<PAGE> 1
ORIGINAL
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934.
For the period ended June 30, 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 400,617 shares outstanding at August 5, 1997.
1
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FIRST EVERGREEN CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Page
Numbers
Consolidated Statements of Condition . . . . . . . . . . . . 3
Consolidated Statements of Income . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS . . . . . . . . . . 8
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . 11
2
<PAGE> 3
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Condition
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 3,
ASSETS 1997 1996
------------------------------
<S> <C> <C>
Cash and due from banks $ 42,377 $ 55,654
Federal funds sold 27,500 53,200
Available for sale securities 142,822 142,625
Held to maturity securities
U.S. Treasury obligations 101,366 133,514
U.S. Government agencies 454,211 403,056
Obligations of states and political subsidiaries 171,541 173,090
Mortgage-backed securities 108,424 83,719
Collateralized mortgage obligations 166,441 190,443
Other securities 1,385 1,385
------------ --------------
Total held to maturity 1,003,368 985,207
(Market value of $1,023,543 in 1997
and $999,696 in 1996)
Loans - net 641,763 615,653
Bank premises and equipment (net) 32,744 31,729
Accrued interest receivable 20,654 19,145
Goodwill and other intangibles (net) 3,860 4,281
Other assets 2,147 2,519
------------ --------------
$ 1,917,235 $ 1,910,013
------------ --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $ 174,956 $ 181,115
Savings deposits and NOW accounts 580,334 588,572
Money market accounts 97,687 97,965
Time deposits 842,654 828,195
------------ --------------
Total deposits 1,695,631 1,695,847
Federal funds purchased and Securities sold
under agreements to repurchase 20,810 17,235
Accrued interest and other liabilities 12,124 10,491
------------ --------------
Total liabilities 1,728,565 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 182,600 180,280
Unrealized losses on Available for sale
securities, net of income taxes (983) (1,318)
------------ --------------
197,253 194,598
Less treasury stock - at cost, 32,115 shares
in 1997 and 31,205 shares in 1996 (8,583) (8,158)
------------ --------------
Total stockholders' equity 188,670 186,440
------------ --------------
$ 1,917,235 $ 1,910,013
============ ==============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
<TABLE>
<CAPTION>
(UNAUDITED) Three months ended June 30
--------------------------
1997 1996
<S> <C> <C>
Interest income
Interest and fees on loans $ 12,790 $ 11,527
Interest and dividends on investment securities
Taxable securities 14,792 14,669
Securities exempt from Federal taxes 2,463 2,316
Dividends 20 20
Interest on available for sale securities 1,895 1,808
Interest on Federal funds sold 252 554
-------- --------
Total interest income 32,212 30,894
-------- --------
Interest expense
Interest on deposits 16,856 15,907
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 222 133
-------- --------
Total interest expense 17,078 16,040
-------- --------
Net interest income 15,134 14,854
Provision for loan losses 300 0
-------- --------
Net interest income after provision
for loan losses 14,834 14,854
-------- --------
Other operating income
Service charges on deposit accounts 797 838
Trust department income 772 439
Other income 350 335
Net security gains (losses) 24 (35)
-------- --------
Total other operating income 1,943 1,577
Other operating expenses
Salaries and employee benefits 6,101 5,775
Net occupancy expense of bank premises 955 841
Equipment depreciation, rentals and maintenance 725 693
Insurance 122 66
Outside fees and services 568 450
Data processing 558 447
Other expenses 1,688 1,545
-------- --------
Total other operating expenses 10,717 9,817
-------- --------
Income before income tax expense 6,060 6,614
Income tax expense 1,438 1,652
-------- --------
NET INCOME $ 4,622 $ 4,962
======== ========
Net income per share $ 11.51 $ 12.32
-------- --------
Weighted average number of shares outstanding 401,384 402,605
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
<TABLE>
<CAPTION>
(UNAUDITED) Six months ended June 30
------------------------
1997 1996
<S> <C> <C>
Interest income
Interest and fees on loans $ 25,258 $ 22,369
Interest and dividends on investment securities
Taxable securities 29,277 30,404
Securities exempt from Federal taxes 4,942 4,560
Dividends 41 41
Interest on available for sale securities 3,749 3,586
Interest on Federal funds sold 697 801
-------- --------
Total interest income 63,964 61,761
-------- --------
Interest expense
Interest on deposits 33,404 32,062
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 404 270
-------- --------
Total interest expense 33,808 32,332
-------- --------
Net interest income 30,156 29,429
Provision for loan losses 450 0
-------- --------
Net interest income after provision
for loan losses 29,706 29,429
-------- --------
Other operating income
Service charges on deposit accounts 1,592 1,670
Trust department income 1,345 889
Other income 697 662
Net security gains (losses) (15) 1,036
-------- --------
Total other operating income 3,619 4,257
Other operating expenses
Salaries and employee benefits 12,276 11,427
Net occupancy expense of bank premises 1,925 1,717
Equipment depreciation, rentals and maintenance 1,422 1,390
Insurance 243 125
Outside fees and services 1,034 970
Data processing 1,105 919
Other expenses 3,391 3,171
-------- --------
Total other operating expenses 21,396 19,719
-------- --------
Income before income tax expense 11,929 13,967
Income tax expense 2,781 3,582
-------- --------
NET INCOME $ 9,148 $ 10,385
======== ========
Net income per share $ 22.78 $ 25.79
-------- --------
Weighted average number of shares outstanding 401,500 402,648
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLARS IN THOUSANDS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30
------------------------
1997 1996
<S> <C> <C>
Cash flows from operating activities :
Net income $ 9,148 $ 10,385
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 1,862 1,776
Provision for loan losses 450 0
Amortization of investment security discounts/premiums 3,047 4,378
Net security losses (gains) 15 (1,036)
Deferred income taxes (106) (60)
Increase (decrease) in accrued interest receivable (1,509) 1,086
Decrease in other assets 320 27,969
Net increase (decrease) in accrued interest and other liabilities 1,633 (18,619)
-------- ---------
Net cash provided by operating activities 14,860 25,879
Cash flows from investing activities :
Capital expenditures (2,456) (1,894)
Proceeds from maturity of securities held to maturity 94,583 172,595
Purchases of securities held to maturity (115,465) (119,777)
Proceeds from sales of securities available for sale 94,019 447,010
Purchases of securities available for sale (94,064) (448,173)
Net Increase in loans (26,560) (61,811)
-------- ---------
Net cash (used by) provided by investing activities (49,943) (12,050)
Cash flows from financing activities :
Net decrease in demand, money market, savings and NOW accounts (14,675) (12,092)
Net increase in time deposits 14,459 22,860
Net increase (decrease) in Federal funds purchased and Securities
sold under agreements to repurchase 3,575 (1,325)
Cash dividends paid (6,828) (6,040)
Acquisition of treasury stock (425) (113)
-------- ---------
Net cash (used by) provided by financing activities (3,894) 3,290
-------- ---------
(Decrease) increase in cash and cash equivalents (38,977) 17,119
Cash and cash equivalents at beginning of period 108,854 58,998
-------- ---------
Cash and cash equivalents at end of period $ 69,877 $ 76,117
======== =========
Supplemental disclosure of cash flow information :
Cash paid during the period for :
Interest $ 38,500 $ 32,243
Income taxes 2,500 3,650
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 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.
In June, 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
which requires comprehensive income and its components to be reported as part
of the financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. The adoption of this Statement will not
materially change the company's statement presentation.
In June, 1997, the FASB issued SFAS No. 131, Disclosure about Segments of an
Enterprise and Related Information, which requires public entities to disclose
financial and descriptive information about segments of their operations using
a management approach. SFAS No. 131 is effective for fiscal years beginning
after December 15, 1997. The adoption of this statement will not materially
change the company's statement presentation.
7
<PAGE> 8
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in Thousands Except Share Data)
FINANCIAL CONDITION
During the six month period ended June 30, 1997, the deposit base was nearly
unchanged, decreasing $216. In the period, the volume of savings, demand and,
to a limited extent, money market accounts declined $8,238, $6,159 and $278,
respectively. Although interest rates paid on time deposits have increased no
more than 50 basis points since year end 1996, these deposit categories
continue to reposition into time deposits which increased $14,459. During the
same 1996 period, deposits increased $10,768, or .65%. Once again, the volume
of time deposits, which grew by $22,860, was funded by a $22,886 decline in
savings and NOW accounts. Also in the 1996 period, the volume of demand and
money market accounts increased $8,229 and $2,565, respectively.
Interest earning assets increased by $18,768 during 1997. The held to
maturity and available for sale portfolios increased $18,161 and $197,
respectively. This increase occurred in holdings of U.S. Government Agency
securities. Net loans continued to show strength rising 4.2% or $26,110. This
growth was in part funded by a $25,700 decline in Federal Funds sold.
For the six month period ended June 30, 1997, the average interest rate spread
expressed on a tax equivalent basis (net interest margin) was 3.05%, as it was
in the same 1996 period. During the same period, the return on interest
earning assets increased nine basis points to 7.48%, while the average cost of
funds increased nine basis points to 4.43%. 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 9.91% at June 30, 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 15 basis points to
.96%.
Total stockholders' equity increased $2,230 from $186,440 at December 31, 1996
to $188,670 at June 30, 1997. During this period, the net unrealized loss on
Available for Sale Securities improved $335, while treasury stock grew by $425.
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 remained unchanged at 9.70%, while the total
risk-based capital ratio decreased to 25.94%. Both capital ratios are
monitored by Federal agencies which require minimums of 5% for Tier I leveraged
ratio and 10% for total risk-based ratio to receive the highest classification
of "well capitalized."
8
<PAGE> 9
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 June 30, 1997, First
Evergreen's sources of liquidity totaled $580,718, including $322,508 in held
to maturity securities maturing within one year, $27,500 in Federal Funds sold,
$87,888 in estimated mortgage backed security prepayments within the next year
and $142,822 in available for sale securities. Deposits totaled $1,695,631,
yielding a liquidity ratio of 34.25%.
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 32.77%,
46.81% and 20.42%, respectively. Similarly, approximately 49.81% of interest
sensitive liabilities could be repriced within one year, 24.89% within one to
five years and 25.30% in excess of five years.
Cash and cash equivalents decreased $38,977 during the six months ended June
30, 1997, reaching $69,877. These funds were redeployed to the held to
maturity and loan portfolios. Operating activities contributed $14,860
primarily due to net income of $9,148. Investing activities used $49,943,
primarily due to the $26,560 increase in gross loans and a $18,161 increase in
the held to maturity investment portfolio. Financing activities used $3,894
due to a $6,828 cash dividend paid and purchases of Treasury stock totaling
$425. Financing cash was provided by an increase totaling $3,575 in securities
sold under agreements to repurchase.
As of June 30, 1997, the market value of the held to maturity investment
portfolio exceeded book value by $20,175. Management has the positive intent
and ability to hold these securities until final maturity.
RESULT OF OPERATIONS - Quarter Ended June 30, 1997 Compared to Quarter Ended
June 30, 1996.
Net interest income, before provision for loan losses, of $15,134 for the
quarter ended June 30, 1997 represents a $280 increase from the same quarter
last year. A loan loss provision totaling $300 was provided for in the 1997
period, while no provision was recorded in 1996. Net interest income (on a tax
equivalent basis) increased $355 from the prior year's quarter. The average
volume of interest earning assets increased $61,963, while their yield
increased six basis points to 7.43%. The average volume of interest sensitive
liabilities increased $44,570, while the average cost of funds increased 16
basis points to 4.43%. The net interest margin declined 10 basis points to
3.00%, while the net yield on earning assets decreased five basis points to
3.65%.
Other operating income increased $366 from the second quarter of 1996. The
increase is attributable to Trust Department income which increased $333 due to
the implementation of a new fee schedule. Service charges on deposit accounts
and other income categories showed little change.
9
<PAGE> 10
Other operating expense increased $900. Salaries and employee benefits
increased $326. Salaries increased $222 due to annual salary adjustments and
an increase in the number of employees necessitated by the opening of a new
facility. Medical insurance increased $60 due to an increased volume of
claims. Net occupancy of bank premises increased $114 due to additional
depreciation and real estate taxes relating to the new facility. Other
expenses are up $143 due to increased charitable contributions, data processing
rose $111 due to expanding technology costs and outside fees and services
increased $118 due to a one time charge relating to ATM processing.
Current period income tax decreased $214 due to a $554 decrease in pretax
income. The effective tax rate declined from 24.98% in 1996 to 23.73% in 1997
as tax exempt interest represented a greater percentage of pretax income in the
latter period.
RESULT OF OPERATIONS - Six Months Ended June 30, 1997 Compared to Six Months
Ended June 30, 1996.
Net interest income before provision for loan losses of $30,156 represents a
$727 increase from the same 1996 period. The provision for loan losses in 1997
totaled $450. No provision was provided for in 1996. In the six month period,
net interest income (on a tax equivalent basis) increased $923. The average
volume of interest earning assets increased $60,513, while their yield
increased eight basis points to 7.48%. The average volume of interest
sensitive liabilities increased $38,033, while the average cost of funds
increased twelve basis points reaching 4.43%. The net interest margin,
therefore, declined four basis points to 3.05%, while the net yield on earning
assets of 3.69% was virtually unchanged.
Other operating income decreased $638 from the same 1996 period. The decrease
is attributable to net security losses of $15 realized in the current period
versus $1,036 in gains recorded in 1996. This decline was in part offset by
trust fees which increased $456. Increasing Trust Department revenues are the
result of volume increases and modified fee schedules. Fees realized on
deposit services and other operating fee categories recorded little change.
Other operating expense increased $1,677. Salaries and employee benefits
increased $849. Salaries increased $502 due to annual salary adjustments and
an increase of 17 full-time equivalent employees as necessitated in part by the
opening of a new facility. Medical insurance expense increased $167 due to an
increase in claims filed. Additionally, other employee relations expense
increased $71 due to changes in the company's service awards program. Net
occupancy expense rose $208 relating to higher depreciation and operating
costs and related real estate tax expense which is incurred as a result of
county reassessments. Management actively seeks to control costs which are
directly related to its facilities. Insurance costs increased $118 entirely due
to the company's FDIC insurance program assessment. Premium costs for all other
insurance coverages remained unchanged. All other operating expenses increased
$406 due to higher data processing costs relating to an expansion of technology
delivery channels and increased charitable community contributions.
Current period income tax decreased $801 due to a $2,038 decrease in pretax
income. The effective tax rate declined from 25.65% in 1996 to 23.31% in 1997.
The decline is the result of slightly higher exempt revenue which now
represents a greater share of pretax dollars.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
The Annual Meeting of Shareholders of the Registrant was held
on April 24, 1997, at which time 345,731 shares were cast in
favor of re-electing the Board of Directors in its entirety
and re-appointing the independent audit firm of Ernst & Young
LLP. Each director shall hold office until the next Annual
Meeting of Shareholders and until his successor shall be
elected and shall qualify.
(a) Exhibits
Financial Data Schedule - Article 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST EVERGREEN CORPORATION
Dated: August 12, 1997 BY: /s/ Stephen M. Hallenbeck
----------------------------------------
Stephen M. Hallenbeck
Secretary/Treasurer
Signing on behalf of the Registrant and
as Principal Financial Officer.
11
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 42,376,758
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 27,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 142,822,185
<INVESTMENTS-CARRYING> 1,003,367,416
<INVESTMENTS-MARKET> 1,023,543,000
<LOANS> 644,804,478
<ALLOWANCE> 3,041,719
<TOTAL-ASSETS> 1,917,234,435
<DEPOSITS> 1,695,630,743
<SHORT-TERM> 20,810,000
<LIABILITIES-OTHER> 12,124,145
<LONG-TERM> 0
0
0
<COMMON> 188,669,547
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,917,234,435
<INTEREST-LOAN> 25,258,440
<INTEREST-INVEST> 38,008,808
<INTEREST-OTHER> 697,292
<INTEREST-TOTAL> 63,964,540
<INTEREST-DEPOSIT> 33,404,257
<INTEREST-EXPENSE> 33,807,993
<INTEREST-INCOME-NET> 30,156,547
<LOAN-LOSSES> 450,000
<SECURITIES-GAINS> (15,227)
<EXPENSE-OTHER> 21,396,440
<INCOME-PRETAX> 11,928,798
<INCOME-PRE-EXTRAORDINARY> 11,928,798
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,147,798
<EPS-PRIMARY> 22.78
<EPS-DILUTED> 22.78
<YIELD-ACTUAL> 3.69
<LOANS-NON> 2,149,400
<LOANS-PAST> 2,926,637
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,623,907
<ALLOWANCE-OPEN> 3,041,637
<CHARGE-OFFS> 612,918
<RECOVERIES> 162,999
<ALLOWANCE-CLOSE> 3,041,719
<ALLOWANCE-DOMESTIC> 3,041,719
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
