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, 1997
Commission File Number 0-10275
EVERGREEN BANCORP, INC.
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(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 July 31, 1997
------------------- -------------------
$3.33 1/3 Par Value 8,973,153
EVERGREEN BANCORP, INC. AND SUBSIDIARIES
INDEX
Page No.
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PART I FINANCIAL INFORMATION
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Item 1 Financial Statements (unaudited):
Consolidated Statements of Income for the Three
Months Ended June 30, 1997, and 1996 1-2
Consolidated Statements of Income for the Six
Months Ended June 30, 1997, and 1996 3-4
Consolidated Statements of Financial Condition
as of June 30, 1997, and December 31, 1996 5-6
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996 7-8
Notes to Consolidated Interim 9-10
Financial Statements
Report of Independent Auditors 11
Item 2 Management's Discussion and Analysis 12-23
PART II OTHER INFORMATION
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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 -
Annual meeting of Shareholders, See Attached Item 4 -
Matters
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,
1997 1996
(Unaudited)
Interest Income:
Interest and Fees on Loans $14,484 $13,936
Interest on U.S. Government & Agency Obligations 3,769 2,770
Interest on State & Municipal Obligations 219 306
Interest on Other Bonds, Notes, & Debentures 113 111
Interest on Federal Funds Sold & Bank Deposits 475 173
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Total Interest Income 19,060 17,296
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Interest Expense:
Interest on Deposits:
Regular Savings, Interest Checking and Money
Market Deposit Accounts 2,431 2,330
Other Time 5,664 4,348
Interest on Short-Term Borrowings 62 49
Interest on Long-Term Debt 421 389
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Total Interest Expense 8,578 7,116
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Net Interest Income 10,482 10,180
Provision for Loan Losses 450 360
------- -------
Net Interest Income After Provision for
Loan Losses 10,032 9,820
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Other Income:
Trust Department Income 640 654
Service Charges on Deposit Accounts 695 712
Net Gain/(Loss) on Security Transactions 9 (17)
Other 313 288
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Total Other Income 1,657 1,637
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(Continued)
- 1 -
CONSOLIDATED STATEMENTS OF INCOME
CONTINUED
(Dollars in Thousands)
(Except Per Share Data)
Three Months
Ended June 30,
1997 1996
(Unaudited)
Other Expense:
Salaries and Employee Benefits 4,019 3,961
Net Occupancy Expense 587 460
Equipment Expense 462 451
Professional Services 254 258
Data Processing 595 630
Supplies and Printing 207 204
Advertising 347 201
Postage 134 121
OREO Writedowns and Expenses 90 276
Other 1,028 1,041
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Total Other Expense 7,723 7,603
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Income Before Taxes 3,966 3,854
Applicable Income Taxes 1,294 1,335
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Net Income $ 2,672 $ 2,519
======= =======
Earnings Per Common Share:
Average Shares Outstanding 9,010,000 9,253,000
Net Income Per Share $ .30 $ .27
======= ========
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,
1997 1996
(Unaudited)
Interest Income:
Interest and Fees on Loans $29,082 $27,554
Interest on U.S. Government & Agency Obligations 6,797 5,686
Interest on State & Municipal Obligations 423 636
Interest on Other Bonds, Notes, & Debentures 216 237
Interest on Federal Funds Sold & Bank Deposits 843 382
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Total Interest Income 37,361 34,495
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Interest Expense:
Interest on Deposits:
Regular Savings, Interest Checking and Money
Market Deposit Accounts 4,840 4,675
Other Time 10,733 8,808
Interest on Short-Term Borrowings 113 92
Interest on Long-Term Debt 812 807
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Total Interest Expense 16,498 14,382
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Net Interest Income 20,863 20,113
Provision for Loan Losses 810 720
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Net Interest Income After Provision for
Loan Losses 20,053 19,393
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Other Income:
Trust Department Income 1,297 1,203
Service Charges on Deposit Accounts 1,336 1,410
Net Gain/(Loss) on Security Transactions 9 (17)
Other 721 616
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Total Other Income 3,363 3,212
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(Continued)
- 3 -
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
CONTINUED
(Dollars in Thousands)
(Except Per Share Data)
Six Months
Ended June 30,
1997 1996
(Unaudited)
Other Expenses:
Salaries and Employee Benefits 8,062 7,781
Net Occupancy Expense 1,172 1,008
Equipment Expense 958 937
Professional Services 554 537
Data Processing 1,175 1,253
Supplies and Printing 419 417
Advertising 610 420
Postage 282 275
OREO Writedowns and Expenses 141 393
Other 2,044 1,957
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Total Other Expenses 15,417 14,978
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Income Before Taxes 7,999 7,627
Applicable Income Taxes 2,645 2,729
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Net Income $ 5,354 $ 4,898
======= =======
Earnings Per Common Share:
Average Shares Outstanding 9,047,000 9,287,000
Net Income Per Share $ .59 $ .53
======= =======
See accompanying notes to consolidated interim financial statements.
- 4 -
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands)
6/30/97 12/31/96
(Unaudited)
Assets:
Cash and Cash Equivalents:
Cash and Due From Banks $ 32,163 $ 33,430
Federal Funds Sold 5,800 22,700
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Total Cash and Cash Equivalents 37,963 56,130
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Securities:
Securities Available For Sale (Amortized
cost of $222,045 and $177,099 at 6/30/97
and 12/31/96, respectively) 222,397 177,140
Securities Held to Maturity (fair value
of $40,907 and $21,016 at 6/30/97
and 12/31/96, respectively) 39,982 20,028
-------- --------
Total Securities 262,379 197,168
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Loans:
Commercial 230,904 225,420
Mortgage 294,218 283,664
Installment 136,183 149,745
Other 185 324
-------- --------
Total Loans 661,490 659,153
Less:
Allowance for Loan Losses (12,811) (12,393)
Unearned Income on Loans (2,379) (4,265)
-------- --------
Loans, Net 646,300 642,495
-------- --------
Bank Premises and Equipment, net 16,350 15,278
Other Real Estate Owned 1,794 1,476
Other Assets 17,448 16,102
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Total Assets $982,234 $928,649
======== ========
(Continued)
- 5 -
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
CONTINUED
(Dollars in Thousands)
6/30/97 12/31/96
(Unaudited)
Liabilities:
Deposits:
Demand $ 93,559 $ 92,737
Regular Savings, Interest Checking and
Money Market Deposit Accounts 349,165 350,762
Certificates of Deposit over $100,000 93,480 79,808
Other Time 312,402 277,549
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Total Deposits 848,606 800,856
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Federal Funds Purchased and Other Short
Term Borrowings 6,806 3,846
Accrued Taxes and Other Liabilities 14,802 12,270
Long-Term Debt 25,844 26,238
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Total Liabilities 896,058 843,210
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Stockholders' Equity:
Common Stock $3.33 1/3 Par Value: Authorized-
20,000,000; Shares Issued 9,633,966 at June 30,
1997 and December 31, 1996 32,113 32,113
Surplus 6,787 6,787
Undivided Profits 55,980 53,149
Market Over Cost of Securities
Available For Sale, Net of Deferred Tax 211 24
Treasury Stock (661,383 shares at June 30, 1997
and 514,158 shares at December 31, 1996) (8,275) (5,826)
Common Stock Subscribed by ESOP (640) (808)
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Total Stockholders' Equity 86,176 85,439
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Total Liabilities and Stockholders' Equity $982,234 $928,649
======== ========
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, 1997 1996
------ ------
Cash Flows from Operating Activities:
Net Income. . . . . . . . . . . . . . . . . . . $ 5,354 $ 4,898
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Net Change in Unearned Loan Fees. . . . . . . 29 24
Net Change in Other Assets and Liabilities. . 1,643 182
(Gain)/Loss on Sale of Securities & OREO. . . (12) 17
Increase in Deferred Tax Benefit. . . . . . . (581) (293)
Loss on Write-Down of Other Real Estate . . . - 99
Gain on Disposition of Assets . . . . . . . . - (7)
Depreciation. . . . . . . . . . . . . . . . . 873 765
Provision for Loan Losses . . . . . . . . . . 810 720
Amortization of Premiums & Accretion of
Discounts on Securities, Net. . . . . 248 195
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Net Cash Provided By Operating Activities. 8,364 6,600
------ ------
Cash Flows From Investing Activities:
Proceeds From:
Sales of Securities Available for Sale. . . . 532 2,811
Maturities of Securities Available for Sale . 27,095 32,406
Maturities of Securities Held to Maturity . . 1,928 4,544
Purchases of Securities Available for Sale. . . (72,791) (10,116)
Purchases of Securities Held to Maturity. . . . (21,903) (2,996)
Proceeds From Sales of Loans. . . . . . . . . . 375 841
Change in Credit Card and
Check Overdraft Receivables . . . . . . . . . (123) 348
Proceeds From Sales of Other Real Estate. . . . 246 235
Net Increase in Loans . . . . . . . . . . . . . (5,457) (44,886)
Capital Expenditures. . . . . . . . . . . . . . (1,945) (292)
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Net Cash Used By
Investing Activities . . . . . . . . . . (72,043) (17,105)
------ ------
Cash Flows From Financing Activities:
Net Increase/(Decrease) in Deposits . . . . . . 47,750 (9,671)
Net Increase in Short-Term Borrowings . . . . . 2,960 11,737
Payments on Long Term Debt. . . . . . . . . . . (226) (768)
Proceeds From Issuance of Common Stock. . . . . - 127
Proceeds From Sale of Treasury Stock. . . . . . 307 -
(Continued)
- 7 -
EVERGREEN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONTINUED
(Dollars in Thousands)
The Six Months Ended June 30, 1997 1996
(Unaudited)
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Payments for Purchase of Treasury Stock. . . . (2,918) (2,271)
Dividends Paid . . . . . . . . . . . . . . . . (2,361) (1,867)
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Net Cash Provided/(Used) By
Financing Activities. . . . . . . . . . 45,512 (2,713)
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Net Decrease in Cash and
Cash Equivalents . . . . . . . . . . . . . . (18,167) (13,218)
Cash and Cash Equivalents at Beginning of Year 56,130 43,621
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Cash and Cash Equivalents at End of Quarter. . $ 37,963 $ 30,403
======= =======
Supplemental Disclosure of Cash Flows:
Interest Paid. . . . . . . . . . . . . . . . . $ 16,204 $ 14,303
Taxes Paid . . . . . . . . . . . . . . . . . . 662 2,964
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 $561,000 and $312,000
during the six months ended June 30, 1997 and 1996, 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 $168,000 and $159,000 during the six months
ended June 30, 1997 and 1996, 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 gain on these securities was $352,000 at June
30, 1997. The adjustment to stockholders' equity for the unrealized
gain was $211,000, net of deferred income tax expense of $141,000.
At June 30, 1996, securities available for sale had an unrealized
loss of $843,000. The adjustment to stockholders equity net of
deferred income tax benefit of $337,000, was $506,000.
See accompanying notes to consolidated interim financial statements.
- 8 -
EVERGREEN BANCORP, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Financial Statement Presentation
--------------------------------
The accompanying interim 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 consoli-
dated 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 finan-
cial position as of June 30, 1997, the results of operations for the
three and six months ended June 30, 1997 and 1996 and cash flows for the
six months ended June 30, 1997 and 1996. 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. 1996 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, 1997, and 1996,
takes into consideration a reduction to issued shares by Treasury Stock
held, weighted by the number of days in the quarter such stock is held.
Earnings per share for the quarter and six months ended June 30, 1996
have been adjusted for the September 1996 stock split effected in the
form of a 100% stock dividend.
In February 1997, the Financial Accounting Standards Board issued State-
ment of Financial Accounting Standards No. 128, "Earnings per Share"
(Statement 128), which establishes standards for computing and presenting
earnings per share (EPS). This statement simplifies the standards for
computing EPS making them comparable to international EPS standards and
supersedes Accounting Principles Board Opinion No. 15, "Earnings per
Share" and related interpretations. Statement 128 replaces the present-
ation of primary EPS with the presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computa-
tion to the numerator and denominator of the diluted EPS computation.
Basic EPS excludes dilution (such as the effect of the Company's out-
- 9 -
EVERGREEN BANCORP, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Continued)
standing stock options) and is computed by dividing income available to
common stockholders by the weighted-average number of common shares out-
standing for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of
common stock that then shared in earnings of the entity (such as the
Company's stock options). This statement is effective for financial
statements issued for periods ending after December 15, 1997, including
interim periods. Earlier application is not permitted. This Statement
requires restatement of all prior period EPS data presented.
The Company will present its EPS information in accordance with Statement
128 as of December 31, 1997. Management anticipates that the effect of
the adoption of this Statement will not have a material effect on the
Company's consolidated financial statements.
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. Recent Accounting Pronouncements
--------------------------------
In June of 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, (Statement 130),
which establishes standards for reporting and display of comprehensive
income and its components in financial statements. Statement 130 states
that comprehensive income includes reported net income of a company,
adjusted for items that are currently accounted for as direct entries to
equity, such as the net unrealized gain or loss on securities available
for sale, foreign currency items, and minimum pension liability adjust-
ments. This Statement is effective for both interim and annual periods
beginning after December 15, 1997. The Company will adopt Statement 130
in the first quarter of 1998.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Inform-
ation" (Statement 131), which establishes standards for reporting by
public companies about operating segments of their business. Statement
131 also establishes standards for related disclosures about products and
services, geographic areas, and major customers. This Statement is effec-
tive for fiscal years beginning after December 15, 1997 and is not anti-
cipated to have a material effect on the Company's financial statements.
- 10 -
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, 1997 and the
related consolidated statements of income for the three-month and
six-month periods ended June 30, 1997 and 1996, and the consolidated
statements of cash flows for the six-month periods ended June 30,
1997 and 1996. 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, 1996,
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 24, 1997, 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, 1996, 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 11, 1997
- 11 -
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.
When used in this quarterly Report on Form 10-Q, the words or phrases
"will likely result," "are expected to," "will continue," "is anticip-
ated," "estimate," "project" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject
to certain risks and uncertainties including, changes in economic con-
ditions in the Company's market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in the
Company's market area and competition, that could cause actual results
to differ materially from historical earnings and those presently anti-
cipated or projected. The Company cautions readers not to place undue
reliance on any such forward-looking statements, which speak only as of
the date made. The factors listed above could affect the Company's
financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements
expressed with respect to future periods in any current statements.
The Company does not undertake, and specifically disclaims, any obli-
gation to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect events or circum-
stances after the date of such events or to reflect the occurance of
anticipated or unanticipated events.
SUMMARY OF RESULTS OF OPERATIONS
--------------------------------
Net income for the three months ended June 30, 1997, was $2,672,000
as compared to $2,519,000 in the same quarter last year. This
represents an increase of $153,000. For the six months ended June 30,
1997 net income was $5,354,000 compared to $4,898,000 in 1996. Net
income per share for the quarter ended June 30, 1997, was $.30,
compared to $.27 for the June 30, 1996 quarter. For the three and six
month periods, the primary reasons for the increases in net income were
increases in net interest income and a lower effective tax rate.
In 1997, the annualized return on average assets for the six months
ended June 30, was 1.13%, compared to 1.12% for the first six months
last year. The annualized return on average stockholders' equity for
- 12 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
the first six months of 1997 was 12.6%, compared to 11.8% for the same
period in 1996. 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, 1997 was
$10,482,000, compared to $10,180,000 for the same period of 1996. This
represents an increase of $302,000, or 3.0%. The first six months of
1997 reflects net interest income of $20,863,000, an increase of 3.7%
as compared to $20,113,000 for the same period last year. The increase
in net interest income in 1997'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 $10,611,000
for the quarter ended June 30, 1997 as compared to $10,374,000 for the
quarter ended June 30, 1996. This represents an increase of $237,000,
or 2.3%. For the first six months of 1997 taxable equivalent net
interest income increased 2.9% to $21,108,000 from $20,512,000 for the
six months ended June 30, 1996. 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
$77.8 million, or 9.4%, in comparison to the same period in 1996. Loans
increased $42.8 million, securities increased $18.2 million and Fed
Funds sold increased $16.8 million on average. The income increase due
to volume was partially offset by a lower net interest margain. At
4.70% the margin for the first six months of 1997 was 28 basis points
lower than the same period of the prior year. The decrease in the
margin was primarily attributed to promotions for time deposits at the
Company's new branches leading to somewhat higher rates on deposits, and
slightly lower yields on earning assets because of lower yielding retail
loans.
The increases in average earning assets were funded by an increase in
average interest bearing liabilities of $75.2 million. Average interest
bearing liabilty increases were concentrated in time deposits, which
increased $64.4 million.
ALLOWANCE FOR LOAN LOSSES
-------------------------
The Company's allowance for loan losses at June 30, 1997, has increased
$418,000 to $12,811,000 from the December 31, 1996 balance. As a per-
cent of total loans, net of unearned income, the allowance was approx-
- 13 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
imately 1.9% at June 30, 1997. The allowance represents approximately
226.1% of total nonperforming loans at quarter end. The provision for
loan losses for the quarter ended June 30, 1996 was $450,000 compared
to $360,000 for the same period in 1996. For the six months ended June
30, 1997 the provision totaled $810,000, compared to $720,000 a year
earlier. The increased provision, from year earlier levels, reflects
the significant loan growth incurred over the last year notwithstanding
a decline in the level of nonperforming loans from the level of the
same period 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
anticipated economic conditions, peer group statistics and other
pertinent factors.
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 nonperforming
loans and other real estate.
6/30/97 12/31/96
------- --------
(Dollars In Thousands)
Non-Accrual $ 4,323 $ 3,792
Past Due 90 Days 1,214 1,414
Restructured 130 133
-------- --------
Total Nonperforming
Loans $ 5,667 $ 5,339
======== ========
Other Real Estate $ 1,794 $ 1,476
======== ========
The majority of the Company's nonperforming loans consist of commercial
and commercial real estate loans. There is no distinct concentration as
to type of borrower within these classifications.
- 14 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
OTHER INCOME AND EXPENSE
------------------------
Other income for the six months ended June 30, 1997, was $3,363,000,
$151,000 more than the $3,212,000 recorded in the same period last
year. Increases in other income included a $94,000 increase in Trust
Department income over prior year levels and an increase in other
income of $105,000. The largest source of other income continues to be
service charges, which declined $74,000 from prior year levels. During
the second quarter of 1997 steps were taken to reverse the decline in
service charges. As a result, service charge income in the third
quarter is expected to increase to at least the prior year levels.
Other expense for the three months ended June 30, 1997 was $7,723,000,
compared to $7,603,000 for the same quarter last year, an increase of
$120,000, or 1.6%. Salaries and employee benefits expense, the largest
component of other operating expense, increased $58,000 to $4,019,000
for the three months ended June 30, 1997, from $3,961,000 during the
same period of 1996. The principal cause of increased salaries is the
addition of three new branches since December of 1996.
Advertising expense increased to $146,000 to $347,000 as compared to
$201,000 for the same quarter last year. This increased expenditure was
in support of the Company opening one branch and moving another during
the quarter. Advertising expenses are expected to decrease to more
traditional levels over the remainder of the year as no additional
branch expansion is scheduled. Net occupancy expense increased $127,000
to $587,000 as compared to $460,000 for the same period of the prior
year. This is again, primarily, a result of the branch expansion. Al-
though the increase includes certain one time expenses that may not be
repeated, occupancy expenses are projected to remain above prior year
levels. OREO expenses decreased $186,000 from the second quarter of
1996 as that quarter included a one time charge incurred to rehabil-
atate a property to salable condition.
INCOME TAX EXPENSE
------------------
Income tax expense for the three months ended June 30, 1997, was
$1,294,000 as compared to $1,335,000 for the quarter ended June 30,
1996. For the six months ended June 30, 1997, income tax expense was
$2,645,000 compared to $2,729,000 in 1996. The effective income tax
rate for the periods ended June 30, 1997 and 1996 were 33.1% and 35.8%,
respectively. The decrease in the effective tax rate is attributable to
somewhat lower State income taxes.
- 15 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
CAPITAL AND LIQUIDITY
---------------------
At June 30, 1997, stockholders' equity was $86,176,000 as compared to
$85,439,000 at December 31, 1996, an increase of $737,000, or .9%. The
increase in stockholders' equity is a result of the retention of
earnings of $2,993,000, treasury stock sales of $307,000, a reduction
of the ESOP balance of $168,000, and a change in the market valuation
of securities available for sale, net of deferred tax expense, of
$187,000. These were offset by treasury stock purchases of $2,918,000.
The following table sets forth the Company's risk based capital ratios
as of June 30, 1997 and the regulatory guidelines for well capitalized
institutions.
Evergreen Well Capitalized
Risk-Based Bancorp, Inc. Regulatory
Ratios June 30, 1997 Guidelines
---------- ------------- ----------------
Leverage Ratio 8.7 % 5.0 %
Tier 1 13.6 % 6.0 %
Total Capital 14.9 % 10.0 %
Average federal funds sold for the six months ended June 30, 1997 was
$31,112,000, as compared to $14,308,000 for the six months ended
June 30, 1996. Net cash provided by operating activities was $8,364,000
for the six months ended June 30, 1997 as compared to net cash provided
of $6,600,000 for the six months ended June 30, 1996. Largely due to
increases in secuities balances, net cash used by investing activities
was $72,043,000 for the six months ended June 30, 1997 as compared to
net cash used of $17,105,000 for the same period last year. Net cash
provided by financing activities was $45,512,000 for the six months of
1997 as compared to cash used of $2,713,000 for the six months of 1996.
The increase in cash provided by financing activities resulted prim-
arily from a $57,421,000 net increase in cash inflows from deposit
accounts. The level of cash and cash equivalents was $37,963,000 at
June 30, 1997 as compared to $30,403,000 at June 30, 1996.
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.
- 16 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUED
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 1997 and 1996 along with a marginal
State income tax rate of 9.0% for 1997 and 9.225% for 1996.
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.
- 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 three months ended
June 30, 1997 VS June 30, 1996
INCREASE / (DECREASE) TOTAL
DUE TO CHANGE IN INCREASE/
VOLUME RATE (DECREASE)
--------------------- ----------
Interest Earned:
Loans
Taxable $ 808 $ (218) $ 590
Tax-Exempt (53) (8) (61)
Investment Securities
Taxable 806 169 975
Tax-Exempt (69) (38) (107)
Federal Funds Sold &
Interest-Bearing Deposits 294 8 302
------ ------ ------
Changes in Total Interest
Income 1,786 (87) 1,699
------ ------ ------
Less Interest Expense Incurred:
Regular Savings, NOW and MMDAs 68 33 101
Time Deposits 1,101 215 1,316
Short-Term Borrowings 13 - 13
Long Term Debt 50 (18) 32
------ ------ ------
Changes in Total Interest
Expense 1,232 230 1,462
------ ------ ------
Changes in Net Interest
Income $ 554 $ (317) $ 237
====== ====== ======
- 18 -
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, 1997 VS June 30, 1996
INCREASE / (DECREASE) TOTAL
DUE TO CHANGE IN INCREASE/
VOLUME RATE (DECREASE)
--------------------- ----------
Interest Earned:
Loans and Leases
Taxable $2,002 $ (370) $1,632
Tax-Exempt (125) (29) (154)
Investment Securities
Taxable 755 283 1,038
Tax-Exempt (213) (52) (265)
Federal Funds Sold &
Interest-Bearing Deposits 453 8 461
------ ------ ------
Changes in Total Interest
Income 2,872 (160) 2,712
------ ------ ------
Less Interest Expense Incurred:
Regular Savings, NOW and MMDAs 91 74 165
Time Deposits 1,757 168 1,925
Short-Term Borrowings 20 1 21
Long Term Debt 93 (88) 5
Changes in Total Interest ------ ------ ------
Expense 1,961 155 2,116
------ ------ ------
Changes in Net Interest
Income $ 911 $ (315) $ 596
======= ====== ======
- 19 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
Average Balances Three Months Ended June 30, 1997
Interest Average
Average Income/ Yield/
Balance Expense Rate
Assets: ------- ------- -------
Loans
Taxable $642,039 $14,313 8.94%
Tax Exempt 12,659 240 7.60%
Securities
Taxable 232,107 3,962 6.85%
Tax Exempt 9,405 199 8.49%
Federal Funds Sold &
Interest Bearing Deposits 34,683 475 5.49%
-------- -------
Total Earning Assets 930,893 19,189 8.27%
-------
Allowance for Loan
Losses (12,866)
Cash and Due from Banks 23,881
Other Non-Earning Assets 33,957
--------
Total Assets $975,865
========
Liabilities and
Stockholders' Equity:
Regular Savings, NOW
and MMDAs $348,527 2,431 2.80%
Time Deposits 405,658 5,664 5.60%
Short-Term Borrowings 4,918 62 5.06%
Long Term Debt 25,866 421 6.53%
-------- -------
Total Interest
Bearing Liabilities 784,969 8,578 4.38%
------- -----
Demand Deposits 91,061
Other Liabilities 14,182
Stockholders' Equity 85,653
Total Liabilities and --------
Stockholders' Equity $975,865
========
Net Interest Income (Tax
Equivalent Basis) 10,611
Tax Equivalent Adjustment (129)
-------
Net Interest Income $10,482
=======
Net Interest Rate Spread 3.89%
=====
Net Interest Margin 4.57%
=====
- 20 -
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 &
Interest Bearing Deposits 13,221 173 5.26%
-------- -------
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%
=====
- 21 -
EVERGREEN BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
Average Balances Six Months Ended June 30, 1997
Interest Average
Average Income/ Yield/
Balance Expense Rate
Assets: ------- ------- -------
Loans
Taxable $642,904 $28,757 9.02%
Tax Exempt 12,132 454 7.55%
Securities
Taxable 211,889 7,182 6.84%
Tax Exempt 8,353 370 8.93%
Federal Funds Sold &
Interest Bearing Deposits 31,190 843 5.45
-------- -------
Total Earning Assets 906,468 37,606 8.37%
------- -----
Allowance for Loan
Losses (12,697)
Cash and Due from Banks 26,840
Other Non-Earning Assets 33,359
--------
Total Assets $953,970
========
Liabilities and
Stockholders' Equity:
Regular Savings, NOW
and MMDAs $346,680 4,840 2.82%
Time Deposits 388,003 10,733 5.58%
Short-Term Borrowings 4,464 113 5.10%
Long Term Debt 25,925 812 6.32%
-------- -------
Total Interest
Bearing Liabilities 765,072 16,498 4.35%
------- -----
Demand Deposits 89,917
Other Liabilities 13,399
Stockholders' Equity 85,582
Total Liabilities and --------
Stockholders' Equity $953,970
========
Net Interest Income (Tax
Equivalent Basis) 21,108
Tax Equivalent Adjustment (245)
-------
Net Interest Income $20,863
=======
Net Interest Rate Spread 4.02%
=====
Net Interest Margin 4.70%
=====
- 22 -
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 &
Interest Bearing Deposits 14,391 382 5.34%
-------- -------
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%
=====
- 23 -
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders was held on May 8, 1997 to consider
the following matters;
Stockholders of the Company were asked to consider the Company's nominees
for director and to elect directors, each to serve for a term of three
years. The Company's nominees for director were all elected by a
plurality of the votes presented.
Stockholders of the Company were asked to approve the Company's amended
and restated 1995 Stock Incentive Plan. The amended plan was approved by
a plurality of the votes presented.
Stockholders of the Company were asked to approve amendments to the 1995
Directors Stock Option Plan. The amendments to the plan were approved by
a plurality of the votes presented.
- 24 -
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 11, 1997 /S/George W. Dougan
--------------- -----------------------------------
Date George W. Dougan
President & Chief Executive Officer
(Principal Executive Officer)
August 11, 1997 /S/George L. Fredette
--------------- --------------------------------
Date George L. Fredette
Senior Vice President, Treasurer
(Chief Financial Officer)
- 25 -
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,
___________________________________
1997 1996
____________ ____________
Net Income Per Common Share:
Weighted Average Common Shares
Outstanding 9,047,000 9,287,000
============ ============
Net Income $ 5,354 $ 4,898
============ ============
Net Income per Common Share $ .59 $ .53
============ ============
Net Income Per Common Share - Primary:
Weighted Average Common Shares
Outstanding 9,047,000 9,287,000
Common Stock Equivalents - Primary 163,000 52,000
------------ ------------
Weighted Average Common Shares and
Common Share Equivalents Outstanding 9,210,000 9,339,000
============ ============
Net Income $ 5,354 $ 4,898
============ ============
Net Income per Common Share $ .58 $ .52
============ ============
Net Income Per Common Share - Fully Diluted:
Weighted Average Common Shares
Outstanding 9,047,000 9,287,000
Common Stock Equivalents - Fully Diluted 189,000 84,000
------------ ------------
Weighted Average Common Shares and
Common Share Equivalents Outstanding 9,236,000 9,371,000
============ ============
Net Income $ 5,354 $ 4,898
============ ============
Net Income per Common Share $ .58 $ .52
============ ============
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-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 32,030
<INT-BEARING-DEPOSITS> 133
<FED-FUNDS-SOLD> 5,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 222,397
<INVESTMENTS-CARRYING> 39,982
<INVESTMENTS-MARKET> 40,907
<LOANS> 659,111
<ALLOWANCE> 12,811
<TOTAL-ASSETS> 982,234
<DEPOSITS> 848,606
<SHORT-TERM> 6,808
<LIABILITIES-OTHER> 14,802
<LONG-TERM> 25,844
<COMMON> 32,113
0
0
<OTHER-SE> 54,063
<TOTAL-LIABILITIES-AND-EQUITY> 982,234
<INTEREST-LOAN> 29,082
<INTEREST-INVEST> 7,436
<INTEREST-OTHER> 843
<INTEREST-TOTAL> 37,361
<INTEREST-DEPOSIT> 15,573
<INTEREST-EXPENSE> 16,498
<INTEREST-INCOME-NET> 20,863
<LOAN-LOSSES> 810
<SECURITIES-GAINS> 9
<EXPENSE-OTHER> 15,417
<INCOME-PRETAX> 7,999
<INCOME-PRE-EXTRAORDINARY> 7,999
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,354
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
<YIELD-ACTUAL> 4.70
<LOANS-NON> 4,323
<LOANS-PAST> 1,214
<LOANS-TROUBLED> 130
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,393
<CHARGE-OFFS> 1,002
<RECOVERIES> 610
<ALLOWANCE-CLOSE> 12,811
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 12,811
</TABLE>
