FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1996
Commission File Number 0-10275
EVERGREEN BANCORP, INC.
-----------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3114735
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
237 GLEN STREET, GLENS FALLS, NEW YORK 12801
--------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (518) 792-1151
--------------
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securi-
ties 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 requirements for
the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each Issuer's classes of
common stock, as of the latest practicable date:
Class of Common Stock Number of Shares Outstanding
as of July 31, 1996
------------------- -------------------
$3.33 1/3 Par Value 4,611,054
EVERGREEN BANCORP, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
------
Item 1 Financial Statements (unaudited):
Consolidated Statements of Income for the Three
Months Ended June 30, 1996, and 1995 1-2
Consolidated Statements of Income for the Six
Months Ended June 30, 1996, and 1995 3-4
Consolidated Statements of Financial Condition
as of June 30, 1996, and December 31, 1995 5-6
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 7-8
Notes to Consolidated Interim 9
Financial Statements
Report of Independent Auditors 10
Item 2 Management's Discussion and Analysis 11-22
PART II OTHER INFORMATION
-------
Item 1 Legal Proceedings - None
Item 2 Changes in Securities - None
Item 3 Defaults Upon Senior Securities - None
Item 4 Submission of Matters to a Vote of Security Holders - None
Item 5 Other Information - None
Item 6(a) Exhibits - The following exhibits are submitted herewith:
Exhibit 11 - Computation of Net Income Per Share
Exhibit 27 - Financial Data Schedule
Item(b) Reports on Form 8-K - None
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(EXCEPT PER SHARE DATA)
THREE MONTHS
ENDED June 30,
1996 1995
(UNAUDITED)
Interest Income:
Interest and Fees on Loans $13,936 $13,313
Interest on U.S. Government & Agency Obligations 2,770 2,414
Interest on State & Municipal Obligations 306 475
Interest on Other Bonds, Notes, & Debentures 111 150
Interest on Federal Funds Sold & Bank Deposits 173 551
------- -------
Total Interest Income 17,296 16,903
------- -------
Interest Expense:
Interest on Deposits:
Regular Savings, NOW and Money Market
Deposit Accounts 2,330 2,379
Other Time 4,348 4,238
Interest on Short-Term Borrowings 49 205
Interest on Long-Term Debt 389 181
------- -------
Total Interest Expense 7,116 7,003
------- -------
Net Interest Income 10,180 9,900
Provision for Loan Losses 360 540
------- -------
Net Interest Income After Provision for
Loan Losses 9,820 9,360
------- -------
Other Income:
Trust Department Income 654 563
Service Charges on Deposit Accounts 712 714
Net Loss on Security Transactions (17) (187)
Other 288 369
------- -------
Total Other Income 1,637 1,459
------- -------
(Continued)
- 1 -
CONSOLIDATED STATEMENTS OF INCOME
CONTINUED
(DOLLARS IN THOUSANDS)
(EXCEPT PER SHARE DATA)
THREE MONTHS
ENDED June 30,
1996 1995
(UNAUDITED)
Other Expense:
Salaries and Employee Benefits 3,961 3,975
Net Occupancy Expense 460 491
Equipment Expense 451 447
FDIC Insurance 1 468
Professional Services 258 478
Data Processing 630 537
Supplies and Printing 204 265
Advertising 201 126
Postage 121 134
OREO Writedowns and Expenses 276 144
Other 1,040 1,008
------- -------
Total Other Expense 7,603 8,073
------- -------
Income Before Taxes 3,854 2,746
Applicable Income Taxes 1,335 915
------- -------
Net Income $ 2,519 $ 1,831
======= =======
Earnings Per Common Share:
Average Shares Outstanding 4,626,000 4,718,000
Net Income per Share $ .54 $ .39
======= ========
See accompanying notes to consolidated interim financial statements.
- 2 -
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(EXCEPT PER SHARE DATA)
SIX MONTHS
ENDED June 30,
1996 1995
(UNAUDITED)
Interest Income:
Interest and Fees on Loans $27,554 $26,208
Interest on U.S. Government & Agency Obligations 5,686 4,899
Interest on State & Municipal Obligations 636 979
Interest on Other Bonds, Notes, & Debentures 237 291
Interest on Federal Funds Sold & Bank Deposits 382 600
------- -------
Total Interest Income 34,495 32,977
------- -------
Interest Expense:
Interest on Deposits:
Regular Savings, NOW and Money Market
Deposit Accounts 4,675 4,736
Other Time 8,808 7,814
Interest on Short-Term Borrowings 92 306
Interest on Long-Term Debt 807 354
------- -------
Total Interest Expense 14,382 13,210
------- -------
Net Interest Income 20,113 19,767
Provision for Loan Losses 720 1,080
------- -------
Net Interest Income After Provision for Loan Losses 19,393 18,687
------- -------
Other Income:
Trust Department Income 1,203 1,236
Service Charges on Deposit Accounts 1,410 1,359
Net Loss on Security Transactions (17) (187)
Other 616 729
------- -------
Total Other Income 3,212 3,137
------- -------
(Continued)
- 3 -
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
CONTINUED
(DOLLARS IN THOUSANDS)
(EXCEPT PER SHARE DATA)
SIX MONTHS
ENDED June 30,
1996 1995
(UNAUDITED)
Other Expenses:
Salaries and Employee Benefits 7,781 7,699
Net Occupancy Expense 1,008 985
Equipment Expense 937 912
FDIC Insurance 1 936
Professional Services 537 823
Data Processing 1,253 1,023
Supplies and Printing 417 586
Advertising 420 330
Postage 275 262
OREO Writedowns and Expenses 393 425
Other 1,956 2,051
------- -------
Total Other Expenses 14,978 16,032
------- -------
Income Before Taxes 7,627 5,792
Applicable Income Taxes 2,729 1,929
------- -------
Net Income $ 4,898 $ 3,863
======= =======
Earnings Per Common Share:
Average Shares Outstanding 4,643,000 4,733,000
Net Income per share $ 1.05 $ .82
======= =======
See accompanying notes to consolidated interim financial statements.
- 4 -
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
6/30/96 12/31/95
(UNAUDITED)
Assets:
Cash and Cash Equivalents:
Cash and Due From Banks $ 30,403 $ 31,021
Federal Funds Sold - 12,600
-------- --------
Total Cash and Cash Equivalents 30,403 43,621
-------- --------
Securities:
Securities Available For Sale (Amortized
cost of $164,703 and $189,995 at 6/30/96
and 12/31/95, respectively) 163,860 190,785
Securities Held to Maturity (fair value
of $22,332 and $24,515 at 6/30/96
and 12/31/95, respectively) 21,559 23,128
-------- --------
Total Securities 185,419 213,913
-------- --------
Loans:
Commercial 233,039 230,771
Mortgage 262,481 247,183
Installment 144,899 120,654
Other 286 429
-------- --------
Total Loans 640,705 599,037
Less:
Allowance for Loan Losses (12,680) (12,115)
Unearned Income on Loans ( 5,301) (6,839)
-------- --------
Loans, net 622,724 580,083
-------- --------
Bank Premises and Equipment, net 13,228 13,694
Other Real Estate Owned 3,762 3,784
Other Assets 16,124 16,328
-------- --------
Total Assets $871,660 $871,423
======== ========
(Continued)
- 5 -
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
CONTINUED
(DOLLARS IN THOUSANDS)
6/30/96 12/31/95
(UNAUDITED)
Liabilities:
Deposits:
Demand $ 92,368 $ 97,380
Regular Savings, Now Accounts and Money
Market Deposit Accounts 341,616 340,218
Certificates of Deposit over $100,000 50,274 70,614
Other Time 256,295 242,012
-------- --------
Total Deposits 740,553 750,224
-------- --------
Federal Funds Purchased and Other Short
Term Borrowings 14,997 3,260
Accrued Taxes and Other Liabilities 10,451 11,419
Long-Term Debt 22,548 23,475
-------- --------
Total Liabilities 788,549 788,378
-------- --------
Stockholders' Equity
Common Stock $3.33 1/3 Par Value: Authorized-
20,000,000; Shares Issued-4,816,983 at June 30,
1996 and 4,810,983 at December 31, 1995 16,056 16,036
Surplus 6,787 6,680
Undivided Profits 65,969 63,065
Market (Under)/Over Cost of Securities
Available For Sale, Net of Deferred Tax (506) 474
Treasury Stock (208,925 shares at June 30, 1996
and 122,268 shares at December 31, 1995) (4,387) (2,243)
Common Stock Subscribed by ESOP (808) (967)
-------- --------
Total Stockholders' Equity 83,111 83,045
-------- --------
Total Liabilities and Stockholders' Equity $871,660 $871,423
======== ========
See accompanying notes to consolidated interim financial statements.
- 6 -
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
THE SIX MONTHS ENDED JUNE 30, 1996 1995
(Unaudited)
------------------
Cash Flows from Operating Activities:
Net Income. . . . . . . . . . . . . . . . . . . $ 4,898 $ 3,863
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Net Change in Unearned Loan Fees. . . . . . . 24 21
Net Change in Other Assets and Other Liabilities 182 133
Loss on Sale of Securities. . . . . . . . . . 17 187
(Increase)/Decrease in Deferred Tax Benefit . (293) 514
Loss on Write-Down of Other Real Estate . . . 99 102
Gain on Disposition of Assets . . . . . . . . (7) -
Depreciation. . . . . . . . . . . . . . . . . 765 731
Provision for Loan Losses . . . . . . . . . . 720 1,080
Amortization of Premiums & Accretion of
Discounts on Securities, Net. . . . . 195 21
------- -------
Net Cash Provided By Operating Activities. 6,600 6,652
------- -------
Cash Flows From Investing Activities:
Proceeds From:
Sales of Securities Available for Sale. . . . 2,811 7,997
Maturities of Securities Available for Sale . 32,406 23,130
Maturities of Securities Held to Maturity . . 4,544 9,144
Purchases of Securities Available for Sale. . . (10,116) (23,352)
Purchases of Securities Held to Maturity. . . . (2,996) (5,500)
Proceeds From Sales of Loans. . . . . . . . . . 841 4,382
Change in Credit Card and
Check Overdraft Receivables . . . . . . . . . 348 269
Proceeds From Sales of Other Real Estate. . . . 235 4,322
Net Increase in Loans . . . . . . . . . . . . . (44,886) (11,483)
Capital Expenditures. . . . . . . . . . . . . . (292) (584)
------- ------
Net Cash (Used)/Provided By
Investing Activities . . . . . . . . . . (17,105) 8,325
------- ------
Cash Flows From Financing Activities:
Net Decrease in Deposits. . . . . . . . . . . . (9,671) (15,058)
Net Increase in Short-Term Borrowings . . . . . 11,737 8,439
Payments on Long Term Debt. . . . . . . . . . . (768) (52)
Proceeds From Issuance of Common Stock. . . . . 127 62
(Continued)
- 7 -
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONTINUED
(DOLLARS IN THOUSANDS)
THE SIX MONTHS ENDED JUNE 30, 1996 1995
(Unaudited)
-------------------
Payments for Purchase of Treasury Stock. . . . (2,271) (749)
Dividends Paid . . . . . . . . . . . . . . . . (1,867) (948)
-------- -------
Net Cash Used By Financing Activities . . (2,713) (8,306)
-------- -------
Net(Decrease)/Increase in Cash and
Cash Equivalents . . . . . . . . . . . . . . (13,218) 6,671
Cash and Cash Equivalents at Beginning of Year 43,621 34,592
-------- --------
Cash and Cash Equivalents at End of Quarter. . $ 30,403 $ 41,263
======== ========
Supplemental Disclosure of Cash Flows:
Interest Paid. . . . . . . . . . . . . . . . . $ 14,303 $ 12,788
Taxes Paid . . . . . . . . . . . . . . . . . . 2,964 2,508
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Certain properties which were foreclosed upon were transferred from
loans to other real estate in the amount of $312,000 and $1,630,000
during the six months ended June 30, 1996 and 1995, respectively.
The Company borrowed $1,600,000 which was used to subscribe for
common stock of the Company in 1990. Payments were made on the ESOP
loan in the amount of $159,000 and $153,000 during the six months
ended June 30, 1996 and 1995 respectively.
As a result of the adoption of Statement of Financial Accounting
Standard No. 115, securities available for sale are recorded at fair
value. The unrealized loss on these securities was $843,000 at June
30, 1996. The adjustment to stockholders' equity for the unrealized
loss was $506,000, net of deferred income tax benefit of $337,000.
At June 30, 1995 these securities had an unrealized loss of
$977,000. The adjustment to stockholders equity net of deferred
income tax benefit of $391,000, was $586,000.
See accompanying notes to consolidated interim financial statements.
- 8 -
EVERGREEN BANCORP, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. Financial Statement Presentation
--------------------------------
The accompanying consolidated financial statements consist of Evergreen
Bancorp, Inc. ("the Company") and the financial statements of its wholly
owned subsidiary, Evergreen Bank, N.A. The unaudited consolidated interim
financial statements have been prepared according to the rules of the
Securities and Exchange Commission. In the opinion of the Company, the
accompanying unaudited consolidated interim financial statements contain
all adjustments necessary to present fairly the financial position as of
June 30, 1996, the results of operations for the three and six months
ended June 30, 1996 and 1995 and cash flows for the six months ended June
30, 1996 and 1995. All adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to rules
and regulations applicable to interim financial statements.
The accompanying interim consolidated financial statements should be read
in conjunction with the Evergreen Bancorp, Inc. consolidated year-end
financial statements, including notes thereto, which are included in the
Evergreen Bancorp, Inc. 1995 Annual Report and Form 10-K.
2. Earnings Per Share
------------------
Earnings per share is calculated as net income divided by average shares
outstanding. Average shares outstanding for June 30, 1996, and 1995,
takes into consideration a reduction to issued shares by treasury stock
held, weighted by the number of days in the period such stock is held.
3. Payment of Dividends
--------------------
The Company is a legal entity separate and distinct from its bank and
other subsidiaries. The principal source of cash flow of the Registrant,
including cash flow to pay dividends to its stockholders, is dividends
from Evergreen Bank. The subsidiary bank is required to meet various
legal requirements prior to the payment of dividends to the Company.
Without the payment of dividends from Evergreen Bank the Company would
not be able to pay dividends to its stockholders.
- 9 -
Independent Auditors' Review Report
The Board of Directors and Stockholders
Evergreen Bancorp, Inc.:
We have reviewed the consolidated statement of financial condition of
Evergreen Bancorp, Inc. and subsidiaries as of June 30, 1996 and the
related consolidated statements of income for the three-month and
six-month periods ended June 30, 1996 and 1995, and the consolidated
statements of cash flows for the six-month periods ended June 30,
1996 and 1995. These consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying ana-
lytical procedures to financial data and making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the consolidated financial statements referred
to above for them to be in conformity with generally accepted ac-
counting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated statement of financial condition
of Evergreen Bancorp, Inc. and subsidiaries as of December 31, 1995,
and the related consolidated statements of income, changes in stock-
holders' equity, and cash flows for the year then ended (not present-
ed herein); and in our report dated January 26, 1996, we expressed an
unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying consoli-
dated statement of financial condition as of December 31, 1995, is
fairly presented, in all material respects, in relation to the con-
solidated statement of financial condition from which it has been
derived.
/s/ KPMG PEAT MARWICK, LLP
Albany, New York
August 2, 1996
- 10 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL REVIEW
----------------
The principal source of earnings for the Company is its single banking
subsidiary, Evergreen Bank, N.A. All discussion herein refers to the
banking activities of the Company's banking subsidiary unless otherwise
noted.
SUMMARY OF RESULTS OF OPERATIONS
--------------------------------
Net income for the three months ended June 30, 1996, was $2,519,000
as compared to $1,831,000 in the same quarter last year. This
represents an increase of $688,000. For the six months ended June 30,
1996 net income was $4,898,000 compared to $3,863,000 in 1995. Net
income per share for the quarter ended June 30, 1996, was $.54,
compared to $.39 for the June 30, 1995 quarter. For the three and six
month periods, the primary reasons for the increases in net income were
increases in net interest income, a lower provision for loan losses,
and a significant decrease in FDIC insurance.
In 1996, the annualized return on average assets for the six months
ended June 30, was 1.12%, compared to .93% for the first six months
last year. The annualized return on average stockholders' equity for
the first six months of 1996 was 11.8%, compared to 10.1% for the same
period in 1995. The increase in the returns on average assets and
stockholders' equity are due primarily to the increased level of net
income.
NET INTEREST INCOME
-------------------
Net interest income for the three months ended June 30, 1996 was
$10,180,000, compared to $9,900,000 for the same period of 1995. This
represents an increase of $280,000, or 2.8%. The first six months of
1996 reflects net interest income of $20,113,000, an increase of 1.8%
as compared to $19,767,000 for the same period last year. The increase
in net interest income in 1996's second quarter is attributed primarily
to a higher level of average earning assets which offset the effects of
a lower net interest margin.
On a taxable equivalent basis, net interest income was $10,374,000
for the quarter ended June 30, 1996 as compared to $10,198,000 for the
quarter ended June 30, 1995. This represents an increase of $176,000,
or 1.7%. For the first six months of 1996 taxable equivalent net
interest income increased 0.7% to $20,512,000 from $20,379,000 for the
- 11 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
six months ended June 30, 1995. The increase in net interest income on
a taxable equivalent basis resulted primarily from an increase in the
volume of average earning assets. Average earning assets increased
$35.2 million, or 4.4%, in comparison to the same period in 1995. This
increase resulted primarily from higher levels of loans and securities.
Loans increased $32.3 million and securities increased $8.5 million
on average. These increases were partially offset by a decrease in
average Fed Funds sold and interest bearing deposits of $5.6 million.
The income increase due to volume was somewhat offset by a lower net
interest margain. At 4.98% the margin for the first six months of 1996
was 20 basis points lower than the same period of the prior year. The
decrease in the margin was a result of rates on interest bearing
deposits rising 17 basis points while rates on interest earning assets
declined 7 basis points. The decrease in yields on earning assets is
due to a relative shift in the loan portfolio from commercial loans to
lower yielding retail loans.
The increases in average earning assets were funded by decreases in
non-earning assets of $5.6 million and an increase in average interest
bearing liabilities of $26.9 million. Average interest bearing liabilty
increases were concentrated in time deposits, which increased $27.6
million, and long-term debt, which increased $12.0 million. These
increases were offset by decreases in other deposit categories and
short-term borrowings.
ALLOWANCE FOR LOAN LOSSES
-------------------------
The Company's allowance for loan losses at June 30, 1996, has increased
$565,000 to $12,680,000 from the December 31, 1995 balance. As a per-
cent of total loans, net of unearned income, the allowance was approx-
imately 2.0% at June 30, 1996. The allowance represents approximately
200.8% of total non-performing loans at quarter end. The provision for
loan losses for the quarter ended June 30, 1996 was $360,000 compared
to $540,000 for the same period in 1995. For the six months ended June
30, 1996 the provision totaled $720,000, compared to $1,080,000 a year
earlier. The reduced provision, from year earlier levels, reflects the
significant and continued reduction of non-performing loans from the
levels of the previous year, and an improvement to the overall credit
quality of the portfolio from that time. Were these trends to reverse,
additional provisions might be required.
The allowance for loan losses represents amounts available for future
credit losses and reflects management's ongoing detailed review of
certain individual credits, as well as analysis of the historic net
charge off experience of the portfolio, an evaluation of current and
anticipated economic conditions, peer group statistics and other
pertinent factors.
- 12 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
Loans (or portions thereof) deemed uncollectable are charged against
the allowance while recoveries of amounts previously charged off are
added to the allowance. Provisions for loan losses charged to earnings
are added to the allowance. Amounts are charged off once the proba-
bility of loss has been determined, with consideration given to factors
such as the customer's financial condition, underlying collateral
and guarantees, and general and industry economic conditions.
The following table presents information concerning non-performing
loans and other real estate.
6/30/96 12/31/95
------- --------
(Dollars In Thousands)
Non-Accrual $ 4,521 $ 4,571
Past Due 90 Days 1,657 1,203
Restructured 136 138
-------- --------
Total Non-Performing
Loans $ 6,314 $ 5,912
======== ========
Other Real Estate $ 3,762 $ 3,784
======== ========
The majority of the Company's non-performing loans consist of
commercial and commercial real estate loans. There is no distinct
concentration as to type of borrower within these classifications.
OTHER INCOME AND EXPENSE
------------------------
Other income for the six months ended June 30, 1996, was $3,212,000,
$75,000 more than the $3,137,000 recorded in the same period last year.
The Company recorded security losses of $17,000 in 1996 versus losses
of $187,000 in 1995, this reduced level of securities losses contri-
buted to the increase in other income. The largest source of other
income continues to be service charges. Other income for the second
quarter of 1996 was $1,637,000, up 12.2% from $1,459,000 in the second
quarter of 1995.
- 13 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
Other expense for the three months ended June 30, 1996 was $7,603,000,
compared to $8,073,000 for the same quarter last year, a decrease of
$470,000, or 5.8%. Salaries and employee benefits expense, the largest
component of other operating expense, declined $14,000 to $3,961,000
for the three months ended June 30, 1996, from $3,975,000 during the
same period of 1995.
FDIC insurance was $1,000 for the quarter ended June 30, 1996, compared
to $468,000 for the same quarter last year. This is a result of the
FDIC determining, late in 1995, that insurance premiums charged to
members of the Bank Insurance Fund, could be reduced or eliminated for
the time being based on the full capitalizaton of the Fund. There is no
assurance that the virtual elimination of FDIC insurance premiums will
continue indefinately. Professional services totaled $258,000 for the
quarter ended June 30, 1996, compared to $478,000 for the same period a
year ago. This represents a decrease of $220,000, or 46.0%, and is due
primarily to lower levels of non-performing loans and other real estate
owned. Data processing costs were $630,000 for the second quarter,
compared to $537,000 for the same period a year ago, an increase of
$93,000 or 17.3% and is due to increased outsourcing. OREO expenses
increased $132,000 from the second quarter of 1995 due to a one time
charge incurred to rehabilatate a property to salable condition.
INCOME TAX EXPENSE
------------------
Income tax expense for the three months ended June 30, 1996, was
$1,335,000 as compared to $915,000 for the three months ended June 30,
1996. For the six months ended June 30, 1996, income tax expense was
$2,729,000 compared to $ 1,929,000 in 1995. The increased expense is a
result of higher levels of income. The effective income tax rates for
the six months ended June 30, 1996 and 1995 were 35.8% and 33.3%,
respectively. The increase in the effective tax rate is attributable to
lower relative levels of income derived from tax exempt sources.
CAPITAL AND LIQUIDITY
---------------------
At June 30, 1996, stockholders' equity was $83,111,000 as compared to
$83,045,000 at December 31, 1995, an increase of $66,000 or .1%. The
increase in stockholders' equity is a result of the retention of
earnings of $3,031,000, stock issuance of $127,000 and a reduction of
the ESOP balance of $159,000. These were offset by treasury share
purchases of $2,271,000 and a change in the valuation of securities
available for sale, net of deferred tax benefit, of $980,000.
- 14 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
On March 16, 1995, the Company indicated its intent to repurchase up to
5% of its then outstanding shares. The purchase authorization was up
to 237,000 shares at a maximim cost of $4,750,000. From that time, and
throughout the second quarter of 1996, the Company purchased 218,416
shares at a cost of approximately $4,698,000, effectively completing
the March 1995 program.
On July 18, 1996 the Company announced a new repurchase program author-
izing purchases of an additional 4% of issued shares or approximately
193,000 shares, at market prices. The funding for this program is not
anticipated to materially affect the liquidity or capital position of
either the Company or the Bank.
The following table sets forth the Company's risk based capital ratios
as of June 30, 1996 and the regulatory guidelines for well capitalized
institutions.
Evergreen Well Capitalized
Risk-Based Bancorp, Inc. Regulatory
Ratios June 30, 1996 Guidelines
---------- ------------- ----------------
Leverage Ratio 9.6 % 5.0 %
Tier 1 13.8 % 6.0 %
Total Capital 15.1 % 10.0 %
Average federal funds sold for the six months ended June 30, 1996 was
$14,308,000, as compared to $19,555,000 for the six months ended
June 30, 1995. Net cash provided by operating activities was $6,600,000
for the six months ended June 30, 1996 as compared to net cash provided
of $6,652,000 for the six months ended June 30, 1995. Largely due to
increases in loan balances, net cash used by investing activities was
$17,105,000 for the six months ended June 30, 1996 as compared to net
cash provided of $8,325,000 for the same period last year. Net cash
used by financing activities was $2,713,000 for the six months of 1996
as compared to cash used of $8,306,000 for the six months of 1995. The
decrease in cash used by financing activities resulted primarily from
a $5,387,000 net decrease in cash outflows from deposit accounts. The
level of cash and cash equivalents was $30,403,000 at June 30, 1996 as
compared to $41,263,000 at June 30, 1995.
Evergreen Bank, N.A. is the principal source of funds to the Company
and, if it cannot pay dividends to the Company, the Company will be
unable to pay dividends to its stockholders.
- 15 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
CAPITAL EXPENDITURES AND COMMITMENTS
------------------------------------
Subsequent to June 30, 1996, the Company entered into commitments for
two additional branches, one owned and one leased, subject to obtaining
the requisite regulatory approvals. The capital expenditures for the
two locations is expected to total approximately $1.8 million. The
Company currently expects to open at least two additional branches in
1997.
Subsequent to June 30, 1996, the Company entered into an agreement to
extend its principal data processing contract through June 30, 2002,
providing for a reduction from existing costs.
The Company has plans to install an imaging system and upgrade teller
platform equipment and systems. The combined cost of these projects is
approximately $500,000.
RATE VOLUME ANALYSIS
--------------------
For the purposes of the following analysis, Securities Available for
Sale are stated at average amortized cost and Stockholders' Equity is
unadjusted for the effects of SFAS No. 115.
Non-accrual loans are included in the following analysis and the
average balance of these loans is deemed immaterial.
Portions of income earned on certain Commercial Loans, US Government
Obligations, and Obligations of State and Political Subdivisions are
exempt from Federal and/or State taxation. Appropriate adjustments have
been made to reflect the equivalent amount of taxable income that
would have been necessary to generate an equal amount of after tax
income. The taxable equivalent adjustment is based on a marginal
Federal income tax rate of 35.0% in 1996 and 1995 along with a marginal
State income tax rate of 9.225% for 1996 and 9.625% for 1995.
The following table sets forth the dollar amounts of interest income
(on a taxable equivalent basis) and interest expense and changes
therein resulting from changes in volume and changes in rate. The
change in interest due to both rate and volume has been allocated to
change due to volume and change due to rate based on the percentage
relationship of such variances to each other.
- 16 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
Analysis of Variance in Net Interest Income Due to Volume and Rates
For the three months ended
June 30, 1996 VS June 30, 1995
INCREASE / (DECREASE) TOTAL
DUE TO CHANGE IN INCREASE/
VOLUME RATE (DECREASE)
--------------------- ----------
Interest Earned:
Loans
Taxable $ 881 $ (255) $ 626
Tax-Exempt 36 (75) (39)
Investment Securities
Taxable 345 (49) 296
Tax-Exempt (256) 40 (216)
Federal Funds Sold (309) (65) (374)
Interest-Bearing Deposits (4) - (4)
------ ------ ------
Changes in Total Interest
Income 693 (404) 289
------ ------ ------
Less Interest Expense Incurred:
Regular Savings, NOW and MMDAs (5) (44) (49)
Time Deposits 235 (125) 110
Short-Term Borrowings (107) (49) (156)
Long Term Debt 183 25 208
Changes in Total Interest ------ ------ ------
Expense 306 (193) 113
------ ------ ------
Changes in Net Interest
Income $ 387 $ (211) $ 176
====== ====== ======
- 17 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
Analysis of Variance in Net Interest Income Due to Volume and Rates
For the six months ended
June 30, 1996 VS June 30, 1995
INCREASE / (DECREASE) TOTAL
DUE TO CHANGE IN INCREASE/
VOLUME RATE (DECREASE)
--------------------- ----------
Interest Earned:
Loans and Leases
Taxable $ 1,467 $ (121) $ 1,346
Tax-Exempt 65 (135) (70)
Investment Securities
Taxable 639 51 690
Tax-Exempt (515) 72 (443)
Federal Funds Sold (144) (65) (209)
Interest-Bearing Deposits (9) - (9)
------- ------ -------
Changes in Total Interest
Income 1,503 (198) 1,305
------- ------ -------
Less Interest Expense Incurred:
Regular Savings, NOW and MMDAs (89) 28 (61)
Time Deposits 763 231 994
Short-Term Borrowings (150) (64) (214)
Long Term Debt 415 38 453
------- ------ -------
Changes in Total Interest
Expense 939 233 1,172
------- ------ -------
Changes in Net Interest
Income $ 564 $ (431) $ 133
======= ====== =======
- 18 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
Average Balances Three Months Ended June 30, 1996
Interest Average
Average Income/ Yield/
Balance Expense Rate
Assets: ------- ------- -------
Loans
Taxable $607,198 $13,723 9.09%
Tax Exempt 15,464 301 7.83%
Securities
Taxable 184,847 2,987 6.50%
Tax Exempt 12,522 306 9.83%
Federal Funds Sold 13,136 172 5.27%
Interest Bearing Deposits
with Banks 85 1 4.73%
-------- -------
Total Earning Assets 833,252 17,490 8.44%
-------
Allowance for Loan
Losses (12,455)
Cash and Due from Banks 29,419
Other Non-Earning Assets 31,075
--------
Total Assets $881,291
========
Liabilities and
Stockholders' Equity:
Regular Savings, NOW
and MMDAs $339,371 2,330 2.76%
Time Deposits 326,949 4,348 5.35%
Short-Term Borrowings 3,893 49 5.06%
Long Term Debt 22,869 389 6.84%
-------- -------
Total Interest
Bearing Liabilities 693,082 7,116 4.13%
------- -----
Demand Deposits 92,221
Other Liabilities 12,552
Stockholders' Equity 83,436
Total Liabilities and --------
Stockholders' Equity $881,291
========
Net Interest Income (Tax
Equivalent Basis) 10,374
Tax Equivalent Adjustment (194)
-------
Net Interest Income $10,180
=======
Net Interest Rate Spread 4.31%
=====
Net Interest Margin 5.01%
=====
- 19 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
Average Balances Three Months Ended June 30, 1995
Interest Average
Average Income/ Yield/
Balance Expense Rate
Assets: ------- ------- -------
Loans
Taxable $567,152 $13,097 9.26%
Tax Exempt 13,841 340 9.85%
Securities
Taxable 163,168 2,691 6.62%
Tax Exempt 23,075 522 9.07%
Federal Funds Sold 35,988 546 6.09%
Interest Bearing Deposits
with Banks 446 5 4.50%
-------- -------
Total Earning Assets 803,670 17,201 8.58%
------- -----
Allowance for Loan
Losses (18,108)
Cash and Due from Banks 27,678
Other Non-Earning Assets 38,669
--------
Total Assets $851,909
========
Liabilities and
Stockholders' Equity:
Regular Savings, NOW
and MMDAs $340,054 2,379 2.81%
Time Deposits 308,911 4,238 5.50%
Short-Term Borrowings 11,318 205 7.27%
Long Term Debt 11,921 181 6.09%
-------- -------
Total Interest
Bearing Liabilities 672,204 7,003 4.18%
------- -----
Demand Deposits 89,813
Other Liabilities 10,222
Stockholders' Equity 79,670
--------
Total Liabilities and
Stockholders' Equity $851,909
========
Net Interest Income (Tax
Equivalent Basis) 10,198
Tax Equivalent Adjustment (298)
-------
Net Interest Income $ 9,900
=======
Net Interest Rate Spread 4.40%
=====
Net Interest Margin 5.09%
=====
- 20 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
Average Balances Six Months Ended June 30, 1996
Interest Average
Average Income/ Yield/
Balance Expense Rate
Assets: ------- ------- -------
Loans
Taxable $596,829 $27,125 9.14%
Tax Exempt 15,398 608 7.94%
Securities
Taxable 188,980 6,144 6.54%
Tax Exempt 13,036 635 9.80%
Federal Funds Sold 14,308 380 5.34%
Interest Bearing Deposits
with Banks 83 2 4.85%
-------- -------
Total Earning Assets 828,634 34,894 8.47%
------- -----
Allowance for Loan
Losses (12,314)
Cash and Due from Banks 29,532
Other Non-Earning Assets 31,932
--------
Total Assets $877,784
========
Liabilities and
Stockholders' Equity:
Regular Savings, NOW
and MMDAs $339,614 4,675 2.77%
Time Deposits 323,583 8,808 5.47%
Short-Term Borrowings 3,651 92 5.07%
Long Term Debt 23,067 807 7.04%
-------- -------
Total Interest
Bearing Liabilities 689,915 14,382 4.19%
------- -----
Demand Deposits 92,309
Other Liabilities 12,368
Stockholders' Equity 83,192
Total Liabilities and --------
Stockholders' Equity $877,784
========
Net Interest Income (Tax
Equivalent Basis) 20,512
Tax Equivalent Adjustment (399)
-------
Net Interest Income $20,113
=======
Net Interest Rate Spread 4.28%
=====
Net Interest Margin 4.98%
=====
- 21 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
Average Balances Six Months Ended June 30, 1995
Interest Average
Average Income/ Yield/
Balance Expense Rate
Assets: ------- ------- -------
Loans
Taxable $565,991 $25,779 9.18%
Tax Exempt 13,973 678 9.78%
Securities
Taxable 169,746 5,454 6.48%
Tax Exempt 23,760 1,078 9.15%
Federal Funds Sold 19,555 589 6.08%
Interest Bearing Deposits
with Banks 456 11 4.94%
-------- -------
Total Earning Assets 793,481 33,589 8.54%
------- -----
Allowance for Loan
Losses (18,574)
Cash and Due from Banks 27,596
Other Non-Earning Assets 39,455
--------
Total Assets $841,958
========
Liabilities and
Stockholders' Equity
Regular Savings, NOW
and MMDAs $346,846 4,736 2.75%
Time Deposits 295,979 7,814 5.32%
Short-Term Borrowings 9,063 306 6.80%
Long Term Debt 11,115 354 6.41%
-------- -------
Total Interest
Bearing Liabilities 663,003 13,210 4.02%
------- -----
Demand Deposits 89,735
Other Liabilities 10,098
Stockholders' Equity 79,122
--------
Total Liabilities and
Stockholders' Equity $841,958
========
Net Interest Income (Tax
Equivalent Basis) 20,379
Tax Equivalent Adjustment (612)
-------
Net Interest Income $19,767
=======
Net Interest Rate Spread 4.52%
=====
Net Interest Margin 5.18%
=====
- 22 -
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 duly authorized.
EVERGREEN BANCORP, INC.
August 12, 1996 /s/ George W. Dougan
--------------- --------------------
Date George W. Dougan
President & Chief Executive Officer
(Principal Executive Officer)
August 12, 1996 /s/ George L. Fredette
--------------- ----------------------
Date George L. Fredette
Senior Vice President, Treasurer
(Principal Financial Officer)
- 23 -
Exhibit 11 - Earnings per Share
EVERGREEN BANCORP, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(Dollars in Thousands, Except Per Share Amounts)
Six Months Ended June 30,
___________________________________
1996 1995
____________ ____________
Net Income Per Common Share:
Weighted Average Common Shares
Outstanding 4,643,000 4,733,000
============ ============
Net Income $ 4,898 $ 3,863
============ ============
Net Income per Common Share $ 1.05 $ .82
============ ============
Net Income Per Common Share - Primary:
Weighted Average Common Shares
Outstanding 4,643,000 4,733,000
Common Stock Equivalents - Primary 56,000 26,000
------------ ------------
Weighted Average Common Shares and
Common Share Equivalents Outstanding 4,699,000 4,759,000
============ ============
Net Income $ 4,898 $ 3,863
============ ============
Net Income per Common Share $ 1.04 $ .81
============ ============
Net Income Per Common Share - Fully Diluted:
Weighted Average Common Shares
Outstanding 4,643,000 4,733,000
Common Stock Equivalents - Fully Diluted 65,000 42,000
------------ ------------
Weighted Average Common Shares and
Common Share Equivalents Outstanding 4,708,000 4,775,000
============ ============
Net Income $ 4,898 $ 3,863
============ ============
Net Income per Common Share $ 1.04 $ .81
============ ============
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
<ARTICLE> 9
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 30,141
<INT-BEARING-DEPOSITS> 262
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 163,860
<INVESTMENTS-CARRYING> 21,559
<INVESTMENTS-MARKET> 22,332
<LOANS> 635,404
<ALLOWANCE> 12,680
<TOTAL-ASSETS> 871,660
<DEPOSITS> 740,553
<SHORT-TERM> 14,997
<LIABILITIES-OTHER> 10,451
<LONG-TERM> 22,548
<COMMON> 16,056
0
0
<OTHER-SE> 67,055
<TOTAL-LIABILITIES-AND-EQUITY> 871,660
<INTEREST-LOAN> 27,554
<INTEREST-INVEST> 6,559
<INTEREST-OTHER> 382
<INTEREST-TOTAL> 34,495
<INTEREST-DEPOSIT> 13,483
<INTEREST-EXPENSE> 14,382
<INTEREST-INCOME-NET> 20,113
<LOAN-LOSSES> 720
<SECURITIES-GAINS> (17)
<EXPENSE-OTHER> 14,978
<INCOME-PRETAX> 7,627
<INCOME-PRE-EXTRAORDINARY> 7,627
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,898
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
<YIELD-ACTUAL> 4.98
<LOANS-NON> 4,521
<LOANS-PAST> 1,657
<LOANS-TROUBLED> 136
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,115
<CHARGE-OFFS> 485
<RECOVERIES> 330
<ALLOWANCE-CLOSE> 12,680
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 12,680
</TABLE>
