,635 during 1997. The held to
maturity portfolio increased $33,506, lead by increases in U.S. Government
Agencies of $35,195 and increases in mortgage backed securities of $27,341.
Loans (net) increased by $6,885, while Federal Funds sold and available for
sale securities declined by $28,800 and $956, respectively.
For the three month period ended March 31, 1997, the average interest rate
spread expressed on a tax equivalent basis (net interest margin) was 3.06%, as
it was in the same 1996 period. During the same period, the return on interest
earning assets increased five basis points to 7.45%, while the average cost of
funds increased five basis points to 4.39%. Financial market conditions
generally dictate the return realized on average earning assets and the rates
paid to depositors. However, management has a discretionary influence on the
investment of assets and rates paid on deposits.
Annual return on average equity decreased from 11.58% for the year ended
December 31, 1996 to 9.98% in the first quarter of 1997. The reduction is due
to increased average equity resulting from First Evergreen's continuing trend
of equity growth. The annualized return on average assets declined 24 basis
points to .96%.
Total stockholders' equity decreased $2,823 from $186,440 at December 31, 1996
to $183,617 at March 31, 1997. During this period, the net unrealized loss on
Available for Sale Securities increased $486, while treasury stock grew by $36.
On January 9, 1997, a $17.00 per share dividend totaling $6,828 was paid to
stockholders of record as of January 2, 1997.
The Tier I leveraged capital ratio decreased 19 basis points from 9.70% at
December 31, 1996 to 9.51% on March 31, 1997, while the total risk-based
capital ratio increased to 25.38%. Both capital ratios are monitored by
Federal agencies which require minimums of 5% for Tier I leveraged ratio and
10% for total risk-based ratio to receive the highest classification of "well
capitalized."
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LIQUIDITY
The objective of liquidity management is to ensure that First Evergreen can
meet its cash flow requirements and capitalize on opportunities on a timely
basis. Liquidity is secured by managing the mix of items on the statement of
condition and expanding sources of liquidity. At March 31, 1997, First
Evergreen's sources of liquidity totaled $502,869, including $262,796 in held
to maturity securities maturing within one year, $24,400 in Federal Funds sold,
$74,004 in estimated mortgage backed security prepayments within the next year
and $141,669 in available for sale securities. Deposits totaled $1,698,857,
yielding a liquidity ratio of 29.60%.
Earning assets with maturities of less than one year, one to five years and in
excess of five years as a percentage of total earning assets totaled 31.87%,
49.22% and 18.91%, respectively. Similarly, approximately 49.99% of interest
sensitive liabilities could be repriced within one year, 24.27% within one to
five years and 25.74% in excess of five years.
Cash and cash equivalents decreased $36,621 during the three months ended March
31, 1997, reaching $72,233. Operating activities contributed $7,829 primarily
due to net income of $4,526. Investing activities used $42,921, primarily due
to the $33,506 increase in the held to maturity investment portfolio.
Financing activities used $1,529 due to a $3,010 increase in deposits offset by
the $6,828 cash dividend paid.
As of March 31, 1997, the market value of the held to maturity investment
portfolio exceeded book value by $4,426. Management has the positive intent
and ability to hold these securities until final maturity.
RESULT OF OPERATIONS - Quarter Ended March 31, 1997 Compared to Quarter Ended
March 31, 1996.
Net interest income, before provision for loan losses, of $15,022 for the
quarter ended March 31, 1997 represents a $447 increase from the same quarter
last year. The provision for loan losses increased $150 due to continued
growth in the loan portfolio. Net interest income (on a tax equivalent basis)
increased $568 from the prior year's quarter. The average volume of interest
earning assets increased $58,332, while their yield increased five basis points
to 7.45%. The average volume of interest sensitive liabilities increased
$36,619, while the average cost of funds increased five basis points to 4.39%.
The net interest margin remained constant at 3.06%, while the net yield on
earning assets increased four basis points to 3.69%.
Other operating income decreased $1,004 from the first quarter of 1996. The
decrease is attributable to security gains of $1,071 realized during the 1996
quarter versus 1997 security losses of $39. Trust Department income increased
$123 due to the implementation of a new fee schedule, while service charges on
deposit accounts and other income showed little change.
Other operating expense increased $777. Salaries and employee benefits
increased $523. Salaries increased $281 due to annual salary adjustments and
an increase of 21 full-time equivalent employees necessitated by the opening of
a new facility. Medical insurance increased $117 due to an increased volume of
claims, while employee relations expense increased $50 due to the purchase of a
new style of employee service awards. Net occupancy of bank premises increased
$94 due to additional depreciation and real estate taxes relating to the new
facility. Other expenses are up $77
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due to increased charitable contributions, data processing rose $75 due to
expanding technologies, and insurance increased by $62 due to the Federal
Deposit Insurance Corporation's resumption of the deposit insurance charge.
Current period income tax decreased $587 due to a $1,484 decrease in pretax
income. The effective tax rate declined from 26.25% in 1996 to 22.88% in 1997
as tax exempt interest represented a greater percentage of pre-tax income in
the latter period.
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Financial Data Schedule - Article 9
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST EVERGREEN CORPORATION
Dated: April 30, 1997 BY: /s/ Stephen M. Hallenbeck
----------------------------------------
Stephen M. Hallenbeck
Secretary/Treasurer
Signing on behalf of the Registrant and
as Principal Financial Officer.
10
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 47,832,657
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 24,400,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 141,668,833
<INVESTMENTS-CARRYING> 1,018,713,301
<INVESTMENTS-MARKET> 1,023,139,072
<LOANS> 625,523,542
<ALLOWANCE> 2,985,852
<TOTAL-ASSETS> 1,916,642,442
<DEPOSITS> 1,698,857,269
<SHORT-TERM> 19,560,000
<LIABILITIES-OTHER> 14,608,314
<LONG-TERM> 0
0
0
<COMMON> 183,616,859
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 183,616,859
<INTEREST-LOAN> 12,467,706
<INTEREST-INVEST> 18,839,104
<INTEREST-OTHER> 445,266
<INTEREST-TOTAL> 31,752,076
<INTEREST-DEPOSIT> 16,548,353
<INTEREST-EXPENSE> 16,730,325
<INTEREST-INCOME-NET> 15,021,751
<LOAN-LOSSES> 150,000
<SECURITIES-GAINS> (38,992)
<EXPENSE-OTHER> 10,678,811
<INCOME-PRETAX> 5,869,397
<INCOME-PRE-EXTRAORDINARY> 5,869,397
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,526,397
<EPS-PRIMARY> 11.27
<EPS-DILUTED> 11.27
<YIELD-ACTUAL> 3.69
<LOANS-NON> 935,358
<LOANS-PAST> 6,126,565
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,986,148
<ALLOWANCE-OPEN> 3,191,637
<CHARGE-OFFS> 239,251
<RECOVERIES> 33,467
<ALLOWANCE-CLOSE> 2,985,852
<ALLOWANCE-DOMESTIC> 2,985,852
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
