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 September 30, 1996
Commission File Number 0-10275
EVERGREEN BANCORP, INC.
-----------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3114735
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
237 GLEN STREET, GLENS FALLS, NEW YORK 12801
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(Address of principal executive offices)
Registrant's telephone number, including area code: (518) 792-1151
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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 October 31, 1996
------------------- ----------------------
$3.33 1/3 Par Value 9,149,787
EVERGREEN BANCORP, INC. AND SUBSIDIARIES
INDEX
Page No.
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PART I FINANCIAL INFORMATION
------
Item 1 Financial Statements (unaudited):
Consolidated Statements of Income for the Three
Months Ended September 30, 1996, and 1995 1-2
Consolidated Statements of Income for the Nine
Months Ended September 30, 1996, and 1995 3-4
Consolidated Statements of Financial Condition
as of September 30, 1996, and December 31, 1995 5-6
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995 7-8
Notes to Consolidated Interim
Financial Statements 9
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
(b) Reports on Form 8-K
Registrant's press release, dated August 15, 1996, announcing
the declaration of a two-for-one stock split in the form of a
100% stock dividend and plans to increase the common stock
dividend.
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(EXCEPT PER SHARE DATA)
THREE MONTHS
ENDED September 30,
1996 1995
(UNAUDITED)
Interest Income:
Interest and Fees on Loans $14,657 $13,369
Interest on U.S. Government & Agency Obligations 2,699 2,714
Interest on State & Municipal Obligations 241 388
Interest on Other Bonds, Notes, & Debentures 111 143
Interest on Federal Funds Sold & Bank Deposits 179 411
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Total Interest Income 17,887 17,025
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Interest Expense:
Interest on Deposits:
Regular Savings, NOW and Money Market
Deposit Accounts 2,381 2,515
Other Time 4,408 4,125
Interest on Short-Term Borrowings 50 185
Interest on Long-Term Debt 383 205
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Total Interest Expense 7,222 7,030
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Net Interest Income 10,665 9,995
Provision for Loan Losses 360 360
------- -------
Net Interest Income After Provision for
Loan Losses 10,305 9,635
------- -------
Other Income:
Trust Department Income 551 465
Service Charges on Deposit Accounts 709 722
Net Gain on Security Transactions 10 25
Other 312 338
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Total Other Income 1,582 1,550
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(Continued)
1
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
CONTINUED
(DOLLARS IN THOUSANDS)
(EXCEPT PER SHARE DATA)
THREE MONTHS
ENDED September 30,
1996 1995
(UNAUDITED)
Other Expense:
Salaries and Employee Benefits 4,360 4,484
Net Occupancy Expense 481 498
Equipment Expense 448 464
FDIC Insurance 1 6
Professional Services 330 374
Data Processing 591 481
Supplies and Printing 205 186
Advertising 195 157
Postage 124 119
OREO Writedowns and Expenses, Net (66) 904
Other 1,018 1,261
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Total Other Expense 7,687 8,934
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Income Before Taxes 4,200 2,251
Applicable Income Taxes 1,506 201
------- -------
Net Income $ 2,694 $ 2,050
======= =======
Earnings Per Common Share:
Average Shares Outstanding 9,199,000 9,416,000
Net Income per Share $ .29 $ .22
See accompanying notes to consolidated interim financial statements.
2
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(EXCEPT PER SHARE DATA)
NINE MONTHS
ENDED September 30,
1996 1995
(UNAUDITED)
Interest Income:
Interest and Fees on Loans $42,211 $39,577
Interest on U.S. Government & Agency Obligations 8,385 7,613
Interest on State & Municipal Obligations 877 1,367
Interest on Other Bonds, Notes, & Debentures 348 434
Interest on Federal Funds Sold & Bank Deposits 561 1,011
------ ------
Total Interest Income 52,382 50,002
------ ------
Interest Expense:
Interest on Deposits:
Regular Savings, NOW and Money Market
Deposit Accounts 7,056 7,251
Other Time 13,216 11,939
Interest on Short-Term Borrowings 142 491
Interest on Long-Term Debt 1,190 559
------ ------
Total Interest Expense 21,604 20,240
------ ------
Net Interest Income 30,778 29,762
Provision for Loan Losses 1,080 1,440
------ ------
Net Interest Income After Provision for Loan Losses 29,698 28,322
------ ------
Other Income:
Trust Department Income 1,754 1,701
Service Charges on Deposit Accounts 2,119 2,081
Net Loss on Security Transactions (7) (162)
Other 928 1,067
------ ------
Total Other Income 4,794 4,687
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(Continued)
3
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
CONTINUED
(DOLLARS IN THOUSANDS)
(EXCEPT PER SHARE DATA)
NINE MONTHS
ENDED September 30,
1996 1995
(UNAUDITED)
Other Expenses:
Salaries and Employee Benefits 12,141 12,183
Net Occupancy Expense 1,489 1,483
Equipment Expense 1,385 1,376
FDIC Insurance 2 942
Professional Services 867 1,197
Data Processing 1,844 1,438
Supplies and Printing 622 772
Advertising 615 487
Postage 399 382
OREO Writedowns and Expenses, Net 327 903
Other 2,974 3,803
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Total Other Expenses 22,665 24,966
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Income Before Taxes 11,827 8,043
Applicable Income Taxes 4,235 2,130
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Net Income $ 7,592 $ 5,913
======= =======
Earnings Per Common Share:
Average Shares Outstanding 9,257,000 9,449,000
Net Income per share $ .82 $ .63
See accompanying notes to consolidated interim financial statements.
4
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
9/30/96 12/31/95
(UNAUDITED)
Assets:
Cash and Cash Equivalents:
Cash and Due From Banks $ 36,938 $ 31,021
Federal Funds Sold 24,000 12,600
-------- --------
Total Cash and Cash Equivalents 60,938 43,621
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Securities:
Securities Available For Sale (Amortized
cost of $163,615 and $189,995 at 9/30/96
and 12/31/95 respectively) 163,321 190,785
Securities Held to Maturity (fair value
of $22,199 and $24,515 at 9/30/96
and 12/31/95 respectively) 21,411 23,128
-------- --------
Total Securities 184,732 213,913
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Loans:
Commercial 223,739 230,771
Mortgage 275,862 247,183
Installment 150,227 120,654
Other 248 429
-------- --------
Total Loans 650,076 599,037
Less:
Allowance for Loan Losses (12,682) (12,115)
Unearned Income on Loans (4,711) (6,839)
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Loans, net 632,683 580,083
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Bank Premises and Equipment, net 12,995 13,694
Other Real Estate Owned 1,292 3,784
Other Assets 16,464 16,328
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Total Assets $909,104 $871,423
======== ========
(Continued)
5
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
CONTINUED
(DOLLARS IN THOUSANDS)
9/30/96 12/31/95
(UNAUDITED)
Liabilities:
Deposits:
Demand $ 98,491 $ 97,380
Regular Savings, Now Accounts and Money
Market Deposit Accounts 344,562 340,218
Certificates of Deposit over $100,000 76,742 70,614
Other Time 267,421 242,012
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Total Deposits 787,216 750,224
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Federal Funds Purchased and Other Short
Term Borrowings 3,181 3,260
Accrued Taxes and Other Liabilities 11,866 11,419
Long-Term Debt 22,486 23,475
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Total Liabilities 824,749 788,378
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Stockholders' Equity
Common Stock $3.33 1/3 Par Value: Authorized-
20,000,000 Shares; Issued 9,633,966 at September
30, 1996 and 9,621,966 at December 31, 1995 32,113 16,036
Surplus 6,787 6,680
Undivided Profits 51,632 63,065
Market (Under)/ Over Cost of Securities Available
For Sale, Net of Deferred Tax (177) 474
Treasury Stock (474,579 shares at September 30,
1996 and 244,536 shares at December 31, 1995) (5,192) (2,243)
Common Stock Subscribed by ESOP (808) (967)
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Total Stockholders' Equity 84,355 83,045
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Total Liabilities and Stockholders' Equity $909,104 $871,423
======== ========
See accompanying notes to consolidated interim financial statements.
6
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 1995
(Unaudited)
-----------------
Cash Flows from Operating Activities:
Net Income. . . . . . . . . . . . . . . . . . . . $ 7,592 $ 5,913
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Net Change in Unearned Loan Fees. . . . . . . . 28 26
Net Change in Other Assets and Other Liabilities 1,077 (388)
Loss on Sale of Securities. . . . . . . . . . . 7 162
(Increase)/Decrease in Deferred Tax Benefit . . (333) 1,499
(Gain)/Loss on Sale / Write-Down of
Other Real Estate . . . . . . . . . . . . . . (40) 903
Loss on Disposition of Assets . . . . . . . . . 10 -
Depreciation. . . . . . . . . . . . . . . . . . 1,139 1,195
Provision for Loan Losses . . . . . . . . . . . 1,080 1,440
Amortization of Premiums & Accretion of
Discounts on Securities, Net. . . . . . 308 91
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Net Cash Provided By Operating Activities. . 10,868 10,841
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Cash Flows From Investing Activities:
Proceeds From:
Sales of Securities Available for Sale. . . . . 6,737 8,404
Maturities of Securities Available for Sale . . 43,520 32,240
Maturities of Securities Held to Maturity . . . 6,684 10,509
Purchases of Securities Available for Sale. . . . (24,162) (36,256)
Purchases of Securities Held to Maturity. . . . . (4,997) (9,601)
Proceeds From Sales of Loans. . . . . . . . . . . 2,713 18,031
Net Increase in Loans . . . . . . . . . . . . . . (57,094) (18,918)
Change in Check Overdraft Receivables . . . . . . 361 191
Proceeds From Sales of Other Real Estate. . . . . 2,844 7,335
Proceeds From Sale of Fixed Assets. . . . . . . . 154 -
Capital Expenditures. . . . . . . . . . . . . . . (604) (1,157)
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Net Cash (Used)/Provided By
Investing Activities . . . . . . . . . . . (23,844) 10,778
------ -------
Cash Flows From Financing Activities:
Net Increase in Deposits. . . . . . . . . . . . . 36,992 12,040
Net Decrease in Short-Term Borrowings . . . . . . (79) (813)
Payments on Long Term Debt. . . . . . . . . . . . (830) (61)
Proceeds From Issuance of Long-Term Debt. . . . . - 7,500
Proceeds From Issuance of Common Stock. . . . . . 127 176
(Continued)
7
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONTINUED
(DOLLARS IN THOUSANDS)
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 1995
(Unaudited)
-----------------
Payments for Purchase of Treasury Stock . . . . (3,128) (749)
Dividends Paid. . . . . . . . . . . . . . . . . (2,789) (1,419)
------ ------
Net Cash Provided By
Financing Activities . . . . . . . . . . 30,293 16,674
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Net Increase in Cash and Cash Equivalents . . . 17,317 38,293
Cash and Cash Equivalents at Beginning of Year. 43,621 34,592
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Cash and Cash Equivalents at End of Quarter . . $ 60,938 $ 72,885
======= =======
Supplemental Disclosure of Cash Flows:
Interest Paid . . . . . . . . . . . . . . . . . $ 21,256 $ 19,916
Taxes Paid. . . . . . . . . . . . . . . . . . . 4,808 3,367
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 $2,487,000 during the
nine months ended September 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 nine months ended September
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 $294,000 at September 30, 1996.
The adjustment to stockholders' equity for the unrealized loss was
$177,000, net of deferred income tax benefit of $117,000.
At September 30, 1995 securities available for sale had an unrealized
loss of $638,000. The adjustment to stockholders' equity net of deferred
income tax benefit of $256,000, was $382,000.
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
September 30, 1996, the results of operations for the three and nine
months ended September 30, 1996 and 1995 and cash flows for the nine
months ended September 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 September 30, 1996, and 1995,
takes into consideration a reduction to issued shares by Treasury Stock
held weighted by the number of days 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.
4. Stock Split
-----------
On August 15, 1996, the Company's Board of Directors approved a two-for-
one common stock split in the form of a 100% stock dividend paid during
September 1996. Accordingly, all share and per share data for 1995 and
1996 have been restated to reflect the stock split. The effect of the
transaction on the Consolidated statements of Financial Condition was to
increase Common Stock and reduce Retained Earnings by $16,056,000.
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 September 30, 1996 and the
related consolidated statements of income for the three-month and nine-
month periods ended September 30, 1996 and 1995, and the consolidated
statements of cash flows for the nine-month periods ended September 30,
1996 and 1995. These consolidated financial statements are the responsi-
bility 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 analytical proced-
ures 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 regard-
ing 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 accounting prin-
ciples.
We have previously audited, in accordance with generally accepted audit-
ing 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 stockholders'
equity, and cash flows for the year then ended (not presented herein);
and in our report dated January 26, 1996, we expressed an unqualified
opinion on those consolidated financial statement. In our opinion, the
information set forth in the accompanying consolidated statement of
financial condition as of December 31, 1995, is fairly presented, in all
material respects, in relation to the consolidated statement of financial
condition from which it has been derived.
/s/ KPMG PEAT MARWICK, LLP
Albany, New York
November 8, 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 OPERATION
-------------------------------
Net income for the three months ended September 30, 1996, was $2,694,000
or $.29 per share, compared to $2,050,000 or $.22 per share in 1995's
third quarter. For the nine month period, net income was $7,592,000, or
$.82 per share, compared to $5,913,000, or $.63 per share, in 1995.
Income for the third quarter was primarily affected by increased net
interest income and a net recovery from the disposal of OREO versus
significant "Bulk Sale" related writedowns in the same quarter of the
prior year. In the third quarter of 1995, the Bank consumated a bulk sale
(the "Bulk Sale") of certain performing and nonperforming loans and OREO
for approximately $13,250,000. These assets sold by the Bank carried a
book value of approximately $20,000,000 and the loan loss reserve was
reduced by approxmately $6,345,000. Tax benefits associated with the Bulk
Sale led to a lower tax provision of $201,000, similar benefits were not
available in 1996. Net income on a year to date basis has also been
positively affected by significantly lower FDIC premiums and loan loss
provisions through the first nine months of 1996.
In 1996, the annualized return on average assets for the nine months was
1.15%, compared to .94% for the first nine months last year. The annual-
ized return on average stockholders' equity, including the effect of FASB
115 "Accounting for Certain Investments in Debt and Equity Securities",
for the first nine months of 1996 was 12.1%, 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 September 30, 1996 was
$10,665,000, compared to $9,995,000 for the same period of 1995. This
represents an increase of $670,000 or 6.7%. The first nine months of 1996
reflect net interest income of $30,778,000, an increase of 3.4% as
compared to $29,762,000 for the same period last year. The increase in
net interest income in 1996's third quarter is attributed to both an
increase in average earning assets and an increase in the net interest
margin. The increase in the net interest margin is due to the fact that
interest rates on costing liabilities declined while rates on earning
assets rose slightly. The increase in rates on earning assets was a
11
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
result of a shift of invested dollars out of securities and Fed Funds and
into loans, and a one time recovery of unrecorded interest on a resolved
non-accrual loan of $246,000.
On a taxable equivalent basis, net interest income was $10,821,000 for
the quarter ended September 30, 1996 as compared to $10,291,000 for the
quarter ended September 30, 1995. This represents an increase of $530,000
or 5.2%. For the first nine months of 1996 taxable equivalent net
interest income increased 2.2% to $31,333,000 from the level reported for
the nine months ended September 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
$34,548,000, or 4.3%, in comparison to the same period in 1995. This
increase resulted primarily from higher levels of loans which increased
$42,197,000 on average. The increase in loans was primarily funded by
decreases in Fed Funds and higher average balances in interest bearing
deposits.
The income increase due to volume was somewhat offset by a lower net
interest margin. At 5.03% the margin for the first nine months of 1996 is
11 basis points lower than the same period of the prior year. The de-
crease in the margin is a result of rates on interest bearing liabilities
rising 9 basis points while rates on interest earning assets declined 3
basis points. The decrease in yields on earning assets is due to a rela-
tive shift in the loan portfolio from commercial loans to lower yielding
municipal and retail loans.
ALLOWANCE FOR LOAN LOSSES
-------------------------
The Company's allowance for loan losses at September 30, 1996, has in-
creased $567,000 to $12,682,000 from the December 31, 1995 balance. As a
percent of total loans, net of unearned income, the allowance was approx-
imately 2.0% at September 30, 1996. The allowance represents 210.4% of
total non-performing loans at quarter end. The provision for loan losses
for the quarter ended September 30, 1996 was $360,000 which equaled the
provision for the same period in 1995. For the nine months ended June 30,
1996 the provision totaled $1,080,000, compared to $1,440,000 a year
earlier. The reduced provision, from year earlier levels, reflects the
reduction of non-performing loans from the levels of the previous year.
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 ant-
icipated 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 probability 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 nonperforming loans
and other real estate.
9/30/96 12/31/95
------- --------
(Dollars In Thousands)
Non-Accrual $ 3,712 $ 4,571
Past Due 90 Days 2,181 1,203
Restructured 135 138
-------- --------
Total Non-Performing
Loans $ 6,028 $ 5,912
======== ========
Other Real Estate $ 1,292 $ 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 nine months ended September 30, 1996, is $4,794,000,
$107,000 more than the $4,687,000 recorded in the same period last year.
The Company recorded investment securities losses of $7,000 in 1996
versus losses of $162,000 in 1995, this reduced level of securities
losses contributed to the increase in other income. The largest source
of other income continues to be service charges. Other income for the
third quarter of 1996 was $1,582,000 up 2.1% from $1,550,000 in the third
quarter of 1995.
Other expense for the quarter ended September 30, 1996 was $7,687,000,
compared to $8,934,000 for the same quarter last year, a decrease of
$1,247,000 or 14.0%. The third quarter of 1995 included a net loss from
sales of other real estate owned of $ 904,000 and a one time charge of
$462,000 related to a reduction in force ("RIF") that was implemented at
the beginning of the fourth quarter of 1995. Although the third quarter
13
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
of 1996 also included one time events in both the salary and OREO line
items, the amounts involved do not approach the levels of the prior
year's quarter. Salary expense is down $124,000 from 1995 levels and OREO
writedowns and expenses are a net recovery of $66,000 for the third
quarter of 1996.
FDIC insurance was virtually nil for the quarters ended September 30,
1996 and 1995. As a result of legislation passed on September 30, 1996
recapitalizing the Savings Association Insurance Fund, this level of
deposit insurance premiums is expected to increase in 1997 to approx-
imately $25,000 per quarter. Data processing costs were $591,000 for the
third quarter, compared to $481,000 for the same period a year ago, an
increase of $110,000 or 22.9% and is due to increased outsourcing.
Effective September 1, 1996 the Company began to experience lower data
processing costs as a result of the renegotiation and extension of its
existing data processing contract.
INCOME TAX EXPENSE
------------------
Income tax expense for the three months ended September 30, 1996, was
$1,506,000 as compared to $201,000 for the three months ended September
30, 1995. The increase of $1,305,000 was largely a result of New York
State tax benefits resulting from the "Bulk Sale" taken in 1995 and a
$1,949,000 increase in net income before taxes. For the nine months ended
September 30, 1996 income tax expense was $4,235,000 compared to
$2,130,000 in 1995. The effective income tax rates for the nine months
ended September 30, 1996 and 1995 were 35.8% and 26.5%, respectively. The
increase in the effective tax rate is attributable to a lack of "Bulk
Sale" related tax benefits and lower relative levels of income derived
from tax exempt sources.
CAPITAL AND LIQUIDITY
---------------------
At September 30, 1996, stockholders' equity was $84,355,000 as compared
to $83,045,000 at December 31, 1995, an increase of 1,310,000 or 1.6%.
The increase in stockholders' equity is a result of the retention of
earnings of $4,803,000, stock issuance of $127,000 and a reduction of the
ESOP balance of $159,000. These were offset by treasury share purchases
of $3,128,000 and a change in the valuation of securities available for
sale, net of deferred tax benefit, of $651,000.
On July 18, 1996 the Company announced a stock repurchase program author-
izing purchases of an additional 4% of issued shares or approximately
386,000 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.
14
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
On August 15, 1996, the Company's Board of Directors approved a two-for-
one common stock split in the form of a 100% stock dividend paid during
September 1996. The effect of the transaction on the Consolidated state-
ments of Financial Condition was to increase Common Stock and reduce
Retained Earnings by $16,056,000.
The following table sets forth the Company's risk based capital ratios as
of September 30, 1996 and the regulatory guidelines for well capitalized
institutions.
Evergreen Well Capitalized
Risk-Based Bancorp, Inc. Regulatory
Ratios Sept. 30, 1996 Guidelines
---------- -------------- ----------------
Leverage Ratio 9.3 % 5.0 %
Tier 1 13.8 % 6.0 %
Total Capital 15.0 % 10.0 %
Average federal funds sold for the nine months ended September 30, 1996
were $13,970,000, as compared to $22,185,000 for the nine months ended
September 30, 1995. Net cash provided by operating activities was
$10,868,000 for the nine months ended September 30, 1996 as compared to
net cash provided of $10,841,000 for the nine months ended September 30,
1995. Largely due to increases in loan balances, net cash used by invest-
ing activities was $23,844,000 for the nine months ended September 30,
1996 as compared to net cash provided of $10,778,000 for the same period
last year. Net cash provided by financing activities was $30,293,000 for
the nine months of 1996 as compared to cash provided of $16,674,000 for
the nine months of 1995. The increase in cash provided by financing
activities resulted from a $24,952,000 net increase in cash inflows from
deposit accounts offset by a decrease in funds provided from long term
debt. The level of cash and cash equivalents was $60,938,000 at September
30, 1996 as compared to $72,885,000 at September 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 shareholders.
CAPITAL EXPENDITURES AND COMMITMENTS
------------------------------------
During the quarter ended September 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 will total approximately $2 million.
15
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
The Company currently expects to move one branch and open two additional
branches, all leased, in 1997. The capital expenditures for the 1997
branch expansion plans currently total approximately $1 million.
The Company is in the process of installing an imaging system and has
plans to upgrade teller platform systems and other computer systems
throughout the organization. Total investment in technology through the
end of 1997 is currently estimated to total approximately $1 million.
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, U.S. 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
September 30, 1996 VS September 30, 1995
INCREASE / (DECREASE) TOTAL
DUE TO CHANGE IN INCREASE/
VOLUME RATE (DECREASE)
--------------------- ----------
Interest Earned:
Loans
Taxable $ 1,349 $ (68) $ 1,281
Tax-Exempt 43 (95) (52)
Investment Securities
Taxable (38) (33) (71)
Tax-Exempt (270) 66 (204)
Federal Funds Sold (192) (37) (229)
Interest-Bearing Deposits (3) - (3)
------ ------ ------
Changes in Total Interest
Income 889 (167) 722
------ ------ ------
Less Interest Expense Incurred:
Regular Savings, NOW and MMDAs (49) (85) (134)
Time Deposits 437 (154) 283
Short-Term Borrowings (110) (25) (135)
Long Term Debt 184 (6) 178
Changes in Total Interest ------ ------ ------
Expense 462 (270) 192
------ ------ ------
Changes in Net Interest
Income $ 427 $ 103 $ 530
====== ====== ======
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 nine months ended
September 30, 1996 VS September 30, 1995
INCREASE / (DECREASE) TOTAL
DUE TO CHANGE IN INCREASE/
VOLUME RATE (DECREASE)
---------------------- ----------
Interest Earned:
Loans and Leases
Taxable $ 2,817 $ (190) $ 2,627
Tax-Exempt 109 (231) (122)
Investment Securities
Taxable 514 105 619
Tax-Exempt (679) 32 (647)
Federal Funds Sold (337) (101) (438)
Interest-Bearing Deposits (12) - (12)
------ ------ ------
Changes in Total Interest
Income 2,412 (385) 2,027
------ ------ ------
Less Interest Expense Incurred:
Regular Savings, NOW and MMDAs (141) (54) (195)
Time Deposits 1,203 74 1,277
Short-Term Borrowings (259) (90) (349)
Long Term Debt 602 29 631
------ ------ ------
Changes in Total Interest
Expense 1,405 (41) 1,364
------ ------ ------
Changes in Net Interest
Income $ 1,007 $ (344) $ 663
====== ====== ======
18
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
Average Balances For The Three Months Ended September 30, 1996
Interest Average
Average Income/ Yield/
Balance Expense Rate
Assets: ------- ------- -------
Loans
Taxable $625,871 $14,447 9.18%
Tax Exempt 15,876 297 7.44%
Securities
Taxable 174,732 2,911 6.63%
Tax Exempt 8,985 209 9.25%
Federal Funds Sold 13,305 178 5.32%
Interest Bearing Deposits
with Banks 96 1 4.14%
-------- -------
Total Earning Assets 838,865 18,043 8.56%
------- -----
Allowance for Loan
Losses (12,783)
Cash and Due from Banks 30,011
Other Non-Earning Assets 30,420
--------
Total Assets $886,513
========
Liabilities and
Stockholders' Equity:
Regular Savings, NOW
and MMDAs $341,791 2,381 2.77%
Time Deposits 325,913 4,408 5.38%
Short-Term Borrowings 3,762 50 5.29%
Long Term Debt 22,508 383 6.77%
-------- -------
Total Interest
Bearing Liabilities 693,974 7,222 4.14%
------- -----
Demand Deposits 96,778
Other Liabilities 11,304
Stockholders' Equity 84,457
Total Liabilities and --------
Stockholders' Equity $886,513
========
Net Interest Income (Tax
Equivalent Basis) 10,821
Tax Equivalent Adjustment (156)
-------
Net Interest Income $10,665
=======
Net Interest Rate Spread 4.42%
=====
Net Interest Margin 5.13%
=====
19
EVERGREEN BANCORP, INC.
Average Balances For The Three Months Ended September 30, 1995
Interest Average
Average Income/ Yield/
Balance Expense Rate
Assets: ------- ------- -------
Loans
Taxable $565,950 $13,166 9.23%
Tax Exempt 13,951 349 9.92%
Securities
Taxable 176,729 2,982 6.69%
Tax Exempt 21,045 413 7.79%
Federal Funds Sold 27,360 407 5.90%
Interest Bearing Deposits
with Banks 434 4 3.65%
-------- -------
Total Earning Assets 805,469 17,321 8.53%
------- -----
Allowance for Loan
Losses (17,789)
Cash and Due from Banks 29,235
Other Non-Earning Assets 37,478
--------
Total Assets $854,393
========
Liabilities and
Stockholders' Equity
Regular Savings, NOW
and MMDAs $348,300 2,515 2.86%
Time Deposits 293,325 4,125 5.58%
Short-Term Borrowings 11,782 185 6.23%
Long Term Debt 11,645 205 6.98%
-------- -------
Total Interest
Bearing Liabilities 665,052 7,030 4.19%
------- -----
Demand Deposits 98,205
Other Liabilities 10,041
Stockholders' Equity 81,095
--------
Total Liabilities and
Stockholders' Equity $854,393
========
Net Interest Income (Tax
Equivalent Basis) 10,291
Tax Equivalent Adjustment (296)
-------
Net Interest Income $ 9,995
=======
Net Interest Rate Spread 4.34%
=====
Net Interest Margin 5.07%
=====
20
EVERGREEN BANCORP, INC.
Average Balances For The Nine Months Ended September 30, 1996
Interest Average
Average Income/ Yield/
Balance Expense Rate
Assets: ------- ------- -------
Loans
Taxable $606,580 $41,572 9.15%
Tax Exempt 15,559 905 7.77%
Securities
Taxable 184,196 9,055 6.57%
Tax Exempt 11,676 844 9.66%
Federal Funds Sold 13,970 558 5.34%
Interest Bearing Deposits
with Banks 88 3 4.55%
-------- -------
Total Earning Assets 832,069 52,937 8.50%
------- -----
Allowance for Loan
Losses (12,471)
Cash and Due from Banks 29,692
Other Non-Earning Assets 31,425
--------
Total Assets $880,715
========
Liabilities and
Stockholders' Equity:
Regular Savings, NOW
and MMDAs $340,345 7,056 2.77%
Time Deposits 324,365 13,216 5.44%
Short-Term Borrowings 3,689 142 5.14%
Long Term Debt 22,879 1,190 6.95%
-------- -------
Total Interest
Bearing Liabilities 691,278 21,604 4.17%
------- -----
Demand Deposits 93,810
Other Liabilities 12,011
Stockholders' Equity 83,616
--------
Total Liabilities and
Stockholders' Equity $880,715
========
Net Interest Income (Tax
Equivalent Basis) 31,333
Tax Equivalent Adjustment (555)
-------
Net Interest Income $30,778
=======
Net Interest Rate Spread 4.33%
=====
Net Interest Margin 5.03%
=====
21
EVERGREEN BANCORP, INC.
Average Balances For The Nine Months Ended September 30, 1995
Interest Average
Average Income/ Yield/
Balance Expense Rate
Assets: ------- ------- -------
Loans
Taxable $565,977 $38,945 9.20%
Tax Exempt 13,965 1,027 9.83%
Securities
Taxable 173,843 8,436 6.49%
Tax Exempt 21,101 1,491 9.45%
Federal Funds Sold 22,185 996 6.00%
Interest Bearing Deposits
with Banks 450 15 4.46%
-------- -------
Total Earning Assets 797,521 50,910 8.53%
-------- ------- -----
Allowance for Loan
Losses (18,309)
Cash and Due from Banks 28,148
Other Non-Earning Assets 38,788
--------
Total Assets $846,148
========
Liabilities and
Stockholders' Equity
Regular Savings, NOW
and MMDAs $347,337 7,251 2.79%
Time Deposits 295,084 11,939 5.41%
Short-Term Borrowings 9,979 491 6.58%
Long Term Debt 11,293 559 6.62%
-------- -------
Total Interest
Bearing Liabilities 663,693 20,240 4.08%
------- -----
Demand Deposits 92,589
Other Liabilities 10,080
Stockholders' Equity 79,786
--------
Total Liabilities and
Stockholders' Equity $846,148
========
Net Interest Income (Tax
Equivalent Basis) 30,670
Tax Equivalent Adjustment (908)
-------
Net Interest Income $29,762
=======
Net Interest Rate Spread 4.45%
=====
Net Interest Margin 5.14%
=====
21
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.
November 13, 1996 /s/ George W. Dougan
----------------- --------------------
Date George W. Dougan
President & Chief Executive Officer
(Principal Executive Officer)
November 13, 1996 /s/ George L. Fredette
----------------- ----------------------
Date George L. Fredette
Senior Vice President, Treasurer
(Principal Financial Officer)
22
Exhibit 11 - Earnings Per Share
EVERGREEN BANCORP, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(Dollars in Thousands, Except Per Share Amount)
Nine Months Ended September 30,
___________________________________
1996 1995
____________ ____________
Net Income Per Common Share:
Weighted Average Common Shares
Outstanding 9,257,000 9,449,000
========== ==========
Net Income $ 7,592 $ 5,913
========== ==========
Net Income Per Common Share $ .82 $ .63
========== ==========
Net Income Per Common Share - Primary:
Weighted Average Common Shares
Outstanding 9,257,000 9,449,000
Common Stock Equivalents - Primary 124,000 71,000
---------- ----------
Weighted Average Common Shares and
Common Share Equivalents Outstanding 9,381,000 9,520,000
========== ==========
Net Income $ 7,592 $ 5,913
========== ==========
Net Income Per Common Share $ .81 $ .62
========== ==========
Net Income Per Common Share - Fully Diluted:
Weighted Average Common Shares
Outstanding 9,257,000 9,449,000
Common Stock Equivalents - Fully Diluted 175,000 127,000
---------- ----------
Weighted Average Common Shares and
Common Share Equivalents Outstanding 9,432,000 9,576,000
========== ==========
Net Income $ 7,592 $ 5,913
========== ==========
Net Income Per Common Share $ .80 $ .62
========== ==========
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
<ARTICLE> 9
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 36,704
<INT-BEARING-DEPOSITS> 234
<FED-FUNDS-SOLD> 24,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 163,321
<INVESTMENTS-CARRYING> 21,411
<INVESTMENTS-MARKET> 22,199
<LOANS> 645,365
<ALLOWANCE> 12,682
<TOTAL-ASSETS> 909,104
<DEPOSITS> 787,216
<SHORT-TERM> 3,181
<LIABILITIES-OTHER> 11,866
<LONG-TERM> 22,486
<COMMON> 32,113
0
0
<OTHER-SE> 52,242
<TOTAL-LIABILITIES-AND-EQUITY> 909,104
<INTEREST-LOAN> 42,211
<INTEREST-INVEST> 9,610
<INTEREST-OTHER> 561
<INTEREST-TOTAL> 52,382
<INTEREST-DEPOSIT> 20,272
<INTEREST-EXPENSE> 21,604
<INTEREST-INCOME-NET> 30,778
<LOAN-LOSSES> 1,080
<SECURITIES-GAINS> (7)
<EXPENSE-OTHER> 22,665
<INCOME-PRETAX> 11,827
<INCOME-PRE-EXTRAORDINARY> 11,827
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,592
<EPS-PRIMARY> .81
<EPS-DILUTED> .80
<YIELD-ACTUAL> 5.03
<LOANS-NON> 3,712
<LOANS-PAST> 2,181
<LOANS-TROUBLED> 135
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,115
<CHARGE-OFFS> 1,004
<RECOVERIES> 491
<ALLOWANCE-CLOSE> 12,682
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 12,682
</TABLE>
