<PAGE> 1
ORIGINAL
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
FORM 10-Q
---------
(Mark One)
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934. For the period ended March 31, 1998.
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 400,261 shares outstanding at April 30, 1998.
1
<PAGE> 2
FIRST EVERGREEN CORPORATION
---------------------------
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Numbers
-------
<S> <C>
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 .............................. 9
</TABLE>
2
<PAGE> 3
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Condition
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1998 1997
-------------------------
<S> <C> <C>
Cash and due from banks $ 40,769 $ 45,977
Federal funds sold 39,600 79,000
Available for sale securities 174,255 149,466
Held to maturity securities
U.S. Treasury obligations 60,467 70,663
U.S. Government agencies 372,652 381,078
Obligations of states and political subdivisions 204,198 184,938
Mortgage-backed securities 96,761 97,217
Collateralized mortgage obligations 179,043 188,007
Other securities 16,829 7,265
---------- ----------
Total held to maturity 929,950 929,168
(Market value of $946,271 in 1998
and $945,930 in 1997)
Loans - net 682,703 670,925
Bank premises and equipment (net) 36,165 35,849
Accrued interest receivable 19,511 17,669
Goodwill and other intangibles (net) 3,229 3,439
Other assets 1,179 1,603
---------- ----------
$1,927,361 $1,933,096
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Demand deposits $ 185,415 $ 197,448
Savings deposits and NOW accounts 580,422 562,654
Money market accounts 103,409 97,062
Time deposits 832,478 843,456
---------- ----------
Total deposits 1,701,724 1,700,620
Federal funds purchased and Securities sold
under agreements to repurchase 16,090 15,305
Accrued interest and other liabilities 14,543 19,029
---------- ----------
Total liabilities 1,732,357 1,734,954
========== ==========
Stockholders' equity
Common stock - authorized, 2,000,000 shares
of $25 par value; issued, 432,842 shares
in 1998 and 1997 10,821 10,821
Surplus 4,815 4,815
Retained earnings 188,908 191,566
Accumulated other comprehensive income:
Unrealized losses on Available for sale
securities, net of income taxes (733) (318)
---------- ----------
203,811 206,884
Less treasury stock - at cost, 32,581 shares
in 1998 and 32,446 shares in 1997 (8,807) (8,742)
---------- ----------
Total stockholders' equity 195,004 198,142
---------- ----------
$1,927,361 $1,933,096
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
DOLLARS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31
---------------------------
1998 1997
<S> <C> <C>
Interest income
Interest and fees on loans $ 13,751 $ 12,468
Interest and dividends on investment securities
Taxable securities 12,656 14,485
Securities exempt from Federal taxes 2,665 2,479
Dividends 120 21
Interest on available for sale securities 2,143 1,854
Interest on Federal funds sold 670 445
---------- ----------
Total interest income 32,005 31,752
---------- ----------
Interest expense
Interest on deposits 16,717 16,548
Interest on Federal funds purchased and Securities
Sold under Agreements to Repurchase 154 182
---------- ----------
Total interest expense 16,871 16,730
---------- ----------
Net interest income 15,134 15,022
Provision for loan losses 300 150
---------- ----------
Net interest income after provision
for loan losses 14,834 14,872
---------- ----------
Other operating income
Service charges on deposit accounts 1,001 795
Trust department income 716 573
Other income 474 347
Net security gains (losses) 733 (39)
---------- ----------
Total other operating income 2,924 1,676
Other operating expenses
Salaries and employee benefits 6,107 6,175
Net occupancy expense of bank premises 1,000 970
Equipment depreciation, rentals and maintenance 819 697
Insurance 113 121
Outside fees and services 473 466
Data processing 617 547
Other expenses 1,569 1,703
---------- ----------
Total other operating expenses 10,698 10,679
---------- ----------
Income before income tax expense 7,060 5,869
Income tax expense 1,711 1,343
---------- ----------
NET INCOME $ 5,349 $ 4,526
========== ==========
Net income per share $ 13.36 $ 11.27
---------- ----------
Weighted average number of shares outstanding 400,300 401,617
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
FIRST EVERGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
Three months ended March 31
---------------------------
1998 1997
<S> <C> <C>
Cash flows from operating activities :
Net income $ 5,349 $ 4,526
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 1,021 922
Provision loan losses 300 150
Amortization of investment security
discounts/premiums 845 1,603
Net (gain) loss on investment securities (733) 39
Deferred income taxes (90) (53)
Increase in accrued interest receivable (1,842) (3,980)
(Increase) decrease in other assets 738 505
Net (decrease) increase in accrued interest
and other liabilities (4,486) 4,117
---------- ----------
Net cash provided by operating activities 1,102 7,829
Cash flows from investing activities :
Capital expenditures (1,127) (947)
Proceeds from maturity of securities held
to maturity 97,259 40,587
Purchases of securities held to maturity (98,658) (75,530)
Proceeds from sales of securities
available for sale 244,880 4,964
Purchases of securities available for sale (269,802) (4,960)
Net Increase in loans (12,078) (7,035)
---------- ----------
Net cash used by investing activities (39,526) (42,921)
Cash flows from financing activities :
Net Increase (decrease) in demand, money market
and savings accounts 12,082 (13,711)
Net (Decrease) increase in time deposits (10,978) 16,721
Net Increase in Federal funds purchased and
Securities sold under agreements to repurchase 785 2,325
Cash dividends paid (8,008) (6,828)
Acquisition of treasury stock (65) (36)
---------- ----------
Net cash used by financing activities (6,184) (1,529)
---------- ----------
Decrease in cash and cash equivalents (44,608) (36,621)
Cash and cash equivalents at beginning of period 124,977 108,854
---------- ----------
Cash and cash equivalents at end of period $ 80,369 $ 72,233
========== ==========
Supplemental disclosure of cash flow information :
Cash paid during the period for :
Interest $ 16,863 $ 16,645
Income taxes 0 0
</TABLE>
5
<PAGE> 6
FIRST EVERGREEN CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1998
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 1997 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 issued an amendment that would delayed until
January 1, 1998 the effective date of the Statement's provisions as they relate
to repurchase agreements and similar transactions. 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 did not
materially change the company's statement presentation. Comprehensive Income
is forth in the table below:
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
OTHER COMPREHENSIVE INCOME:
Net Change in Unrealized losses on $<415> $<486>
available for sale securities, Net of Taxes
------ ------
Total Comprehensive Income $4,934 $4,040
====== ======
</TABLE>
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 company will adopt this Statement for its Annual
Report to shareholders.
6
<PAGE> 7
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in Thousands Except Share Data)
FINANCIAL CONDITION
During the three month period ended March 31, 1998, the deposit base increased
$1,104, reaching $1,701,724. In the period, the volume of savings and money
market accounts increased $17,768 and $6,347 while demand and time deposits
decreased by $12,033 and $10,978. Despite growing pressures from other
financial markets and interest rates on mid and short-term deposits remaining
nearly unchanged, the bank did not experience any deposit runoff. During the
same 1997 period, deposits increased $3,010 or .18%. In 1997, time deposits
and money market accounts increased $16,721 and $2,091, respectively, while
demand and savings deposits decreased by $13,314 and $2,488, respectively.
Interest earning assets decreased by $2,051 during 1998. The combined held to
maturity and available for sale securities portfolios increased $25,571. Net
loans continued to show strength rising 1.73% or $11,778. This growth was in
part funded by a $39,400 decrease in Federal Funds sold.
For the three month period ended March 31, 1998, the average interest rate
spread expressed on a tax equivalent basis (net interest margin) was 2.98%, a
decline of eight basis points from the same 1997 period. During the same
period, the return on interest earning assets remained constant at 7.45%, while
the average cost of funds increased eight basis points to 4.47%. Financial
market conditions generally dictate the return realized on average earning
assets and the rates paid to depositors. However, management has a
discretionary influence on the investment of assets and rates paid on deposits.
Annual return on average equity increased from 9.51% for the year ended
December 31, 1997 to 11.19% at March 31, 1998 as annualized earnings increased
by 19.76%. The annualized return on average assets increased 19 basis points
to 1.13%.
Total shareholders' equity decreased $3,138 from $198,142 at December 31, 1997
to $195,004 at March 31, 1998. During this period, the net unrealized loss on
available for sale securities increased $415, while treasury stock grew by $65.
On January 9, 1998, a $20.00 per share dividend totaling $8,008 was paid to
stockholders of record as of January 2, 1998.
The Tier I leveraged capital ratio decreased 17 basis points to 10.04%, while
the total risk-based capital ratio decreased to 24.53%. 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."
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, 1998, First
Evergreen's sources of liquidity totaled $441,578, consisting of $227,723 in
held to maturity securities maturing within one year, $39,600 in Federal Funds
sold, and $174,255 in available for sale securities. Deposits totaled
$1,701,724, yielding a liquidity ratio of 25.95%.
7
<PAGE> 8
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 33.26%,
34.37% and 33.37%, respectively. Similarly, approximately 47.74% of interest
sensitive liabilities could be repriced within one year, 26.41% within one to
five years and 25.85% in excess of five years.
Cash and cash equivalents decreased $44,608 during the three months ended March
31, 1998, reaching $80,369. These funds were redeployed to available for sale
(AFS) securities and loan portfolio. Operating activities contributed $1,102
primarily due to net income of $5,349 and a $4,486 decrease in accrued interest
and other liabilities. Investing activities used $39,526, due to the increases
in AFS securities and gross loans noted above. Financing activities consisted
of a $1,104 increase in deposits, an $8,008 cash dividend paid to shareholders,
purchases of treasury stock totaling $65, and a $785 increase in repurchase
agreements.
As of March 31, 1998, the market value of the held to maturity investment
portfolio exceeded book value by $16,321. Management has the positive intent
and ability to hold these securities until maturity.
RESULT OF OPERATIONS - Quarter Ended March 31, 1998 Compared to Quarter Ended
March 31, 1997.
Net interest income, before provision for loan losses, of $15,134 for the
quarter ended March 31, 1998 represents a $112 increase from the same quarter
last year. Net interest income (on a tax equivalent basis) also increased by
$210 from the prior year's quarter. The average volume of interest earning
assets increased $20,078, while their yield remained constant at 7.45%. The
average volume of interest sensitive liabilities decreased $16,012, while the
average cost of funds increased eight basis points to 4.47%. The net interest
margin decreased eight basis points to 2.98% with a corresponding 17 point
decrease in net yield on earning assets.
Other operating income increased $1,248 from the first quarter of 1997. The
increase is primarily attributable to realized security gains of $733 in 1998,
versus 1997 losses of $39. Additionally, revised fee schedules and volume
increases were responsible for increases in service charges on deposit accounts
and trust department income, which rose by $206 and $143, respectively. Other
income rose $127 due to a change in the ATM fee structure.
Other operating expense increased $19. Salaries and employee benefits
decreased $68. Salaries increased $148 due to annual salary adjustments and an
increase in the number of employees necessitated by the opening of a new
facility. Medical insurance decreased $162 as accruals were reduced in
relationship with claims paid. Equipment and data processing increased $122
and $70, respectively. These increases relate to product technology
enhancements, equipment repairs and profitability initiatives. Other expenses
declined $134 due to decreased level of charitable contributions.
Current period income tax increased $368 due to a $1,191 increase in pretax
income. The effective tax rate increased from 22.88 % in 1997 to 24.24% in
1998 as tax exempt interest represented a smaller percentage of pretax income
in the latter period.
8
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Financial Data Schedule - Article 9
(b) Report on Form 8-K under Section 13 or 15(d) of the Securities Exchange
Act was filed April 27, 1998 regarding the agreement and plan of merger
dated as of April 21, 1998 between First Evergreen Corporation and Old
Kent Financial Corporation.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST EVERGREEN CORPORATION
Dated: May 8, 1998 BY: /s/ Stephen M. Hallenbeck
----------------------------
Stephen M. Hallenbeck
Secretary/Treasurer
Signing on behalf of the Registrant and
as Principal Financial Officer.
9
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 40,769,001
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 39,600,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 174,255,479
<INVESTMENTS-CARRYING> 929,949,898
<INVESTMENTS-MARKET> 946,271,000
<LOANS> 686,321,015
<ALLOWANCE> 3,617,724
<TOTAL-ASSETS> 1,927,361,227
<DEPOSITS> 1,701,724,527
<SHORT-TERM> 16,090,000
<LIABILITIES-OTHER> 14,542,917
<LONG-TERM> 0
0
0
<COMMON> 195,003,783
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,927,361,227
<INTEREST-LOAN> 13,750,975
<INTEREST-INVEST> 17,584,270
<INTEREST-OTHER> 669,883
<INTEREST-TOTAL> 32,005,128
<INTEREST-DEPOSIT> 16,717,341
<INTEREST-EXPENSE> 16,871,681
<INTEREST-INCOME-NET> 15,133,447
<LOAN-LOSSES> 300,000
<SECURITIES-GAINS> 732,833
<EXPENSE-OTHER> 10,697,578
<INCOME-PRETAX> 7,060,156
<INCOME-PRE-EXTRAORDINARY> 7,060,156
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,349,156
<EPS-PRIMARY> 13.36
<EPS-DILUTED> 13.36
<YIELD-ACTUAL> 3.69
<LOANS-NON> 2,332,443
<LOANS-PAST> 3,641,219
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,992,346
<ALLOWANCE-OPEN> 3,515,265
<CHARGE-OFFS> 340,439
<RECOVERIES> 142,898
<ALLOWANCE-CLOSE> 3,617,724
<ALLOWANCE-DOMESTIC> 3,617,724
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 113,489
</TABLE>
