UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission File No.: 0-10275
EVERGREEN BANCORP, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 36-3114785
(State of incorporation) (I.R.S. Employer Identification No.)
237 Glen Street, Glens Falls, New York 12801
(Address of principal executive offices) (Zip Code)
(518) 792-1151
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $ 3.33 1/3 Par Value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. _
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
The aggregate market value of the Registrant's common stock (based
upon the average of the bid and asked prices on February 27, 1998)
held by non-affiliates was approximately $185.4 million, excluding
1,185,000 shares held by affiliates of the registrant. The number
of shares of Registrant's Common Stock outstanding on February 27,
1998 was 8,909,353.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Stockholders
for the fiscal year ended December 31, 1997(Parts I, II and IV).
(2) Portions of the Registrant's Proxy Statement for its 1998
Annual Meeting of Stockholders to be filed within 120 days of the
Registrant's fiscal year-end (Part III).
PART I
EVERGREEN BANCORP, INC.
ITEM 1. Description of Business
GENERAL
Evergreen Bancorp, Inc. ("Registrant" or "Evergreen") is a Delaware
Corporation registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHC Act") having its principal
place of business at 237 Glen Street, Glens Falls, New York. Evergreen
commenced business under its former name of First Glen Bancorp on
November 3, 1980. Evergreen adopted its current name on April 23,
1986.
The Registrant conducts substantially all of its business through
its sole banking subsidiary, Evergreen Bank, N.A. (the "Bank"). Its
predecessor bank, The First National Bank of Glens Falls, was originally
organized as a state-chartered bank in New York State in 1853, and
was converted to a national bank in 1865. Today, the Bank is regulated
by the Office of the Comptroller of the Currency ("OCC"). The deposits
of Evergreen Bank are insured by the Federal Deposit Insurance Corporation
("FDIC") to the extent permitted by law. See "Supervision and Regulation."
The Bank's principal offices are in Glens Falls, New York, and it
has 25 banking offices in 8 counties of upstate New York. At December
31, 1997 Evergreen Bank had total assets of approximately $1,002 million,
total deposits of approximately $857 million, and total stockholders'
equity of approximately $83 million.
Evergreen and its principal bank subsidiary derive substantially
all of their revenue and income from the furnishing of bank and bank-related
services. Evergreen functions primarily as the holder of stock of
its subsidiaries and assists the management of its subsidiaries as
appropriate.
The Bank conducts a general commercial banking and trust business
at 27 locations in upstate New York, concentrated in three principal
regions generally known as Glens Falls, Plattsburgh and Albany. Through
the Bank, Evergreen provides a variety of banking services to individuals,
partnerships, corporations, municipalities and government entities
in New York State. Such banking services include: accepting deposits,
making loans; checking and interest checking accounts; business, agricultural,
real estate, home improvement, automobile and other personal loans;
letters of credit; home equity lines of credit; safe deposit boxes;
wire transfer facilities; and access to automated teller machines.
The Bank operates as a typical community banking institution,
and does not currently engage in any specialized finance or capital
market activities, or hold any credit card assets, although management
currently expects the Bank to re-enter the credit card business in
the near future. In 1996, the Bank formed a new wholly owned subsidiary
as a real estate investment trust to hold certain residential and
commercial loans, which are serviced and otherwise managed by the Bank.
The Bank engages in various finance functions for municipalities
and governmental entities located within its geographic markets. Municipal
deposits comprise a larger proportion of total deposits than most
banks in its peer group, consequently the municipal business is relatively
significant to the Bank.
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Evergreen is a legal entity separate and distinct from its subsidiaries.
The right of Evergreen to participate in any distribution of the assets
or earnings of any subsidiary is subject to the prior claims of creditors
of the subsidiary, except to the extent that claims, if any, of Evergreen
itself as a creditor may be recognized. See "Supervision and Regulation
- - Payment of Dividends".
GOVERNMENT MONETARY POLICY
The Bank is affected by the credit policies of monetary authorities,
including the Board of Governors of the Federal Reserve System. An
important element of the Federal Reserve System is to regulate the
national supply of bank credit. Among the instruments of monetary
policy used by the Federal Reserve are open market operations in U.S.
Government securities, changes in the discount rate, reserve requirements
on member bank deposits, and funds availability regulations. The monetary
policies of the Federal Reserve have in the past had a significant effect on
the operations of financial institutions, including the Bank, and will continue
to do so in the future. Changing conditions in the national economy and money
markets, as well as the impact of actions by monetary and fiscal authorities,
make it difficult to predict the effect of future changes in interest rates,
deposit levels or loan demand on the business and income of the Bank.
COMPETITION
The Bank faces strong competition in its three principal market
areas, both in attracting deposits and making loans. The Bank's most
direct competition for deposits and trust services has historically
come from other banks, savings institutions and credit unions located
in the Bank's market areas. However, the Bank also faces significant
non-banking competition from mutual funds, insurance companies, investment
management firms, investment banking firms, broker dealers and a growing
list of other investment alternatives. This has increased the competition
for funds that historically would have been maintained as bank deposits.
The Bank competes in this environment by providing a broad range of
financial services, competitive interest rates and a personal level
of service that, combined, tend to retain the loyalty of customers
in its market areas against competitors with far larger resources
than that of the Bank. To a lesser extent, convenience of branch locations
and hours of operations are competitive advantages of the Bank in
the Glens Falls and Plattsburgh regions.
The Bank encounters significant competition for new loans, both commercial
and consumer, from other commercial banks, including super-regional,
money center and locally-owned banks. In addition, savings banks,
savings and loan associations, credit unions, mortgage bankers, mortgage
brokers affiliated with nationally franchised real estate brokers,
and other financial institutions compete actively for new loans. Competition
for home mortgages in the past five years has been especially intense
in the Bank's market areas. The Bank competes for new loans principally
through the interest rates and fees it charges, the responsiveness
of the Bank to its local markets, and the efficiency in which it provides
loan services.
Mergers among financial institutions have added competitive
pressure. Competition is expected to intensify as a consequence of
interstate banking laws now in effect in the majority of states which
permit banking
3
organizations to expand geographically. Further, the Reigle-Neal Interstate
Banking and Branching Efficiency Act of 1994 has generally removed
the remaining restrictions on interstate acquisitions of banks and
bank holding companies.
SUPERVISION AND REGULATION
General. The Registrant is a bank holding company, registered
with the Board of Governors of the Federal Reserve System (the "Federal
Reserve") under the BHC Act. As such, the Registrant and its subsidiaries
are subject to the supervision, examination, and reporting requirements
of the BHC Act and the regulations of the Federal Reserve.
The BHC Act requires every bank holding company to obtain the
prior approval of the Federal Reserve before: (i) it may acquire direct
or indirect ownership or control of any voting shares of any bank
if, after such acquisition, the bank holding company will directly
or indirectly own or control more than 5.0% of the voting shares of
the bank; (ii) it or any of its subsidiaries, other than a bank, may
acquire all or substantially all of the assets of the bank; or (iii)
it may merge or consolidate with any other bank holding company.
The Registrant is also subject to the provisions of Article
III-A of the New York State Banking Law. Among other things, Article
III-A requires the approval of the New York Banking Department prior
to the acquisition by a bank holding company of direct or indirect ownership
or control of 10% or more of the voting stock of a banking institution, or the
acquisition by a bank holding company directly or indirectly through a
subsidiary of all or substantially all of the assets of a banking institution,
or a merger or consolidation with another bank holding company.
The BHC Act generally prohibits the Registrant from engaging
in activities other than banking or managing or controlling banks
or other permissible subsidiaries and from acquiring or retaining
direct or indirect control of any company engaged in any activities
other than those activities determined by the Federal Reserve to be
so closely related to banking or managing or controlling banks as
to be a proper incident thereto.
The Bank, the single subsidiary bank of the Registrant, is a
member of the FDIC, and as such, its deposits are insured by the FDIC
to the extent provided by law. The Bank is also subject to numerous
state and federal statutes and regulations that affect its business,
activities, and operations, and it is supervised and examined by one
or more federal bank regulatory agencies.
Because the Bank is a national bank, it is subject to supervision
and regulation by the OCC. The OCC regularly examines the operations
of the subsidiary bank and has authority to approve or disapprove
mergers, consolidations, the establishment of branches, and similar
corporate actions. The OCC also has the power to prevent the continuance
or development of unsafe or unsound banking practices or other violations
of law.
The Bank is subject to the provisions of the CRA. Under the
terms of the CRA, the appropriate federal bank regulatory agency is
required, in connection with its examination of a subsidiary institution,
to assess such institution's record in meeting the credit needs of
the community served by that institution, including those of low and
moderate-income neighborhoods. The regulatory agency's assessment
of the institution's record is made available
4
to the public. Further, such assessment is required of any institution
which has applied to: (i) charter a national bank; (ii) obtain deposit
insurance coverage for a newly chartered institution; (iii) establish
a new branch office that will accept deposits; (iv) relocate an office;
or (v) merge or consolidate with, or acquire the assets or assume
the liabilities of, a federally regulated financial institution. In
the case of a bank holding company applying for approval to acquire
a bank or other bank holding company, the Federal Reserve will assess
the records of each subsidiary institution of the applicant bank holding
company, and such records may be the basis for denying the application.
An institution's CRA rating is taken into account by its regulator
in considering various types of applications. In addition, an institution
receiving a rating of "substantial noncompliance" is subject to civil
money penalties or a cease and desist order under Section 8 of the
Federal Deposit Insurance Act (the "FDIA"). CRA remains a critical
component of the regulatory examination process. CRA examination results
and related concerns have been cited as a reason to reject and or
modify branching and merger applications by various federal and state
banking agencies.
Payment of Dividends. The Registrant is a legal entity separate
and distinct from the Bank and its other subsidiaries. The principal
source of cash flow of the Registrant, including cash flow to pay
dividends to its stockholders, is dividends from the Bank. The subsidiary
bank is required by the OCC to obtain prior approval for the payment
of dividends to the Registrant if the total of all dividends declared
by such subsidiary bank in any year would exceed the total of such
bank's net profits (as defined and interpreted by regulation) for
that year and the retained net profits (as defined) for the preceding
two years, less any required transfers to surplus. There are also
other statutory and regulatory limitations on the payment of dividends
by the Bank to the Registrant as well as the Registrant to its stockholders.
Without receiving dividends from the Bank the Registrant would not
be in a position to pay dividends to its stockholders.
If, in the opinion of a federal regulatory agency, an institution
under its jurisdiction is engaged in or is about to engage in an unsafe
or unsound practice (which, depending on the financial condition of
the institution, could include the payment of dividends), such agency
may require, after notice and a hearing, that such institution cease
and desist from such practice. The Federal Reserve, the OCC, and the
FDIC, have indicated that paying dividends that deplete an institution's
capital base to an inadequate level would be an unsafe and unsound
banking practice. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), an insured institution may not
pay any dividend if it is undercapitalized, or if such payment would
cause it to become undercapitalized. See "Prompt Corrective Action."
Moreover, the Federal Reserve, the OCC, and the FDIC have issued policy
statements which provide that bank holding companies and insured banks
should generally only pay dividends out of current operating earnings.
At December 31, 1997, under dividend restrictions imposed under
federal and state laws, the Bank, without obtaining governmental approvals,
could declare aggregate dividends to the Registrant of approximately
$3.1 million, provided that the Bank would then be in compliance with
one or more minimum capital requirements. Moreover, federal bank regulatory
authorities also have the general authority to limit the dividends
paid by insured banks if such payments may be deemed to constitute
an unsafe and sound practice.
5
Transactions With Affiliates. There are various regulatory
restrictions on the extent to which the Registrant and its non-bank
subsidiaries can borrow or otherwise obtain credit from the subsidiary
bank. The Bank (and its subsidiaries) is limited in engaging in borrowing
and other "covered transactions" with non-bank or non-savings bank
affiliates to the following amounts: (i) in the case of any such affiliate,
the aggregate amount of covered transactions of the subsidiary bank
and its subsidiaries may not exceed 10% of the capital stock and surplus
of such subsidiary bank; and (ii) in the case of all affiliates, the
aggregate amount of covered transactions of the subsidiary bank and
its subsidiaries may not exceed 20% of the capital stock and surplus
of such subsidiary bank. "Covered transactions" are defined by statute
to include a loan or extension of credit, as well as a purchase of
securities issued by an affiliate, a purchase of assets (unless otherwise
exempted by the Federal Reserve), the acceptance of securities issued
by the affiliate as collateral for a loan and the issuance of a guarantee,
acceptance, or letter of credit on behalf of an affiliate. Covered
transactions are also subject to certain collateralization requirements.
Further, a bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any
extension of credit, lease, or sale of property or furnishing of services.
Capital Adequacy. The Registrant and the Bank are required to
comply with the capital adequacy standards established by the Federal
Reserve in the case of the Registrant, and the OCC in the case of
the subsidiary bank. There are two basic measures of capital adequacy
for bank holding companies that have been promulgated by the Federal
Reserve: a risk-based measure and a leverage measure. All applicable
capital standards must be satisfied for a bank holding company to
be considered in compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile
among banks and bank holding companies, to account for off-balance
sheet exposure, and to minimize disincentives for holding liquid assets.
Assets and off-balance sheet items are assigned to broad risk categories,
each with appropriate weights. The resulting capital ratios represent
capital as a percentage of total risk-weighted assets and off-balance
sheet items.
As to the holding company, the Registrant, the minimum guideline
for the ratio of total capital ("Total Capital") to risk-weighted
assets (including certain off-balance-sheet items, such as standby
letters of credit) is 8.0%. At least half of the Total Capital must
be composed of common stock, minority interests in the equity accounts
of consolidated subsidiaries, noncumulative perpetual preferred stock,
and a limited amount of cumulative perpetual preferred stock, less
goodwill and certain other intangible assets ("Tier 1 Capital"). The
remainder may consist of subordinated debt, other preferred stock,
and a limited amount of loan loss reserves. At December 31, 1997,
the Registrant's consolidated Tier 1 Capital and Total Capital ratios
were 13.5% and 14.8%, respectively.
In addition, the Federal Reserve has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide
for a minimum ratio of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets (the "leverage ratio"), of 3.0%
for bank holding companies that meet certain specified criteria, including
having the highest regulatory rating. All other bank holding companies
generally are required to maintain a leverage ratio of at least 3.0%
plus an additional cushion of 100 to 200 basis points. The Registrant's
leverage ratio at December 31, 1997 was 8.6%. The
6
guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels
without significant reliance on intangible assets. Furthermore, the
Federal Reserve has indicated that it will consider a banking institutions
"tangible Tier 1 Capital leverage ratio" (deducting all intangibles)
and other indications of capital strength in evaluating proposals
for expansion or new activities.
Evergreen Bank is subject to risk-based and leverage capital
requirements adopted by the OCC which substantially mirror the requirements
of the holding company. The Bank's capital ratios are substantially
similar to those of the Registrant and as such is also in compliance
with all applicable ratios.
Failure to meet capital guidelines could subject a bank to a
variety of enforcement remedies, including the termination of deposit
insurance by the FDIC, and to certain restrictions on its business.
See "Prompt Corrective Action."
The federal bank regulators continue to indicate their desire
to raise capital requirements applicable to banking organizations
beyond their current levels. In this regard, the Federal Reserve and
the OCC have, pursuant to FDICIA, adopted an amendment to the risk-based
capital standards which would calculate the change in an institution's
net economic value attributable to increases and decreases in market
interest rates and would require banks with excessive interest rate
risk exposure to hold additional amounts of capital against such exposures.
Support of Subsidiary Bank. Under Federal Reserve policy, the
Registrant is expected to act as a source of financial strength to,
and to commit resources to support, the subsidiary bank. This support
may be required at times when, absent such Federal Reserve policy,
the Registrant may not be inclined to provide it. In addition, any
capital loans by a bank holding company to the subsidiary bank are
subordinate in right of payment to deposits and to certain other indebtedness
of such subsidiary bank. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a subsidiary bank
will be assumed by the bankruptcy trustee and entitled to a priority
of payment.
Under the FDIA, a depository institution insured by the FDIC
can be held liable for any loss incurred by, or reasonably expected
to be incurred by, the FDIC after August 9, 1989 in connection with:
(i) the default of a commonly controlled FDIC-insured depository institution;
or (ii) any assistance provided by the FDIC to any commonly controlled
FDIC-insured depository institution "in danger of default." The FDIC's
claim for damages is superior to claims of stockholders of the insured
depository institution or its holding company, but is subordinate
to claims of depositors, secured creditors, and holders of subordinated
debt (other than affiliates) of the commonly controlled insured depository
institution. The Bank is subject to these cross-guarantee provisions.
As a result, any loss suffered by the FDIC in respect of the Bank
would likely result in assertion of the cross-guarantee provisions
superior to the claims of the parent holding company.
Prompt Corrective Action. FDICIA establishes a system of prompt
corrective action to resolve the problems of undercapitalized institutions.
Under this system, which became effective on December 19, 1992, the
federal
7
banking regulators are required to establish five capital categories
("well-capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized")
and to take certain mandatory supervisory actions, and are authorized
to take other discretionary actions, with respect to institutions
in the three undercapitalized categories, the severity of which will
depend upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, the FDICIA requires the
banking regulator to appoint a receiver or conservator for an institution
that is critically undercapitalized. The federal banking agencies
have specified by regulation the relevant capital level for each category.
At December 31, 1997, Evergreen Bank had the requisite capital
levels to qualify as well capitalized.
Brokered Deposits. The FDIC has adopted regulations governing
the receipt of brokered deposits. Under the regulations, a depository
institution cannot accept, rollover, or renew brokered deposits unless
(i) it is well capitalized or (ii) it is adequately capitalized and
receives a waiver from the FDIC. A depository institution that cannot
receive brokered deposits also cannot offer "pass-through" insurance
on certain employee benefit accounts. Whether or not it has obtained
such a waiver, an adequately capitalized depository institution may
not pay an interest rate on any deposits in excess of 75 basis points
over certain prevailing market rates specified by regulation. There
are no such restrictions on a depository institution that is well
capitalized. Since Evergreen Bank had the requisite capital levels
to qualify as well capitalized as of December 31, 1997, the Registrant
believes the brokered deposits regulation has had no material effect
on the funding or liquidity of Evergreen Bank.
FDIC Insurance. Under the FDIC's risk related insurance assessment
system, insured depository institutions maybe required to pay annual
assessments to the FDIC. An institution's risk classification is based
on assignment of the institution by the FDIC to one of three capital
groups and to one of three supervisory subgroups. The three supervisory
subgroups are group "A", financially solid institutions with only
a few minor weaknesses, Group "B", institutions with weaknesses which,
if uncorrected, could cause substantial deterioration of the institution
and increased risk to the insurance fund and Group "C", institutions
with a substantial probability of loss to the fund absent effective
corrective action. The three capital categories are well capitalized;
adequately capitalized; and undercapitalized. These three categories
are substantially the as the prompt corrective action categories previously
described, with the undercapitalized category including institutions
that are undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes.
As of May 31, 1995 the FDIC was able to determine that the Bank
Insurance Fund ("BIF") obtained the desired reserve ratio (i.e., ratio
of reserves to insured deposits) of 1.25%. As a result, FDIC insurance
premiums were reduced to the point where Evergreen was required to
pay no FDIC insurance. On September 30 1997, legislation was passed
recapitalizing the Savings Association Insurance Fund. Included in
that legislation were provisions requiring members of the BIF to assist
in the repayment of FICO bonds. The cost to Evergreen mandated by
this legislation was $102,000 in 1997.
Under the FDIA, insurance of deposits may be terminated by the
FDIC upon
8
a finding that the institution has engaged in unsafe and unsound practices,
is in an unsafe or unsound condition to continue operations, or has
violated any applicable law, regulation, rule, order, or condition
imposed by the FDIC.
Safety and Soundness Standards. Federal banking agencies promulgate
safety and soundness standards relating to internal controls, information
systems and internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth, compensation, fees, and benefits.
With respect to internal controls, information systems, and internal
audit systems, the standards describe the functions that adequate
internal controls and information systems must be able to perform,
including: (i) monitoring adherence to prescribed policies; (ii) effective
risk management; (iii) timely and accurate financial, operational,
and regulatory reporting; (iv) safeguarding and managing assets; and
(v) compliance with applicable laws and regulations. The standards
also include requirements that: (i) those performing internal audits
be qualified and independent; (ii) internal controls and information
systems be tested and reviewed; (iii) corrective actions be adequately
documented; and (iv) that results of an audit be made available for
review of management actions.
Depositor Preference. The Omnibus Budget Reconciliation Act
of 1993 provides that deposits and certain claims for administrative
expenses and employee compensation against an insured depository institution
would be afforded a priority over other general unsecured claims against
such an institution in the "liquidation or other resolution" of such
an institution by any receiver.
Legislative Proposals. Because of concerns relating to the competitiveness
and the safety and soundness of the industry, Congress continues to
consider a number of wide-ranging proposals for altering the structure,
regulation, and competitive relationships of the nation's financial
institutions. Among such bills are proposals to prohibit depository
institutions and bank holding companies from conducting certain types
of activities, to subject depository institutions to increased disclosure
and reporting requirements, to alter the statutory separation of commercial
and investment banking, and to further expand the powers of depository
institutions, bank holding companies, and competitors of depository
institutions. It cannot be predicted whether or in what form any of
these proposals will be adopted or the extent to which the business
of the Registrant may be affected thereby.
NON-BANKING ACTIVITIES
The Bank does not currently generate any significant revenues
from non-banking activities, but it may subsequently engage in other
permissible activities for registered bank holding companies when
suitable opportunities develop. Any proposal for such further activities
subject to approval by appropriate regulatory authorities. See "Supervision
and Regulation".
EMPLOYEES
As of year-end 1997, Evergreen and its affiliates had a total
of 391 employees on a full time equivalent basis. Evergreen considers
its employee relations to be good.
9
FOREIGN OPERATIONS
Neither Evergreen nor The Bank engages in material operations
in foreign countries or have any outstanding loans to foreign investors.
The subsidiary bank maintains immaterial Canadian and other foreign
bank accounts and currency levels for use in the ordinary course of
business.
STATISTICAL INFORMATION AND ANALYSIS
The material under the heading "Financial Review" in the 1997
Annual Report is incorporated herein by reference as a presentation
and discussion of statistical data relating to Evergreen. The information
with respect to such tables should not be construed to imply any conclusions
on the part of the management of Evergreen that the results, causes,
or trends indicated therein will continue in the future. The nature
and effects of governmental monetary policy, supervision and regulation,
future legislation, inflation and other economic conditions and many
other factors which affect interest rates, investments, loans, deposits
and other aspects of Evergreen's operations are extremely complex
and thus historical operations, earnings, assets, and liabilities
are not necessarily indicative of future performance. See "Government
Monetary Policy".
STATISTICAL DISCLOSURE REQUIRED BY BANK HOLDING COMPANIES
I. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest rates and Interest Differential
The information set forth on pages 15 through 17 of Registrant's
1997 Annual Report is incorporated herein by reference.
II. Investment Portfolio
The information set forth on page 20 of Registrant's 1997 Annual
Report is incorporated herein by reference.
III. Loan Portfolio
The information set forth on pages 21 Registrant's 1997 Annual Report
is incorporated herein by reference.
Non-Performing Loans
The information set forth on page 21 through 22 of Registrant's 1997
Annual Report is incorporated herein by reference.
IV. Summary of Loan Loss Experiences
The information set forth on page 18 of Registrant's 1997
Annual Report is incorporated herein by reference.
V. Deposits
The information set forth on page 24 through 26 of Registrant's
1997 Annual Report is incorporated herein by reference.
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VI. Return on Equity and Assets
The information set forth on page 13 of Registrant's 1997 Annual
Report is incorporated herein by reference.
ITEM 2. Properties
Registrant
The Registrant has six physical properties, all of which are
leased to The Bank and independent third parties at market rates.
Real estate holdings, and the income generated from them, represent
an insignificant portion of the Registrant's business. The office
facilities of the Registrant are located at 237 Glen Street, Glens
Falls, New York in a building owned by Evergreen Bank, N.A.
Evergreen Bank, N.A.
Evergreen Bank, N.A.'s main offices are also at 237 Glen Street,
Glens Falls, New York. The Bank owns in fee the buildings where 20
of the Bank's offices are located. In addition to the facilities leased
from the Registrant, five offices are leased from third parties at
the current rate of $15,906 per month through June 30, 2001.
Item 3. Legal Proceedings
Evergreen is not presently involved in any material legal proceedings.
The Bank is involved in a number of ordinary and routine legal proceedings
which typically present, as one or more defenses by the borrower in
a collection action, assertions of lender liability on the part of
the Bank. In the aggregate, the Bank's legal proceedings involve claims
which are not believed to be material to the financial condition of the Bank.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to security holders during the
fourth quarter of 1997.
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Identification of Executive Officers
(pursuant to General Instruction G of Form 10-K)
Executive Officers of the Registrant
The following table sets forth certain information with respect to
the executive officers of Registrant:
<TABLE>
<CAPTION>
Officers with Executive
Name Age Registrant or Bank Subsidiary Officer Since
<S> <C> <C> <C>
George W. Dougan 58 President and Chief 1994
Executive Officer
Paul A. Cardinal 41 Executive Vice President 1995
and General Counsel
Thomas C. Crowley 51 Executive Vice President 1994
Chief Credit Officer
Anthony J. Koenig 59 Executive Vice President 1986
and Chief Administrative
Officer
George L. Fredette 38 Executive Vice President 1995
Chief Financial Officer
Daniel J. Burke 45 Senior Vice President 1997
Retail Banking (Evergreen
Bank, N.A.)
Kenneth J. Cartledge 53 Senior Vice President 1995
Asset Quality (Evergreen
Bank, N.A.)
John M. Fullerton 48 Executive Vice President 1988
of Trust and Investment
(Evergreen Bank, N.A.)
</TABLE>
None of the individuals named in the above table as an officer
of Registrant was selected to his/her position pursuant to any arrangement
or understanding with any other person, nor are there any family relationships
between them. Each of the above officers, except as noted below, has
held the same or another executive position with the Registrant or
the Bank for the past five years.
George W. Dougan was elected President and Chief Executive Officer
of Evergreen and the Bank on March 10, 1994. Prior thereto he was
Chairman of the Board for the Bank of Boston (Florida Division) from
June 1992 and Senior Vice President and Director of Retail Banking,
for the Bank of Boston, from June 1988 to June 1992.
Paul A. Cardinal was elected Executive Vice President of Evergreen
and the Bank in May 1995. For more than five years prior thereto he
was General Counsel of Trans World Entertainment Corporation.
Thomas C. Crowley was elected Executive Vice President and Chief
Credit Officer of Evergreen and the Bank in May 1994. Prior thereto,
he served as
12
Senior Vice President for Trustco Bank New York from 1993 to 1994.
Prior to 1993 he served as Executive Vice President and Chief Credit
Officer for Fleet Bank of New York.
Anthony J. Koenig was elected Executive Vice President and Chief
Administrative Officer of Evergreen and the Bank in August 1993. He
also served as Regional President of the Capital Region from January
1986 to January 1994.
George L. Fredette was elected Executive Vice President
and Chief Financial Officer of Evergreen and the Bank, in December
1997. Prior thereto he was Senior Vice President, Finance of Evergreen
and the Bank. Prior to joining Evergreen in 1993 he was Vice President
and Chief Financial Officer of Schenectady Federal Savings and Loan
Association.
Daniel J. Burke was elected Senior Vice President,
Retail Banking of Evergreen Bank in July 1997. Prior thereto he served
as Senior Vice President, Retail Sales and Director of Marketing since
1995. Prior thereto he was Vice President of Marketing since January, 1991.
Kenneth J. Cartledge was elected Senior Vice President, Asset
Quality of Evergreen Bank in November 1995. Prior thereto he was Senior
Vice President and Senior Credit Officer of Evergreen Bank. Prior
to joining Evergreen in 1994, he served as Vice President at Trustco
Bank since 1993. Prior to joining Trustco he served as Senior Vice
President and Regional Senior Lender for Fleet Bank of New York.
John M. Fullerton was elected Executive Vice President of Trust
and Investments at Evergreen Bank in October 1993. Prior thereto he
was Executive Vice President of Retail Banking Services at Evergreen
Bank from June 1992 and Senior Vice President of Trust and Investment
at Evergreen Bank prior thereto.
Mr. Dougan is a director of Trans World Entertainment Corporation,
a publicly-traded specialty retailer traded on the NASDAQ National
Market System. None of the other individuals named above holds a
directorship with a company (except for the Registrant) registered
pursuant to Section 12 of the Securities Exchange Act, or subject
to the requirements of Section 15(d) of that Act, or with a company
which is registered as an Investment Company under the Investment
Company Act of 1940.
13
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The information set forth on page 2 under caption "Common Stock Data"
of the Registrant's 1997 Annual Report to stockholders is incorporated
herein by reference.
ITEM 6. Selected Financial Data
The information set forth on page 13 under the caption "Summary of
Selected Financial Data" of the Registrant's 1997 Annual Report is
incorporated herein by reference.
ITEM 7. Management's Discussion and Analysis of Financial Conditions
and Results of Operation
The information set forth on pages 14 through 26 of Registrant's 1997
Annual Report is incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data
The information set forth on pages 27 through 47 of Registrant's 1997
Annual Report is incorporated herein by reference.
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
14
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information included under "Proposal One - Election of Directors"
in the Registrant's Proxy Statement for its 1998 Annual Meeting of
Stockholders, and under "Executive Officers of the Registrant" in
Part I of this report, is hereby incorporated by reference.
ITEM 11. Executive Compensation
The information included under "Proposal One - Election of Directors"
in the Registrant's Proxy Statement for its 1998 Annual Meeting of
Stockholders, is hereby incorporated by reference, except that the
information under the caption "Report of the Human Resources and
Nominating Committee" and the "Five Year Performance Graph" are not
so incorporated.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information included under "Proposal One - Election of Directors"
in the Registrant's Proxy Statement for its 1998 Annual Meeting of
Stockholders, is hereby incorporated by reference.
ITEM 13. Certain Relationships and Related Transactions
The information included under "Proposal One - Election of Directors
- Certain Transactions" in the Registrant's Proxy Statement for its
1998 Annual Meeting of Stockholders, is hereby incorporated by
reference.
15
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
The following consolidated financial statements of Registrant and
its subsidiaries, and the accountants' report thereon, included on
pages 27 through 47, inclusive, of Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1997, are
incorporated herein by reference:
Financial Statements:
Consolidated Statements of Income - Years ended December 31, 1997,
1996 and 1995
Consolidated Statements of Condition - December 31, 1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity - Years
ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
Financial Statement Schedules
(All financial statement schedules for Registrant and its
subsidiaries have been omitted as the required information is
included in the consolidated financial statements or the related
notes thereto, is not required or is inapplicable.)
The following exhibits are incorporated herein by reference:
Exhibit 3(a) - Certificate of Incorporation and amendments
thereto.#
Exhibit 3(b) - By-Laws (incorporated by reference to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1995).
Exhibit 3(c) - Amendment No.1 to the amended and restated By-Laws
of Evergreen Bancorp, Inc.#
Exhibit 10(a)* - 1985 Incentive Stock Option Plan of the
Registrant (incorporated by reference to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993).
Exhibit 10(b)* - 1989 Stock Incentive Plan of the Registrant
(incorporated by reference to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993).
16
Exhibit 10(c)* - Deferred Compensation Plan(incorporated
by reference to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993).
Exhibit 10(d)* - Evergreen Bancorp, Inc. Plan for the Payment
and Deferral of Directors Fees (incorporated by reference
to Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993).
Exhibit 10(e)* - Amended and Restated 1995 Incentive Stock
Option Plan.#
Exhibit 10(f)* - 1995 Directors Stock Option Plan (incorporated
by reference to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995).
Exhibit 10(g)* - Amendment No. 1 to the 1995 Directors Stock
Option Plan.#
Exhibit 10(h)* - Form of Change in Control Agreement (incorporated
by reference to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995).
Exhibit 10(i)* - Severance Agreement, dated April 18, 1995,
with Paul A. Cardinal (incorporated by reference to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995).
Exhibit 10(j)* - Employment Agreement dated as of December
19, 1997, between Registrant and George W. Dougan
(incorporated by reference to Registrant's Annual Report
on Form 10-K for the fiscal
year ended December 31, 1996).
Exhibit 10(k)* - Supplemental Executive Retirement Plan
(incorporated by reference to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996).
Exhibit 10(l)* - Senior Officer Supplemental Retirement
Plan (incorporated by reference to Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1995).
Exhibit 13 - Registrant's Annual Report to Stockholders
for the year ended December 31, 1997.#
Exhibit 21 - Subsidiaries of Registrant.#
17
Exhibit 23 - Consent of KPMG Peat Marwick LLP to the
use of its Report on the Consolidated Financial Statements
of Registrant in connection with previously filed
registration statements of the Registrant.#
Exhibit 27 - Financial Data Schedule.#
# Filed herewith.
* Represents a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this report pursuant to Item
14(c) of this report.
The Registrant hereby agrees to furnish the Securities
and Exchange Commission upon request, copies of instruments outstanding,
including indentures, which define the rights of long-term debt security
holders.
No reports on Form 8-K were filed during the three month
period ended December 31, 1997.
18
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
EVERGREEN BANCORP, INC.
(Registrant)
By: /s/ George W. Dougan
GEORGE W. DOUGAN
President and Chief Executive Officer
(Principal Executive Officer)
March 20, 1998
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signatures Titles Dates
<S> <C> <C>
/s/ George W. Dougan Chairman of the Board 3/20/98
George W. Dougan of Directors
/s/ George L. Fredette Executive Vice President 3/20/98
George L. Fredette (Chief Financial and
Accounting Officer)
/s/ John W. Bishop Director 3/20/98
John W. Bishop
/s/ Carl R. DeSantis Director 3/20/98
Carl R. DeSantis
/s/ Robert F. Flacke Director 3/20/98
Robert F. Flacke
/s/Michael D. Ginsburg Director 3/20/98
Michael D. Ginsburg
/s/Joan M. Mannix Director 3/20/98
Joan M. Mannix
/s/Anthony J. Mashuta Director 3/20/98
Anthony J. Mashuta
/s/Philip H. Morse Director 3/20/98
Phillip H. Morse
/s/William E. Philion Director 3/20/98
William E Philion
/s/Alan R. Rhodes Director 3/20/98
Alan R. Rhodes
/s/Floyd H. Rourke Director 3/20/98
Floyd H. Rourke
/s/ Paul W. Tomlinson Director 3/20/98
Paul W. Tomlinson
/s/ Walter Urda Director 3/20/98
Walter Urda
</TABLE>
19
EXHIBIT 3(a)
[Annual Report on Form 10-K]
CERTIFICATE OF INCORPORATION
OF
FIRST GLEN BANCORP, INC.
The undersigned incorporator, in order to form a corporation
under the General Corporation Law of the State of Delaware, certifies
as follows:
1. Name. The name of the corporation is
FIRST GLEN BANCORP, Inc. (hereinafter called the "Corporation").
2. Address; Registered Agent. The address of the
Corporation's registered office is 100 West Tenth Street, City of
Wilmington, County of New Castle, State of Delaware; and its registered
agent at such address is The Corporation Trust Company.
3. Purposes. The nature of the business and purposes
to be conducted or promoted by the Corporation are to engage in, carry
on and conduct any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
4. Number of Shares. The total number of shares of stock
which the Corporation shall have authority to issue is: One Million
(1,000,000), all of which shall be shares of Common Stock of the par
value of Ten Dollars ($10.00) each.
5. Name and Address of Incorporator. The name and mailing
address of the incorporator are: Thomas B. Kinsock, 611 Olive St.,
Suite 1400, St. Louis, Missouri 63101.
6. Directors; Election and Classification.
(a) Members of the Board of Directors may be elected either by
written ballot or by voice vote.
(b) The Board shall consist of seventeen (17) persons and shall be divided
into three classes, with the first class to comprise six (6) members,
the second class to comprise six (6) members, and the third class to
comprise five (5) members. At the election of the first Board, the
class of each of the seventeen members then elected shall be
designated. The term of office of those members then designated as
the first class shall expire at the annual meeting of shareholders
next ensuing, that of the members designated as the second class at
the annual meeting of shareholders one year thereafter, and that of
the members designated as the third class at the annual meeting of
shareholder two years thereafter. At each annual meeting of
shareholders held after the election and classification of the first
Board, directors shall be elected for a full term of three (3) years
to succeed those members whose terms then expire.
7. Adoption, Amendment and/or Repeal of By-Laws.
The Board of Directors may from time to time (after adoption by the
undersigned of the original by-laws of the Corporation adopt, amend
or repeal the by-laws of the Corporation; provided, that any by-laws
adopted, amended or repealed by the Board of Directors may be amended
or repealed, and any by-laws may be adopted, by the stockholders of
the Corporation
8. Compromise and Arrangements. Whenever a compromise
or arrangement is proposed between this Corporation and its creditors
or any class of them and/or between this corporation and its stockholders
or any class of them, any court of equitable jurisdiction within the
State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application
of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on
the application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of section 279
of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of creditors
of this Corporation, as the case may be, to be summoned in such manner
as the said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the stockholders
or class of stockholder of this Corporation, as the case may be, agree
to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the
said compromise or arrangement and the said reorganization shall,
if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or
on all the stockholders or class of stockholders, of this Corporation,
as the case may be, and also on this Corporation.
IN WITNESS WHEREOF, this certificate has been signed on this
31st day of October, 1980, and the signature of the undersigned shall
constitute the affirmation and acknowledgment of the undersigned,
under penalties of perjury, that the Certificate is the act and deed
of the undersigned and that the facts stated in the Certificate are
true.
/s/ Thomas B. Kinsock
Thomas B. Kinsock, Incorporator
- - 2-
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF FIRST GLEN BANCORP, INC.
Before Payment of Capital
Pursuant to Section 241 of the General Corporation Law, as amended,
the undersigned, being a majority of the directors of the above-named
Delaware corporation (the "Corporation"), hereby certify as follows:
ONE: At a meeting of the board of directors of the Corporation,
duly called and held, a majority of the directors acting by resolution
adopted the following amendment to the Certificate of Incorporation
of the Corporation:
1. Article 4 of the Certificate of Incorporation of the
Corporation, which sets forth the classes and numbers of shares of
stock of the Corporation, shall be amended in its entirety to read
as follows:
4. Number and Classes of Shares; Relative Rights, Preferences,
and Limitations. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is One Million,
Five Hundred Thousand (1,500,000), of which One Million (1,000,000)
shares of the par value of Ten Dollars ($10.00) each, amounting in
the aggregate to Ten Million Dollars ($10,000,000), shall be common
stock and Five Hundred Thousand (500,000) shares of the par value
of Ten Dollars ($10.00) each, amounting in the aggregate to Five Million
Dollars (5,000,000), shall be preferred stock.
The preferred stock may be issued from time to time in one or
more series for any proper corporate purpose without further action
by the shareholders. The designations, preferences and other rights
and limitations or restrictions of the preferred stock of each series
(other than such as are stated and expressed herein) shall be such
as may be fixed by the Board of Directors (authority so to do being
hereby expressly granted) and stated and expressed in a resolution
or resolutions adopted by the Board of Directors providing for the
initial issue of preferred stock of such series. Such resolution
or resolutions shall (a) fix the dividend rights of holders of shares
of such series, including the dividend rate thereon, whether such
dividends shall be cumulative, and, if so, on what terms, (b) fix
the terms on which stock of such series may be redeemed, including
amounts payable upon redemption if the shares of such series are to
be redeemable, (c) fix the rights of the holders of stock of such
series upon dissolution, liquidation or any distribution of assets,
(d) fix the terms or amount of the sinking fund, if any, to be provided
for the purchase or redemption of stock of such series, (e) fix the
terms upon which the stock of such series may be converted into or
exchanged for stock of any other class or classes or of any one or
more series of preferred stock, if the shares of such series are to
be convertible or exchangeable, (f) fix the voting rights, if any,
of the shares of such series and (g) fix such other designations,
preferences, and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof desired
to be so fixed.
Except to the extent otherwise provided in the resolution of
resolutions of the Board of Directors providing for the initial issue
of shares of a particular series or expressly required by law, holders
of shares of preferred stock of any series shall be entitled to one
vote for each share thereof so held, shall vote share-for-share with
the holders of the common stock without distinction as to class and
shall not be entitled to vote separately as a class or a series of
a class. The number of shares of preferred stock may be increased
or decreased from time to time by the affirmative vote of the holders
of a majority of the stock of the Corporation entitled to vote, and
the holders of the preferred stock shall not be entitled to vote
separately as a class or series of a class on any such increase or
decrease.
All shares of any one series of preferred stock shall be identical
with each other in all respects except that shares of any one series
issued at different times may differ as to the dates from which dividends
thereon shall accumulate, and all series of preferred stock shall
rank equally and be identical in all respects except as specified
in the respective resolutions of the Board of Directors providing
for the initial issue thereof. Subject to the prior and superior
rights of the preferred stock as set forth in any resolution or
resolutions of the Board of Directors providing for the initial issue of
a particular of preferred stock, such dividends (payable in cash, stock
or otherwise) as may be determined by the Board of Directors may be
delayed and paid on the common stock from time to time out of any
fund legally available therefor, and the preferred stock shall not
be entitled to participate in any such dividend.
No holder of stock of the Corporation shall be entitled as a
matter of right, preemptive or otherwise, to subscribe for or purchase
any part of any stock now or hereafter authorized to be issued, or
shares thereof held in the treasury of the Corporation or securities
convertible into stock, whether issued for cash or other consideration
or by way of dividend or otherwise.
2. Subsection (b) of Article 6 of the Certificate of Incorporation
of the Corporation, which sets forth the number and classes of the
directors of the Corporation, which sets forth the number and classes
of the directors of the Corporation, shall be amended in its entirety
to read as follows:
"(b) The Board of Directors shall be divided into
three classes. The number of directors of the first class shall equal
one-third (1/3) of the total number of directors as determined in
the manner provided in the By-Laws (with fractional remainders to
count as one); the number of directors of the second class shall equal
one-third (1/3) of said total number of directors (or the nearest
whole number thereto); and the number of directors of the third class
shall equal said total number of directors minus the aggregate number
of directors of the first and second classes. At the election of
the first Board of Directors, the class of each of the members then
elected shall be designated. The term of office of each member then
designated as a director of the first class shall expire at the annual
meeting of the shareholders next ensuing, that of each member then
designated as a director of the second class at the annual meeting
of shareholders one year thereafter, and that of each member then
designated as a director of the third class at the annual meeting
of shareholders two years thereafter. At each annual meeting of
shareholders held after the election and classification of the first
Board of Directors, directors shall be elected for a full term of three
(3)years to succeed those members whose terms then expire."
TWO:The Corporation has not received any payment for any
of its stock.
- - 2 -
IN WITNESS WHEREOF, this Certificate has been signed on this
11th day of March, 1981, and the signature of the undersigned shall
constitute the affirmation and acknowledgment of the undersigned,
under penalties of perjury, that the Certificate is the act and deed
of the undersigned and that the facts stated in the Certificate are
true.
/s/ William L. Bitner
(Seal) William L. Bitner III, President
ATTEST:
/s/ Michael P. Brassel
Michael P. Brassel, Secretary
- 3 -
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
First Glen Bancorp, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at
a meeting duly held, adopted a resolution proposing and declaring
advisable the following amendments to the Certificate of Incorporation
of said corporation:
RESOLVED that the Certificate of Incorporation of First Glen
Bancorp, Inc. be amended by changing Article 4 thereof so that, as
amended, said Article shall be and read as follows:
4. Number and Classes of Shares; Relative Rights, Preferences,
and Limitations
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Two Million, Five Hundred
Thousand (2,500,000), of which Two Million (2,000,000) shares of the
par value of Five Dollars ($5.00) each, amounting in the aggregate
to Ten Million Dollars ($10,000.000), shall be common stock and Five
Hundred Thousand (500,000) shares of the par value of Ten Dollars
($10.00) each, amounting in the aggregate to Five Million Dollars
($5,000,000), shall be preferred stock.
The preferred stock may be issued from time to time in one or
more series for any proper corporate purpose without further action
by the shareholders. The designations, preferences and other rights
and limitations or restrictions of the preferred stock of each series
(other than such as are stated and expressed herein) shall be such
as may be fixed by the Board of Directors (authority so to do being
hereby expressly granted) and stated and expressed in a resolution
or resolutions adopted by the Board of Directors providing for the
initial issue of preferred stock of such series. Such resolution
or resolutions shall (a) fix the dividend rights of holders of shares
of such series, including the dividend rate thereon, whether such
dividends shall be cumulative, and, if so, on what terms, (b) fix
the terms on which stock of such series may be redeemed, including
amounts payable upon redemption if the shares of such series are to
be redeemable, (c) fix the rights of the holders of stock of such
series upon dissolution, liquidation or any distribution of assets,
(d) fix the terms or amount of the sinking fund, if any, to be provided
for the purchase or redemption of stock of such series, (e) fix the
terms upon which the stock of such series may be converted into or
exchanged for stock of any other class or classes or of any one or
more series of preferred stock, if the shares of such series are to
be convertible or exchangeable, (f) fix the voting rights, if any,
of the shares of such series and (g) fix such other designations,
preferences, and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof desired
to be so fixed.
Except to the extent otherwise provided in the resolution or
resolutions of the Board of Directors providing for the initial issue
of shares of a particular series or expressly required by law, holders
of shares of preferred stock of any series shall be entitled to one
vote for each share thereof so held, shall vote share-for-share with
the holders of the common stock without distinction as to class and
shall not be entitled to vote separately as a class or a series of
a class. The number of shares of preferred stock may be increased
or decreased from time to time by the affirmative vote of the holders
of a majority of the stock of the Corporation entitled to vote, and
the holders of the preferred stock shall not be entitled to vote separately
as a class or series of a class on any such increase or decrease.
All shares of any one series of preferred stock shall be identical
with each other in all respects except that shares of any one series
issued at different times may differ as to the dates from which dividends
thereon shall accumulate, and all series of preferred stock shall
rank equally and be identical in all respects except as specified
in the respective resolutions of the Board of Directors providing
for the initial issue thereof. Subject to the prior and superior
rights of the preferred stock as set forth in any resolution or resolutions
of the Board of Directors providing for the initial issue of a particular
series of preferred stock, such dividends (payable in cash, stock
or otherwise) as may be determined by the Board of Directors may be
declared and paid on the common stock from time to time out of any
fund legally available therefor, and the preferred stock shall not
be entitled to participate in any such dividend.
No holder of stock of the Corporation shall be entitled as a
matter of right, preemptive or otherwise, to subscribe for or purchase
any part of any stock now or hereafter authorized to be issued, or
shares thereof held in the treasury of the Corporation or securities
convertible into stock, whether issued for cash or other consideration
or by way of dividend or otherwise.
BE IT FURTHER RESOLVED, that the Certificate of Incorporation
of First Glen Bancorp, Inc. be amended by changing Article 6 thereof
so that, as amended said Article shall be and read as follows:
6. Directors; Election and Classification.
(a) Members of the Board of Directors may be elected either by
written ballot or by voice vote.
(b) The Board shall consist of a minimum of five and a maximum
of twenty-five members. The total number of directors may be changed
from time to time within the above minimum and maximum numbers by
vote of the majority of the total number of directors then in office,
provided that such total number of directors may not be increased
by more than two between any two successive annual meetings of
shareholders. Directors need not be stockholders and each director
hold office until his successor is elected and qualified or until his
earlier death, resignation or removal.
(c) The Board of Directors shall be divided into three classes. The number
of directors of the first class shall equal one-third (1/3) of the
total number of directors determined in the manner provided in
subdivision (b) above (with fractional remainders to count as one);
the number of directors of the second class shall equal one-third
(1/3) of said total number of directors (or the nearest whole number
thereto); and the number of directors of the third class shall equal
said total number of directors minus the aggregate number of
directors of the first and second classes. At the election of the
first Board of Directors, the class of each of the members then
elected shall be designated. The term of office of each member then
designated as a director of the first class shall expire at the annual
meeting of the shareholders next ensuing, that of each member then
designated as a director of the second class at the annual meeting of
shareholders one year thereafter, and that of each member then
designated as a director of the third class at the annual meeting of
shareholders two years thereafter. At each annual meeting of
shareholders held after the election and classification of the first
Board of Directors, directors shall be elected for a full term of
three (3) years to succeed those members whose terms then expire.
(d) At a special meeting of shareholders called expressly for
that purpose, any director, or the entire Board of Directors, may
be removed from office at any time, without cause, but only by the
affirmative vote of the holders of not less than eighty percent (80%)
of the shares of the Corporation then entitled to vote in an election
of directors. At a special meeting of shareholders called expressly
for that purpose, a director may be removed by the shareholders for
cause by the affirmative vote of the holders of a majority of the
shares then entitled to vote in an election of directors. Except
as may otherwise be provided by law, cause for removal shall be
construed to exist only if the director whose removal is proposed
- - 2 -
(i) has been convicted of a felony by a court of competent jurisdiction
and such conviction is no longer subject to direct appeal or (ii)
has been adjudged by a court of competent jurisdiction to be liable
for negligence or misconduct in the performance of his duty to the
Corporation in a matter of substantial importance to the Corporation,
and such adjudication is no longer subject to direct appeal.
(e) Notwithstanding any other provision of the Certificate of
Incorporation to the contrary, the affirmative vote of the holders
of not less than eighty percent (80%) of the shares of the Corporation
then entitled to vote in an election of directors shall be required
to alter, amend or repeal, or to adopt any provision inconsistent
with the provisions of this Article 6.
BE IT FURTHER RESOLVED, that the Certificate of Incorporation of First
Glen Bancorp, Inc. amended by adding a new Article 9 to said certificate
which shall reach as follows.
9. Shareholder Approval of Business Combinations. The approval
of any Business Combination (as hereinafter defined) shall, in addition
to any affirmative vote required by law or any other provision of
this Certificate of Incorporation, require the affirmative vote of
the holders of not less than eighty percent (80%) of the shares of
the Corporation then entitled to vote generally in the election of
directors of the Corporation voting as a single class, with each share
to have one (1) vote; provided, however, that any such Business Combination
may be approved by the affirmative shareholder vote required by law
or otherwise, if: (a) such Business Combination is approved by not
less than eighty percent (80%) of the entire Board of Directors of
the Corporation, or (b) the consideration to be received per share
by holders of Common Stock of the Corporation and by holders of each
other class of stock entitled to vote generally in the election of
directors of the Corporation, if any, is Fair Consideration (as hereinafter
defined).
a. Definitions for the purposes of Article 9:
1. "Business Combination" shall mean as follows:
(i) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (1) any Substantial Shareholder (as
hereinafter defined), or (2) any other corporation which, after such
merger or consolidation, would be a Substantial Shareholder, regardless
of which entity survives;
(ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of transactions)
to or with any Substantial Shareholder of all or substantially all
of the assets of the Corporation or any Subsidiary, or both;
(iii) the adoption of any plan or proposal for the liquidation
of the Corporation proposed by or on behalf of a Substantial Shareholder;
or
- - 3 -
(iv) any transaction involving the Corporation or any Subsidiary,
including any issuance, transfer or reclassification or any securities
of, or any recapitalization of, the Corporation or any Subsidiary,
or any merger or consolidation of the Corporation with any Subsidiary
( whether or not involving a Substantial Shareholder), if the
transaction would have the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class of equity
or convertible securities of the Corporation or any Subsidiary, of which
a Substantial Shareholder is the Beneficial Owner.
2. "Substantial Shareholder" shall mean and include any individual,
corporation, partnership or other person or entity (other than the
Corporation or any Subsidiary) which, together with its "Affiliates"
and "Associates" (as such terms were defined as of December 11, 1984,
under Rule 13d-3 under the Securities Exchange Act of 1934) is the
Beneficial Owner (as hereinafter defined) in the aggregate of more
than five percent (5%) of the voting power of the then-outstanding
shares of the Corporation entitled to vote generally in an election
of directors; and any Affiliate or Associate of any such individual
corporation, partnership or other person or entity.
3. "Beneficial Owner" - The term "Beneficial Owner" shall be
defined with reference to the rules and regulations of the Securities
and Exchange Commission under the Securities and Exchange Act of 1934
as in effect from time to time provided that in addition thereto a
person shall be a Beneficial Owner of any capital stock or be considered
to "Beneficially" own any capital stock:
(i) which such person or any of its Affiliates and Associates
beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates and Associates
has (1) the right to acquire (whether such right is exercisable immediately
or only after the passage of time) pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (2) the right to vote
pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purposes of acquiring, holding, voting or disposing of any shares
of capital stock.
4. "Subsidiary" shall mean any corporation of which a majority
of any class of equity security is owned, directly or indirectly by
the Corporation.
5. "Fair Consideration" shall mean,
(i) in the case of shares of Common Stock of the Corporation,
an amount in cash or readily available funds at least equal to the
highest of the following (whether or not the Substantial Shareholder
has previously acquired any such shares):
(a) the highest per share price paid by the Substantial
Shareholder for any such shares acquired by it within the four-year
period immediately preceding the first public announcement of the
proposal of the Business Combination (hereinafter referred to as the
"Announcement Date"), plus an "Adjustment" of such price, as defined
hereafter in this Article 9;
(b) the highest reported per share price at which such shares
were publicly traded during the two-year period immediately preceding
the Announcement Date, plus an "Adjustment" of such price, as defined
hereafter in this Article 9;
- - 4 -
(c) the per share fair market value of such shares on the
Announcement Date, plus an "Adjustment" of such value, as defined
hereafter in this Article 9; or
(d) the book value per share of the Common Stock of the
Corporation (determined in accordance with generally accepted
accounting principles) as of the end of the latest fiscal quarter
preceding the Announcement Date, plus an "Adjustment" of such value
as defined hereafter in this Article 9.
(ii) and in the case of any other shares of voting stock of the
Corporation outstanding, an amount in cash or readily available funds
at least equal to the highest of the following (whether or not the
Substantial Shareholder has previously acquired any such shares):
(a) the highest per share price paid
by the Substantial Shareholder for any such shares acquired by it
the four-year period immediately preceding the Announcement
Date, plus an "Adjustment" of such price, as defined hereafter in
this Article 9:
(b) the highest reported per share price
at which such shares were publicly traded during the two-year period
immediately preceding the Announcement Date, plus an "Adjustment"
of such price, as defined hereafter in this Article 9;
(c) the per share fair market value of such shares on the
Announcement Date, plus an "Adjustment" or such price, as defined
hereafter in this Article 9; or
(d) the highest preferential amount per share to which the holders
of such shares are entitled in the event of voluntary or
involuntary liquidation or dissolution or the Corporation.
An "Adjustment" of any price or value per share for shares of
stock of the Corporation under this Article 9 shall equal an amount
of interest on such price or value compounded annually from the Announcement
Date until the consummation of the Business Combination (the "Consummation
Date"), or, in the case of subdivisions (a) and (b) in each of subsections
5 (i) and 5 (ii) in this Article 9, from the date the Substantial
Shareholder first became a Substantial Shareholder (the "Determination
Date") until the Consummation Date, at a market prime rate of interest
as may be determined from time to time by a majority of the Board
of Directors of the Corporation, less the aggregate amount of any
cash dividends per share paid on such class of shares during such
period up to but not in excess of such amount of interest.
Notwithstanding any other provision of this Certificate of Incorporation
or any provision of law or any preferred stock designation to the
contrary, but in addition to any affirmative vote of the holders of
any particular class or series of outstanding voting stock of the
Corporation required by law or this Certificate of Incorporation or
any preferred stock designation of this Corporation, the affirmative
vote of the holders of at least eighty percent (80%) of the voting
power of the then outstanding shares of the Corporation then entitled
to vote in an election of directors, voting together as a single class,
shall be required to alter, amend or repeal, or to adopt any provision
inconsistent with, this Article 9 or any provision of this Article
9.
SECOND: that the foresaid amendments were duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation
Law of the State of Delaware by a majority of shareholders of First
Glen Bancorp, Inc. at the annual meeting of First Glen Bancorp, Inc.
on March 20, 1985
- - 5 -
IN WITNESS WHEREOF, said First Glen Bancorp, Inc. has caused
the Certificate to be signed by G. Nelson Lowe, its Senior Vice President,
and attested by Michael P. Brassel, its Secretary, this 5th day of
April, 1985.
First Glen Bancorp, Inc.
By /s/ G. Nelson Lowe
G. Nelson Lowe
Senior Vice President
Attest:
By /s/ Michael P. Brassel
Michael P. Brassel
Secretary
Filed: April 15, 1985
- 6 -
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
First Glen Bancorp, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation,
at a meeting duly held, adopted the following resolution proposing
and declaring advisable the following amendment to the Certificate
of Incorporation as amended of said corporation:
RESOLVED that the Certificate of Incorporation as amended of
First Glen Bancorp, Inc. be amended by changing Article 1 thereof
so that, as amended, said Article shall be and read as follows:
1. Name. The name of the corporation is EVERGREEN
BANCORP, Inc. (hereinafter called the "Corporation").
SECOND: That the foresaid amendment was duly adopted in
accordance State of Delaware by a majority of shareholders of First
Glen Bancorp, Inc. at the with the applicable provisions of Section
242 of the General Corporation Law of the annual meeting of First
Glen Bancorp, Inc. on April 23, 1986.
IN WITNESS WHEREOF: said First Glen Bancorp, Inc. has caused
the Certificate to be signed by Michael P. Brassel, its Senior Vice
President, and attested by Kathleen Martinez, it Secretary, this 23rd
day of April, 1986.
First Glen Bancorp, Inc.
By /s/ Michael P. Brassel
Michael P. Brassel
Senior Vice President
Attest:
By /s/ Kathleen G. Martinez
Kathleen G. Martinez
Secretary
Filed: April 29, 1986
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Evergreen Bancorp, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at
a meeting duly held, adopted the following resolution proposing and
declaring advisable the following amendment to the Certificate of
Incorporation as amended of said corporation:
RESOLVED that the Certificate of Incorporation as amended of
Evergreen Bancorp, Inc. be amended by changing the first sentence
of Article 4 thereof so that, as amended, said first paragraph of
Article 4 shall be and read as follows:
4. Number and Classes of Shares; Relative Rights, Preferences,
and Limitations
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Four Million, Five Hundred
Thousand (4,500,000), of which Four Million (4,000,000) shares of
the par value of Three Dollars, Thirty Three and one Third Cents ($3.33
1/3) each, amounting in the aggregate to Thirteen Million Three Hundred
Thirty Three Thousand Three Hundred Thirty Three and One Third
Dollars ($13,333,333 1/3), shall be common stock and Five Hundred
Thousand (500,000) shares of the par value of Ten Dollars ($10.00)
each, amounting in the aggregate to Five Million Dollars ($5,000,000),
shall be preferred stock.
SECOND: that the foresaid amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the General
Corporation law of the State of Delaware by a majority of shareholders
of Evergreen Bancorp, Inc. at the annual meeting of Evergreen Bancorp,
Inc. on April 23, 1986.
THIRD: that the aforesaid amendment shall become effective
on the close of business on May 30, 1986.
IN WITNESS WHEREOF: said Evergreen Bancorp, Inc. has caused
the Certificate to be signed by Michael P. Brassel, its Senior Vice
President, and attested by Kathleen Martinez, its Secretary, this
19 day of May, 1986.
Evergreen Bancorp, Inc.
By /s/ Michael P. Brassel
Michael P. Brassel
Attest: Senior Vice President
By /s/ Kathleen G. Martinez
Kathleen G. Martinez
Secretary
Filed: May 29, 1986
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Evergreen Bancorp, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation,
at a meeting duly held, adopted the following resolution proposing
and declaring advisable the following amendment to the Certificate
of Incorporation as amended of said corporation:
RESOLVED: That the Certificate of Incorporation of EVERGREEN
BANCORP, INC. as now in effect be amended by adding the following
Article 10 thereto:
10. No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
SECOND: That the foresaid amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the General
Corporation Law of the State of Delaware by a majority of stockholders
of Evergreen Bancorp, Inc. at the annual meeting of Evergreen Bancorp,
Inc., on April 15, 1987.
IN WITNESS WHEREOF: Said Evergreen Bancorp, Inc. has caused
the Certificate to be signed by Michael P. Brassel, its Senior Vice
President, and attested by Kathleen Martinez, its Secretary, this
15th day of April, 1987.
Evergreen Bancorp, Inc.
By: /s/ Michael P. Brassel
Michael P. Brassel
Senior Vice President
Attest:
By: /s/ Kathleen G. Martinez
Kathleen G. Martinez
Secretary
Filed: May 13, 1987
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Evergreen Bancorp, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation,
at a meeting duly held, adopted the following resolution proposing
and declaring advisable the following amendment to the Certificate
of Incorporation as amended of said corporation;
RESOLVED: That the Certificate of Incorporation as amended
of Evergreen Bancorp, Inc., be amended by changing the first sentence
of Article 4 thereof so that, as amended, said first sentence of Article
4 shall be and read as follows:
4. Number and Classes of Shares; Relative Rights, Preferences, and
Limitations
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Twenty Million, Five
Hundred Thousand (20,500,000), of which Twenty Million (20,000,000)
shares of the par value of Three Dollars, Thirty Three and One Third
Cents ($3.33 1/3) each, amounting in the aggregate to Sixty Six Million
Six Hundred Sixty Six Thousand Six Hundred Sixty Six and Two Thirds
Dollars ($66,666,666.67) shall be common stock and Five Hundred Thousand
(500,000) shares of the par value of Ten Dollars ($10.00) each, amounting
in the aggregate to Five Million Dollars ($5,000,000), shall be preferred stock.
SECOND: that the foresaid amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the General
Corporation Law of the State of Delaware by a majority of stockholders
of Evergreen Bancorp, Inc. at the annual meeting of Evergreen Bancorp,
Inc. on April 14, 1988.
IN WITNESS WHEREOF: said Evergreen Bancorp, Inc., has caused
this Certificate to be signed by Michael P. Brassel, its Senior Vice
President, and attested by Kathleen G. Martinez, its Secretary, this
16 day of May, 1988.
Evergreen Bancorp, Inc.
By /s/ Michael P. Brassel
Michael P. Brassel
Attest: Senior Vice President
By /s/ Kathleen G. Martinez
Kathleen G. Martinez
Secretary
Filed: May 31, 1988
AMENDMENT NO 1.
TO THE
AMENDED AND RESTATED BY-LAWS OF
EVERGREEN BANCORP, INC.
AMENDMENT NO. 1, dated as of January 16, 1997 (the "Amendment"),
to the Amended and Restated By-Laws of Evergreen Bancorp, Inc., is
hereby adopted as follows:
WHEREAS, the Board, after discussion, believes it to be in the best
interests of the Company to increase the retirement age of directors as
recommended; upon the motion of Anthony Mashuta, Chairman of the Human
Resource and Nominating Committee, and duly seconded, it is unanimously
RESOLVLED, that the Company's By-Laws be, and they hereby are, amended
effective immediately to delete the last sentence of Section 3.2 of the
By-Laws, captioned "Number; Qualification; Term of Office", and insert
in its stead the following:
"Notwithstanding the foregoing, any director reaching the age of 72
during any term of office shall continue to be qualified to serve as
director only untill the next annual meeting of stockholders following
his 72nd birthday."
IN WITNESS WHEREOF, the undersigned confirms the adoption of this
Amendment by the Board of Directors of Evergreen Bancorp, Inc. as of the
date first set forth above.
EVERGREEN BANCORP, INC.
By: /s/ George W. Dougan
George W. Dougan,
Chairman of the Board
EXHIBIT 10(e)
[Annual Report on Form 10-K]
EVERGREEN BANCORP, Inc.
AMENDED AND RESTATED
1995 STOCK INCENTIVE PLAN
1. Purpose. The purpose of the Evergreen Bancorp, Inc.
(the "Company") 1995 Stock Incentive Plan (the "Plan") is to advance the
interests of the Company and its stockholders by aiding the Company in
attracting, retaining and motivating employees of the Company and its
Affiliates.
2. Definitions. For purposes of the Plan, the following terms shall
be defined as set forth below:
(a) "Affiliate" means:
(i) A member of a controlled group of corporations of which
the Company is a member; or
(ii) Any majority-owned subsidiary of either the Company or
its principal banking subsidiary, Evergreen Bank, N.A.; or
(iii) An unincorporated trade or business which is under
common control with the Company as determined in accordance with
Section 414(c) of the Internal Revenue Code of 1986, as amended
("Code") and regulations issued thereunder.
For purposes hereof, a "controlled group of corporations" shall mean
a controlled group of corporations as defined in Section 1563(a) of
the Code determined without regard to Section 1563(a)(4) and (e)(3)(C)
of the Code.
(b) "Award" means the grant of any Stock Option, Limited
Alternate Right or Conditional Share granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" means, for purposes of the Plan, an event
of the nature that:
(i) Would be required to be reported in response to Item 1(a) of
the current report on Form F-3, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Exchange Act; or
(ii) Results in a Change in Control of the Company within the
meaning of the Change in Bank Control Act of 1978, as amended,
and the Rules and Regulations promulgated by the Federal Deposit
Insurance Company at 12 C.F.R. Section 303.4(a), as in effect on
the date hereof; or
(iii) Without limiting the above conditions, such a Change in
Control shall be deemed to have occurred at such time as:
(A) Any "person" (as the term is used in Section 13(d) and
14(d) of the Exchange Act), or group of persons acting in
concert, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) directly or indirectly, of any class
of equity securities of the Company representing 25% or more of a
class of equity securities, except that a securities purchase or
purchases by the Company's employee stock ownership plan and trust
that exceeds, in the aggregate, 25% or more of a class of equity
securities shall not be deemed to be a Change in Control under
this Plan; or
(B) Individuals who constitute the Board on the date hereof
(the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election was approved by a
vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the Company's
shareholders was approved by the same Committee serving under an
Incumbent Board, shall be, for purposes of this clause (B)
considered as though he were a member of the Incumbent Board; or
(C) A plan of reorganization, merger, consolidation, sale of
all or substantially all the assets of the Company or any similar
transaction occurs in which the Company is not or will not be the
resulting entity; or
(D) A proxy statement shall be distributed soliciting proxies
from stockholders of the Company, by someone other than the current
management of the Company, seeking stockholder approval of a plan
or similar transaction with one or more corporations as a result of
which the outstanding shares of the class of securities then
subject to such plan or transaction are exchanged for or converted
into cash or property or securities not issued by the Company; or
(E) A tender offer is made for 25% or more of the voting
securities of the Company then outstanding.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the Human Resources and Nominating
Committee of the Board. Such committee, or a subcommittee thereof formed for
the purposes of making discretionary awards under this Plan, shall
be comprised at all times solely of at least two "non-employee directors",
as that term is defined under Rule 16b-3 of the Exchange Act promulgated
by the Securities and Exchange Commission, or any successor regulation.
(g) "Common Stock" means the common stock, par value $3.33-1/3
per, share, of the Company.
(h) "Conditional Share" means a share of the Common Stock of
the Company, such share becoming the sole property of a Participant upon the
fulfillment of performance and/or tenure requirements as set forth by the
Committee pursuant to Section 7 of the Plan.
(I) "Date of Grant" means the date an Award is made to a
Participant.
(j) "Disability" means any physical or mental condition which
may reasonably be expected to be permanent and which renders the Participant
incapable of continuing as an employee for his customary hours of
employment, provided, however, that such disability originated while
the Participant was in the active service of the Company, and (1)
did not arise while engaged in or as a result of having engaged in
an illegal or criminal act or an act contrary to the best interests
of the Company, or (2) did not result from habitual drunkenness or
addiction to narcotics or a self-inflicted injury while sane or insane.
To aid the Committee and determining whether such disability exists,
the Committee may require, as a condition precedent to the receipt
of any benefits hereunder, that the Participant submit to examinations
by one or more duly licensed and practicing physicians selected by
the Committee.
(k) "Exchange Act" means the Securities Exchange Act of 1934,
as amended
- -- 2 --
from time to time. References to any provision of the Exchange Act
shall be deemed to include successor provisions thereto and regulations
thereunder.
(l) "Fair Market Value" means with respect to shares of Common
Stock or other property, the fair market value of such shares or other property
determined by such methods or procedures as shall be established from
time to time by the Committee. If the shares are listed on any established
stock exchange or a national market system then, unless otherwise
determined by the Committee in good faith, the Fair Market Value of
Shares shall mean the closing price per share on the immediately preceding
date (or, if the shares were not traded on that day, the next preceding
day that the shares were traded) on the national market system or
principal exchange on which the Common Stock is traded, as such prices
are officially quoted.
(m) "Normal Retirement" means retirement at the normal or early
retirement date as set forth in any tax-qualified retirement/pension plan of
the Company. If no such plan is in place, it shall mean termination
of employment at or after age 65.
(n) "Participant" means any employee of the Company or its
Affiliates selected by the Committee to participate in the Plan for the current
Plan year.
(o) "Plan Year" means a calendar year commencing on or after
January 1, 1995.
(p) "Stock Option" shall mean a right granted to a Participant to
purchase Common Stock of the Company at a specified price (the "Strike
Price") for a specified period. Such Stock Options may be granted
by the Committee as either:
(i) Incentive Stock Options -- Those Stock Options so specified
by the Committee at the Date of Grant as being intended to comply
with the provisions of Section 422 of the Internal Revenue Code of
1986 as from time to time amended; or
(ii) Non-Qualified Stock Options -- Those Stock Options so specified
by the Committee at the Date of Grant as not being intended to qualify
as Incentive Stock Options.
(q) "Stock Agreement" shall mean the agreement entered into
between the Company and the Participant pursuant to the terms of the Company's
1995 Stock Incentive Plan.
(r) "Termination for Cause" means the Company's termination of any
Participant's employment for the following: (i) the commission of
any intentional acts or conduct by the Participant involving moral
turpitude; (ii) the gross negligence by the Participant in complying
or otherwise in performing his required duties for the Company; (iii)
the commission of any intentional act of dishonesty in the performance
of the Participant's duties for the Company; or (iv) the deliberate
and intentional refusal by Participant during the term of his employment,
other than by reason of incapacity due to illness or accident, to
obey lawful directives from the chief executive officer or the Board
of Directors of the Company.
3. Administration. (a) Authority of the Committee. Except as expressly
provided in this Plan, the Plan shall be administered by the Committee,
and the Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the
provisions of the Plan:
(i) to select participants to whom Awards may be granted;
- -- 3 --
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be granted to
each Participant;
(iv) to determine the type and number of Awards to be granted,
the number of shares of Common Stock to which an Award may relate,
the terms and conditions of any Award granted under the Plan
(including, but not limited to, any exercise price, grant price,
or purchase price, and any bases for adjusting such exercise,
grant or purchase price, any restriction or condition, any
schedule for lapse of restrictions or conditions relating to
transferability or forfeiture, exercisability,
or settlement of an Award, and waiver or accelerations thereof,
and waivers of performance conditions relating to an Award, based
in each case on such considerations as the Committee shall
determine), and all other matters to be determined in connection
with an Award;
(v) to determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price of
an Award may be paid, in cash, shares of Common Stock, other
Awards, or other property, or an Award may be canceled,
forfeited, exchanged, or surrendered;
(vi) to determine whether, to what extent, and under what
circumstances cash, shares of Common Stock, other Awards, or
other property payable with respect to an Award will be deferred
either
automatically, at the election of the Committee, or at the
election of the Participant;
(vii) to prescribe the form of each Stock Agreement, which need
not be identical for each Participant;
(viii) to adopt, amend, suspend, waive, and rescind such rules
and regulations and appoint such agents as the Committee may deem
necessary or advisable to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile
any inconsistency in the Plan and to construe and interpret the
Plan and any Award, rules and regulations, Stock Agreement, or
other instrument hereunder;
(x) to accelerate the exercisability or vesting of all or any
portion of any Award or to extend the period during which an
is exercisable; and
(xi) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem
necessary or advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. The Committee shall
have sole discretion in exercising its authority under the Plan.
Any action of the Committee with respect to the Plan shall be final,
conclusive, and binding on all persons, including the Company, Affiliates,
Participants, any person claiming any rights under the Plan from or
through any Participant, and stockholders. The express grant of any
specific power to the Committee, and the taking of any action by the
Committee, shall not be construed as limiting any power or authority
of the Committee. The Committee may delegate to officers or managers
of the Company or any Affiliate the authority, subject to such terms
as the Committee shall determine, to perform administrative functions
and, with respect to Awards granted to persons not subject to Section
16 of the Exchange Act, to perform such other functions as the Committee
may determine, to the extent permitted under Rule 16b-3 (if applicable)
and other applicable law.
(c) Limitation of Liability. Each member of the Committee shall
be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any officer or other employee
of the Company or any Affiliate, the Company's independent certified
public accountants, or other professional retained by the Company
to assist in the administration of the Plan. No member of the Committee,
nor any officer or employee of the Company acting on behalf of the
Committee, shall be personally liable for any action, determination,
or interpretation taken or made in good faith with respect to the
Plan, and all members of the Committee and any officer or employee
of the Company acting on their behalf shall, to the extent permitted
by law, be fully
- -- 4 --
indemnified and protected by the Company with respect to any such
action, determination, or interpretation.
4. Participation. (a) Each Plan Year, the Committee shall, in its
sole discretion, determine which employees of the Company and its
Affiliates shall participate in the Plan. Participation in the Plan
for one Plan Year is neither a guarantee of participation in future
Plan Years nor a guarantee of future employment.
(b) At the time an employee is named as a Participant in the Plan,
the Committee shall notify such Participant of the Award. Such notification
shall identify:
(i) The number of Stock Options granted (if any) and their terms
and conditions, including whether such stock options carry Limited
Alternate Rights; and
(ii) The number of Conditional Shares granted (if any) and their
terms and conditions.
5. Stock Options. (a) The Committee shall have the right to grant
Stock Options to a Participant pursuant to this Section 5, and establish
the terms and provisions, including but not limited to the exercise
price, option term and methods of exercise. A Stock Option Award
shall not be considered an Incentive Stock Option unless it is specifically
designated as such in the Stock Agreement. All Stock Option Awards
shall be presumed to be Non-Qualified Stock Options unless it is specifically
stated to the contrary in a Stock Agreement.
(b) Stock Options shall be granted at the Fair Market Value of the
Common Stock on the Date of Grant except as provided for Incentive
Stock Options in Section 5(g) below.
(c) Unless otherwise determined by the Committee, Non-Qualified Stock
Options shall become vested and be exercisable for their remaining
term following death or Disability or Normal Retirement and, to the
extent then vested, shall become exercisable for three years following
termination of employment by the Company for reasons other than Cause,
for three months following the date of separation if an employee terminates
employment for any other reason, and immediately forfeited following
Termination for Cause. Incentive Stock Options shall be exercisable
for one year following death or disability; for three months following
Normal Retirement or termination of employment by the Company for
reasons other than Cause. Incentive Stock Options shall be exercisable
for three months following date of separation if an employee terminates
employment for any other reason, and immediately forfeited following
Termination for Cause. Notwithstanding the foregoing, Stock Options
shall in no event be exercisable after the date specified in the Stock
Agreement relating thereto.
(d) No Stock Options shall be exercisable for more than 10 years
following the Date of Grant. No Incentive Stock Option may be exercisable
earlier than at least one year following the Date of Grant.
(e) Unless otherwise determined by the Committee, Stock Options may
be exercised by tendering cash, a certified check, Common Stock then
owned by the Participant or any combination thereof, to the Office
of the Secretary of the Company, provided that any shares of Common
Stock tendered which were acquired through a previous Stock Option
exercise were held by the Participant for at least six months from
the Date the Grant pursuant to which they were acquired was granted.
If the optionee intends to obtain a permissible broker loan or a simultaneous
order to sell the shares issuable upon exercise of any Options, upon
the giving of at least 48 hours prior written notice to the Company,
exercise thereof shall not be deemed to occur until the Company receives
the proceeds of the recipient's broker loan or other permitted transaction.
(f) To the extent that the aggregate Fair Market Value of Common Stock
with respect to
- -- 5 --
which Incentive Stock Options are exercisable for the first time by
a Participant during any calendar year under the Plan and any other
plan of the Company or an Affiliate of the Company exceeds $100,000,
such Stock Options shall be treated as Non-Qualified Stock Options.
(g) No Incentive Stock Option shall be granted to a Participant who,
at the time of the grant, owns stock representing more than ten percent
(10%) of the total combined voting power of all classes of stock either
of the Company or any Affiliate of the Company, unless the Strike
Price of the shares or Common Stock issuable upon exercise of such
Incentive Stock Option is at least one hundred ten percent (110%)
of the Fair Market Value (at the time the Incentive Stock Option is
granted), and the Incentive Stock Option is not exercisable more than
five (5) years from the date it is granted.
6. Limited Alternate Rights. (a) The Committee may, in its sole
discretion, grant Limited Alternate Rights in tandem with any Stock Option
Award.
(b) Limited Alternate Rights shall entitle the holder to receive,
in lieu of exercising the Stock Option to which such Limited Alternate
Rights relate (in which event such Stock Option shall terminate),
an amount in cash equal to 100 percent of the excess of the Fair Market
Value of the Common Stock on the date of exercise times the number
of rights tendered, over the aggregate Strike Price of the Stock Options
to which the Limited Alternate Rights relate.
(c) Limited Alternate Rights shall only become vested and exercisable:
(i) If there is a Change in Control of the Company; and,
(ii) The Stock Option to which the Limited Alternate Right is
attached has been held by the Participant for a period of at least
six months at the time the Change in Control has occurred.
7. Conditional Shares. (a) The Committee shall have the right to
grant Conditional Shares to a Participant pursuant to this Section
7, and establish the terms and provisions, including but not limited
to vesting provisions and conditions of forfeiture.
(b) Conditional Shares represent the right to receive free of any
restrictions, shares of Common Stock on the completion of specified
performance and/or tenure requirements as set forth in a Participant's
Conditional Share agreement by the Committee. At the discretion of
the Committee, such shares may be issued to the Participant at the
time of the grant, provided such shares bear a restrictive legend
specifying that such shares cannot be sold or otherwise transferred
by the Participant.
(c) Conditional Shares shall be vested in full following death,
Disability or Normal Retirement. If a Participant terminates employment with
the Company for any other reason, all unvested Conditional Shares
shall be forfeited, except as may be determined in the judgment of
the Committee.
(d) A Participant holding Conditional Shares shall, unless otherwise
determined by the Committee, be entitled to receive dividends and
exercise voting rights with respect to such Conditional Shares even
though such Conditional Shares have not vested.
8. Designation Of Beneficiary. A Participant may, with the consent
of the Committee, designate a person or persons to receive or exercise,
in the event of the Participant's death, any Award to which the Participant
would have been entitled. Such designation will be made upon forms
supplied by and delivered to the Company and may be revoked in writing.
If a Participant fails to effectively designate a beneficiary then
the Participant's estate, or legal representative, will be deemed
to be the beneficiary. Except as provided in this Section 8 and except
for transfers by will or laws of descent and distribution, or except
as permitted by the
- -- 6 --
Committee, all awards granted pursuant to the Plan shall be nontransferable.
9. Change in Control Provisions. In the event of a Change in Control,
the following acceleration and cash-out provisions shall apply unless
otherwise provided by the Committee at the time of the Award grant.
All outstanding Awards pursuant to which the Participant may have
rights, the exercise of which is restricted or limited, shall become
fully exercisable at the time of the Change in Control. Unless the
right to lapse of restrictions or limitations is waived or deferred
by a Participant prior to such lapse, all restrictions or limitations
(including risks of forfeiture and deferrals) on outstanding Awards
subject to restrictions or limitations under the Plan shall lapse,
and all performance criteria and other conditions to payment of Awards
under which payments of cash, shares of Common Stock or other property
are subject to conditions shall be deemed to be achieved or fulfilled
and shall be waived by the Company at the time of the Change in Control.
10. Miscellaneous Provisions. (a) Tax Withholding. The Company's
obligations under the Plan shall be subject to applicable federal,
state, and local tax withholding requirements. Federal, state, and
local withholding tax due at the time of a grant or upon the exercise
of any Award may, in the discretion of the Committee, be paid in shares
of Common Stock already owned by the Participant upon such terms and
condition as the Committee shall determine. If the Participant shall
fail to pay, or make arrangements satisfactory to the Committee for
the payment, to the Company of all such federal, state and local taxes
required to be withheld by the Company, then the Company shall, to
the extent permitted by law, have the right to refuse to issue the
shares of Common Stock relating to the Award and/or to deduct from
any payment of any kind otherwise due to such Participant an amount
equal to any federal, state, or local taxes of any kind required to
be withheld by the Company.
(b) Amendment. The Board may amend, alter, suspend, discontinue, or
terminate the Plan or the Committee's authority to grant Awards under
the Plan without the consent of stockholders of the Company or Participants,
except that any such amendment, alteration, suspension, discontinuation,
or termination shall be subject to the approval of the Company's stockholders
to the extent such stockholder approval is required under Section
422 of the Code, Rule 16b-3 under the Exchange Act, or any other federal
or state law or regulation; provided, however, that, without the consent
of an affected Participant, no amendment, alteration, suspension,
discontinuation, or termination of the Plan may materially and adversely
affect the rights of such Participant under any Award theretofore
granted to him or her. The Committee may waive any conditions or
rights under, amend any terms of, or amend, alter, suspend, discontinue
or terminate, any Award theretofore granted, prospectively or retrospectively;
provided, however, that, without the consent of a Participant, no
amendment, alteration, suspension, discontinuation or termination
of any Award may materially and adversely affect the rights of such
Participant under any Award theretofore granted to him or her.
(c) Applicable Law. The Plan will be administered in accordance with
the laws of the State of New York, without regard to its principles
of conflict of laws, to the extent not governed by relevant provisions
of the Exchange Act and other federal law.
(d) Shares Authorized. The Committee shall be authorized to make
Awards of Stock Options, Conditional Shares or any combination thereof
representing up to 900,000 shares of Common Stock, subject to adjustment
as provided below. Any shares of Evergreen Common Stock that are delivered
to or withheld by the Company to satisfy the tax withholding consequences
of an option exercise or the grant or vesting of a conditional share
award shall again be available for purposes of the 1995 Stock Incentive
Plan.
(e) Maximum Award. No Participant may receive an Award of Stock Options,
Conditional Shares or any combination thereof, representing more than
100,000 shares in any Plan Year, subject to adjustment as provided
below.
- -- 7 --
(f) Adjustments in Common Stock for Recapitalizations, Splits, etc.
In the event that the Committee shall determine that any dividend
in Common Stock, recapitalization, Common Stock split, reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase,
or share exchange, or other similar corporate transaction or event,
affects the shares of Common Stock such that an adjustment is appropriate
in order to prevent dilution or enlargement of the rights of Participants
under the Plan, then the Committee shall make such equitable changes
or adjustments as it deems appropriate and, in such manner as it may
deem equitable, adjust any or all of:
(i) the number and kind of shares which may thereafter be issued under
the Plan,
(ii) the number and kind of shares, other securities or other
consideration issued or issuable in respect of outstanding Awards,
(iii) the exercise price, grant price, or purchase price relating
to any Award, and
(iv) the Maximum Award; provided, however, in each case that, with
respect to Incentive Stock Options, such adjustment shall be made
in accordance with Section 424(a) of the Code, unless the Committee
determines otherwise. In addition, the Committee is authorized to
make adjustments in the terms and conditions of, and the criteria
and performance objectives included in, Awards in recognition of
unusual or nonrecurring events (including, without limitation, events
described in the preceding sentence) affecting the Company or any
Affiliate or the financial statements of the Company or any Affiliate,
or in response to changes in applicable laws, regulations, or
accounting principles.
(g) Compliance with Legal and Trading Requirements. The Plan, the
granting and exercising of Awards thereunder, and the other obligations
of the Company under the Plan and any Stock Agreement, shall be subject
to all applicable federal and state laws, rules and regulations, and
to such approvals by any regulatory or governmental agency as may
be required. The Company, in its discretion, may postpone the issuance
or delivery of shares of Common Stock under any Award until completion
of such stock exchange or market system listing or registration or
qualification of such shares of Common Stock or other required action
under any state or federal law, rule or regulation as the Company
may consider appropriate, and may require any Participant to make
such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of shares
of Common Stock in compliance with applicable laws, rules and regulations.
No provisions of the Plan shall be interpreted or construed to obligate
the Company to register any shares Common Stock under federal or state
law.
(h) Unfunded Status of Awards. The Plan is intended to constitute
an "unfunded" plan for incentive compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Participant
any rights that are greater than those of a general creditor of the
Company; provided, however, that the Committee may authorize the creation
of trusts or make other arrangements to meet the Company's obligations
under the Plan to deliver cash, shares of Common Stock, other Awards,
or other property pursuant to any Award, which trusts or other arrangements
shall be consistent with the "unfunded" status of the Plan unless
the Committee otherwise determines with the consent of each affected
Participant.
(i) Non-exclusivity of the Plan. Neither the adoption of the Plan
by the Board nor its submission to the stockholders of the Company
for approval shall be construed as creating any limitations on the
power of the Board to adopt such other incentive arrangements as it
may deem desirable, including, without limitation, the granting of
options and other awards otherwise than under the Plan, and such arrangements
may be either applicable generally or only in specific cases.
- -- 8 --
11. Effective Date Of The Plan. The Plan, as amended and restated,
shall become effective January 16, 1997, subject to approval by a
majority vote of the stockholders of record of the Company at the
1997 annual meeting. The Plan shall terminate on April 1, 2005, or
such earlier date as determined by the Board.
Effective Date: April 20, 1995; amended and restated effective January
16, 1997.
* * * * *
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
behalf of the Company effective January 16, 1997.
Evergreen Bancorp, Inc.
By: /s/ Anthony J. Koenig
Anthony J. Koenig,
Executive Vice President--Administration
- -- 9 --
EXHIBIT 10(g)
[Annual Report on Form 10-K]
This AMENDMENT NO. 1, dated as of January 16, 1997 (the "Amendment"),
to the Evergreen Bancorp, Inc. 1995 Directors Stock Option Plan is
made and entered into by EVERGREEN BANCORP, INC., a corporation organized
and existing under the laws of the State of Delaware and having its
principal office and place of business at 237 Glen Street, Glens Falls,
New York 12801 (the "Bank").
WHEREAS, the Bank has previously established the Evergreen Bancorp,
Inc. 1995 Directors Stock Option Plan (the "Plan") to advance the
interests of the Bank and its shareholders in attracting, retaining
and motivating high quality directors for the Bank; and
WHEREAS, the number of shares issuable under the formula under the
Plan and the maximum number of shares issuable under the Plan should
have doubled upon the two-for-one stock split of the Common Stock
effected in September, 1996 in the form of a 100% stock dividend;
and
WHEREAS, the Board of Directors of the Bank has adopted a resolution
approving and adopting the amendments to the Plan as set forth herein.
NOW, THEREFORE, by the power and authority vested in the Board
of Directors of the Bank, the Plan is amended to now provide as follows:
1. Effective Date and Condition Precedent. This Amendment
shall be effective upon and expressly conditioned upon the approval
of the Bank's stockholders at the 1997 Annual Meeting of Stockholders,
scheduled for May 8, 1997.
2. Defined Terms. Capitalized terms not otherwise defined herein
shall have the meaning ascribed to them in the Plan.
3. Amendments to the Plan. The Plan is hereby amended as follows:
(a) Section II (H) is amended by deleting the word "Member" or
"Employee" each time it appears in the Section and replacing it with
the word "Participant".
(b) Section III (A) is hereby amended by deleting it and inserting
in lieu thereof "The Plan shall be administered by the Board of Directors
of the Bank (the "Administrator")."
(c) Section IV (A) is hereby amended by deleting the number "200"
in the first sentence and replacing it with "1,600", and by adding
the following to the end of the Section:
"B. The Stock Options granted pursuant to Section IV (A) shall
be granted as of and on the date of the Bank's Annual Shareholders'
meeting.
"C. Consistent with the Plan provisions, and except for authority
that would precluded designation of the Bank's Directors from qualifying
as a "non-employee director" under Rule 16b-3 ("Rule 16b-3"), as from
time to time in effect and applicable to the Plan and Participants,
promulgated by the Securities and Exchange Commission under Section
16 of the Securities Exchange Act of 1934, as amended, the Board as
Administrator shall have full and final authority to make additional
grants of Stock Options to Participants under the Plan, including
but not limited to the right to determine the type and number of Awards
to be granted, the number of Shares to which an Award may relate,
the terms and conditions of any Award granted under the Plan (including,
but not limited to, any exercise price, grant price, or purchase price,
provided that the exercise price is equal to or exceeds the Fair Market
Value of the Common Stock on the date of grant), any schedule for
lapse of restrictions or conditions relating to transferability or
forfeiture, exercisability, or settlement of an Award, and waiver
or accelerations thereof, and waivers of performance conditions relating
to an Award, based in each case on such considerations as the Board
shall determine), and all other matters to be determined in connection
with an Award."
(d) Section V (E) is hereby amended by adding the following at
the end thereof:
"If the Participant intends to obtain a permissible broker loan or
a simultaneous order to sell the shares of Common Stock issuable upon
exercise of any Stock Options, upon the giving of at least 48 hours
prior written notice to the Bank, exercise thereof shall not be deemed
to occur until the Bank receives the proceeds of the recipient's broker
loan or other permitted transaction. In addition, the Administrator
shall the authority to impose any other conditions on or provisions
for the exercise of any Award not inconsistent with the provisions
of the Plan and Rule 16b-3."
(e) Section VII (D) is hereby amended by deleting it and inserting
in lieu thereof the following:
"Shares Authorized for Issuance--Subject to adjustment as provided
in Section VII (E) hereof, the total number of Shares reserved for
issuance in connection with Awards under the Plan shall be 90,000.
No Award may be granted if the number of Shares to which such Award
relates, when added to the number of Shares of Common Stock previously
issued under the Plan, exceeds the number of Shares of Common Stock
reserved under the preceding sentence. If any Awards are forfeited,
canceled, terminated, exchanged or surrendered or such Award is settled
in cash or otherwise terminates without a distribution of Shares of
Common Stock to the Participant, any Shares of Common Stock counted
against the number of Shares of Common Stock reserved and available
under the Plan with respect to such Award shall, to the extent of
any such forfeiture, settlement, termination, cancellation, exchange
or surrender, again be available for Awards under the Plan."
4. Ratification of the Plan. As modified and amended by this
Amendment, the Plan is hereby ratified and confirmed.
* * * * *
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
Evergreen Bancorp, Inc.
By: /s/ Anthony J. Koenig
Anthony J. Koenig,
Executive Vice President--Administration
1997 Annual Report
Growth.
By choice, not chance.
Evergreen Bancorp
This year represents the best year in the 144 year history of your
bank. All of our successes this year are the results of a tightly
focused organization. One that builds on its strengths and recognizes
opportunities for growth. Seizes upon them with innovative solutions.
In a constantly shifting financial services sector, we are creating our
destiny. Above all, we know who we are. We know where we want to go. And
we will be successful in getting there.
We continue to make the right choices.
Choice, not chance, determines our destiny.
Financial Highlights
A record year.
Solid performance.
And significant efforts to build on our growth.
Common Stock Data
Evergreen Bancorp's common stock is traded on the NASDAQ National
Market System under the symbol EVGN. There were 1,670 stockholders
of record as of December 31, 1997. The range of the high and low sales
prices, as reported by NASDAQ, and the quarterly cash dividends paid
for the years 1997 and 1996 are in the adjacent column. The information
provided has been adjusted to reflect the company's two-for-one stock
split effective on September 16, 1996.
For more information on restrictions relating to the payment of cash
dividends, see Note 12 of Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
1997 High Low Div. Paid
<S> <C> <C> <C>
4th Quarter $25.25 $18.25 $0.15
3rd Quarter 20.63 16.63 0.13
2nd Quarter 17.00 14.25 0.13
1st Quarter 17.13 14.75 0.13
</TABLE>
<TABLE>
<CAPTION>
1996 High Low Div. Paid
<S> <C> <C> <C>
4th Quarter $16.50 $14.00 $0.13
3rd Quarter 15.00 12.13 0.10
2nd Quarter 13.13 10.63 0.10
1st Quarter 11.56 10.38 0.10
</TABLE>
Financial Highlights
<TABLE>
<CAPTION>
(Dollars -- except per share data -- expressed in thousands)
1997 1996 1995
<S> <C> <C> <C>
Net Income $11,327 $10,313 $8,380
Per Share:
Basic Net Income 1.26 1.12 .89
Diluted Net Income 1.24 1.11 .88
Cash Dividends .54 .43 .23
Book Value 9.91 9.37 8.86
Average Shares
Outstanding 8,995,000 9,229,000 9,430,000
Year End:
Assets $1,010,161 $928,649 $871,423
Loans,
Net of
Unearned
Income 679,039 654,888 592,198
Deposits 853,676 800,856 750,224
Stockholders'
Equity 88,256 85,439 83,045
Trust Assets
Under Management 511,100 463,600 427,800
</TABLE>
Corporate Profile
Evergreen Bancorp, Inc. (NASDAQ: EVGN) is a one-bank
holding company headquartered in Glens Falls, New York. Its principal
subsidiary, Evergreen Bank, N.A., operates 27 banking locations in
a 250-mile area of eastern New York, from 50 miles south of Albany
to the Canadian border.
Within this region the bank provides its corporate, institutional
and individual customers with a wide range of deposit, lending, trust
and investment services. Throughout its 144-year history, Evergreen
has pursued the essential mission of a community bank: to provide
exemplary service and responsiveness to its
customers and local communities.
Evergreen Bank, N.A., with assets exceeding $1 billion as of year-end
1997, is among the leading community banks in its franchise area.
Annual Meeting
The Annual Meeting of Shareholders will be held in the Adirondack
Room of the Queensbury Hotel, 88 Ridge Street, Glens Falls, New York
at 10:00 a.m. on May 7, 1998.
Form 10-K
A copy of the Company's Form 10-K annual report is available
without charge to shareholders upon written request to
Brian Hampl, Assistant Secretary, 237 Glen Street, Glens Falls, New
York, 12801.
"The key was our management team, no question about it... They're
energized to meet the bank's objectives, no matter what the market
conditions."
- --George W. Dougan,
Chairman, President and CEO
Dougan on Evergreen
Chairman's Report
Now a billion-dollar bank, Evergreen is developing a reputation for
strong, solid, consistent financial performance. Far from relying on
market and industry trends, that reputation stems from focused
management in every corner of the bank. Evergreen's top manager, George
Dougan, explains how active management led to an exceptional 1997--and
how growth by choice, not chance, remains the course for the future.
On the highlights of 1997:
Simply put, Evergreen turned in an excellent performance:
Record earnings of $11,327,000
Closing stock price of $24.875 as of December 31, 1997,
a 52% increase from the end of 1996
Record level dividends of $0.54 per share
Over $1 billion in assets for the first time
Improvements in efficiency and return on equity
Expansion in our principal markets
Market capitalization over $200 million,
up from $150 million in 1996
In a nutshell, the performance of 1997 has added significantly to
the value of the franchise--the value for our shareholders--
in many ways. We've worked hard to manage our way toward that goal,
rather than rely on external factors.
On achieving record earnings and expanding in the same year:
The key to our growth was our management team, no question about it.
Every year, our senior managers work more closely as a functioning
unit; they stay focused on both sides of the ledger. And they're
energized to meet the bank's objectives, no matter what the market
conditions.
This past year was a good example. Early in 1997, we faced a slow-growth
economy, a soft marketplace in mortgages and indirect lending, expenses
from expansion, and the rise in bankruptcies that every bank was
encountering. The management team created responses to each of these
issues to continue the bank's solid growth. We delayed hiring. We re-
allocated human resources to open new branches with almost no rise in
staffing. We took significant steps on the financial side. We reviewed
third-party contracts for potential cost savings. We pursued new fee-
income opportunities. Faced with slow loan growth--but strong growth in
deposits--we adjusted by investing the deposits to generate income.
These initiatives paid off to the point where we exceeded budget
projections at the end of 1997.
Dougan on Evergreen
Chairman's Report--continued
On addressing the market, segment by segment:
This is key to our ongoing success. With products, it comes down to
meeting needs at different points in the life cycle. This past year,
for instance, we rolled out programs for children, first-time
homebuyers, the middle market, the affluent, and small business. By
aiming at different segments, we increase our chances of
maximizing market share in each one.
That applies geographically, too. In 1997, we addressed the need for
an ever greater presence in one of our largest markets, the Capital
Region. To increase our physical presence, we opened two new locations
to complement our branch opening in 1996, and we relocated a third.
We also rolled out our new commercial products for the region's business
customers, who hold significant potential for us. And we generated
a lot of favorable press. Has all this made an impact? Well, of the
new locations we've opened over the past two years, all have far
exceeded their first-year deposit goals. I think that speaks to our
increased effectiveness in a significant geographic market.
On technology as a growth driver:
Quite a few initiatives have taken place on the technology front.
Our technology team has fully implemented the teller automation system,
which streamlines branch operations. The new call center will help
us fulfill our mission by providing customers with faster, better
service--no matter where they are in our franchise area. New imaging
capabilities in loan origination and documentation do the same for
our lending customers, including auto dealers providing indirect loans.
In each case, our goal is to leverage technology which drives our
costs lower and our level of service higher.
On Evergreen's response to market trends:
Consolidation in banking is going to continue. We take advantage of
it by looking for opportunities...whether they lie in acquiring branches
or simply entering a niche that consolidation has made available.
These niches have opened up frequently in our franchise area: some
of our larger competitors have changed their presence here, through
consolidation or other means, and we will attempt to fill the niche
they leave behind.
Part of that niche is a commitment to service. To fill it, we do many
of the simple things that add up in the customer's mind. They're all
in keeping with maximizing market share by staying true to our identity:
that of a profitable, well organized, customer focused community bank.
Deregulation will also continue, which is a minus and a plus. Certainly
it allows more competitors to enter the ball game.
At the same time, it creates opportunities for us in complementary
lines of business--and we will continue to look at exploiting those
lines of business in ways that make sense to Evergreen.
Naturally, the volatility on Wall Street has a big impact on us,
especially in terms of fluctuating interest rates. We've addressed
this through a formal, systematic risk management process--
regularly reviewing risk criteria and adjusting our financial
situation to minimize our exposure. Judging by the results, we've
had success.
On protecting the franchise:
Many financial institutions have relaxed their credit standards, but
we haven't--nor will we. Especially with the nationwide rise in
delinquencies and bankruptcies, asset quality requires constant
vigilance, and we've maintained that by managing the entire process
before a loan reaches non-performing status. As a result, non-performing
assets are down from the prior year. That's critical to protecting the
franchise.
So is addressing a major computer issue: the Year 2000. In 1997,
Evergreen dedicated a team specifically to this issue. That team has put
us ahead of the curve in resolving the problem: in fact, we've completed
the planning stage and started implementation of a solution. We're
also talking with anyone associated with Evergreen--business customers,
retail customers, vendors--to make sure they're compliant, too. All in
all, I believe we're on track to resolve this issue by December 31,
1998.
And by resolving this issue, we avoid problems that could significantly
hinder our continued operations--and therefore our continued growth.
On the refocused
strategic plan:
All these initiatives, of course, flow directly from Evergreen's new
strategic plan which we set out at the beginning of 1997.
It's actually a continuation of the previous plan in many of its
objectives: we still aim to maintain our position as a community bank,
achieve profitable growth, enhance operating efficiencies, increase fee
income, and protect net interest income. The major difference is that
the new plan is focused on the next three years, based on changes in
opportunities.
What hasn't changed is our basic direction: then, as now, we know
who we are, and we know where we're going.
On 1998 and beyond:
I see us continuing many of the same initiatives that have brought
our shareholders such significant rewards over the past few years:
Expanding core business in Evergreen's current markets
Initiating new products
Investigating additional branches
Growing market share--especially in the Capital Region
Implementing new financial initiatives
Continuing our stock repurchase program
Finding new sources of fee income
Improving efficiency
Adding new technology as necessary
Continuing to manage risk in every area
In short, we want to put things in place to
generate enhanced growth in the future. And by "the future", I mean
not just tomorrow, but years from now. If we see a solid return in
both the long and the short term, we will invest.
On the energy at Evergreen:
Whenever I talk to anyone--analysts, shareholders, customers--I hear
an excitement about our bank. "What are you doing now? Are you going
to open branches, or do this or that?" The energy here is contagious.
And I believe, with the bank's past performance and future mission--and
especially with our commitment to focused growth--there's good reason
for all our constituencies to share in that excitement. I certainly do.
"The energy here is
contagious...especially with our commitment
to focused growth--
there's good reason for
all our constituencies to share in that excitement.
I certainly do."
--George W. Dougan,
Chairman, President and CEO
Growth for Today.
Groundwork for Tomorrow.
Management Report
At certain times, banks find themselves preparing for future growth.
At other times, they enjoy the fruits of their preparation.
In 1997, Evergreen did both.
More than ever, the initiatives of previous years contributed to record
earnings for the bank in 1997. Not content simply to enjoy the returns,
however, Evergreen management generated a wealth of new initiatives
to continue--even accelerate--the bank's growth as it moves ahead.
Toward a Higher Profile--and Higher
Market Share.
Critical to Evergreen's continued growth were the branch openings
of 1997. The new locations in Clifton Park and Niskayuna--and the
relocation of another branch to a bustling business corridor--
provided Evergreen with a higher profile in a market with high
potential: the greater Capital Region of New York State.
Whether in actual growth or in efforts to create it, the Capital Region
focus has already affected all sectors of the bank. In retail, the
new branches have exceeded their deposit goals and generated loan
growth. In trust and investment, they have led to profitable
relationships that would have been otherwise impossible. And on the
commercial side, Evergreen has created a new regional lending group,
introduced new products and services, and devoted significant resources
to capturing market share in the small business segment.
A New Record in Trust & Investment.
Evergreen's growth--and its preparation for growth--was also evident
in trust and investment. The numbers spoke clearly of the year's
success: for the first time ever, the Trust & Investment Group broke
$500 million in assets under management.
That success, however, came largely from careful preparation.
A major driver of asset growth, for instance, was implemented the
year before: Evergreen's Private Banking program. In its first full
year, the program not only surpassed projections in its own right,
but also delivered benefits to all areas of the bank. Indeed, Evergreen
gained millions in additional retail deposits alone from Private Banking
customers.
Such growth is significant in a business sector built on long-term
relationships. "The relationship business takes quite a while to
nourish," said John M. Fullerton, Executive Vice President, Trust &
Investment Group, "so the returns we've seen are especially pleasing,
coming so soon after the program's inception."
Private Banking was not the only growth driver for trust and investment.
Forays into alternative investments have generated non-interest income,
which carries a high priority bankwide. New alliances have brought
additional products and services to the arena of employee benefits.
More broadly, success arose from the Trust & Investment Group's approach
to cost effectiveness and tax management. "For a fee less than the
fees normally associated with mutual funds, we provide so much more:
investments to be sure, but also individual service, financial and
estate planning," Fullerton noted. "We can only do that because of
our unique approach to controlling costs and taxes. That approach
also keeps more of the customer's money working for the customer."
"Banks today must be aggressive about providing all the services,
especially financial planning.
With Private Banking
we remain competitive while bringing additional
business to the bank."
--John M. Fullerton, Executive Vice President, Trust & Investment
Group
Beyond Expectations
in Retail.
"Deposits were a major factor," said Daniel J. Burke, Senior Vice
President, Retail Banking, of his sector's solid performance in 1997.
Indeed, a 6% rise in deposits provided a significant source of funds
with which to grow net interest income.
While the rise came in part from the strong performance of Evergreen's
newest branches, other factors also contributed--including new products
and services for the high-potential middle market. The bank attracted
a broad range of new depositors with Evergreen Advantage, a value-added
checking account similar to Evergreen's Privilege 50 for seniors. Kids
Kash encouraged children to start saving in a no-cost account with a
preferred interest rate. The bank's new ATM and Check Card are beginning
to contribute to fee income, helped by the introduction of new ATM
locations. In another market segment, the bank's focus on municipal
business--already a strong source of deposits--added substantially to
the deposit base.
Residential mortgages accounted for the growth in Evergreen's retail
lending through strong mortgage originations and higher home equity
activity. Here again, Evergreen laid the foundation for further growth
with new offerings such as the Good Neighbor Mortgage, designed for
first-time homebuyers and homeowners with little equity, and a third-
party alliance to help mortgage customers who don't fit Evergreen's
traditional credit profile.
Building on the initiatives of the past year, the retail division
is undertaking new projects for 1998. Among them are an Evergreen
credit card and an expanded mortgage origination program.
New Products for Business Growth--and Bank Growth.
A slow local economy and competitive marketplace didn't stop Evergreen's
commercial sector from breaking new ground with innovative products
and services.
Some of those offerings provide small
businesses with tools traditionally enjoyed
by their larger counterparts. With BusinessDirect, a PC-based cash
management software system, companies can conduct banking right from
their own offices. The excitement generated by the product has resulted
in new fee income. An ancillary offering, FaxDirect--which provides
businesses with a faxed account statement every morning--has tied many
customers closer to the bank with what they perceive as an indispensable
service.
No less fruitful was the bank's continued relationship with the Small
Business Administration (SBA). Enjoying a record year for SBA loan
closings, Evergreen also applied for and received two designations,
Certified Lender and Preferred Lender, that make its SBA program more
attractive by reducing turnaround time for loan decisions.
Other developments reinforced Evergreen's profile as a stable
community bank. Behind the scenes, the bank maintained solid loan
loss reserves throughout the year. In a more visible arena, Evergreen
furthered its community banking mission in such loan projects as the
Downtown Glens Falls Revitalization Program and the Hudson Falls
Revitalization Program, through which the bank has dedicated funds to
draw businesses into its home communities.
"New branches and new products provided incremental growth for the bank,
and our mortgage-based business accounted for an increase in loan
business. It all added up to a strong year in the retail sector."
--Daniel J. Burke, Senior Vice President, Retail Banking
"The vigorous stewardship of our resources, together with the plans we
put in place over the past few years, have made a major impact."
--Anthony J. Koenig, Executive Vice President, Chief
Administrative Officer
Management Report--continued
"Proactive management
of the credit process allows us to keep to
our fundamental
strategy: to generate quality growth--
not just growth for growth's sake."
--Thomas C. Crowley, Executive Vice President, Chief
Credit Officer
Among the initiatives for 1998 is a benchmark research study of current
customers. "This survey will provide us insight into the level of
service we currently provide to the small business market segment,"
said Thomas C. Crowley, Executive Vice President, Chief Credit Officer.
"Because we build our market share on superior service, our findings
will be critical to our efforts toward continued growth."
As in past years, Evergreen continued its vigilance in asset quality.
"Proactive management of the credit process keeps us poised to take
on new business in a responsible manner," Crowley said. "That's in
keeping with our fundamental choice: to generate quality growth--not
just growth for growth's sake."
Underlying all these efforts is a cross-functional committee dedicated
to rationalizing all management initiatives for their return on
investment. Chaired by George L. Fredette, Executive Vice President,
Chief Financial Officer, the so-called Devil's Advocate Committee
reviews each initiative the bank undertakes for its return of value to
the shareholders. "We are continuously challenging each area of the bank
to produce a return," said Fredette. "The process provides another
source of insight to ensure the bank's continued performance."
Streamlining the Infrastructure.
Seamless operation, greater efficiency, customer service--whether
visible or invisible to customers--Evergreen's continued strides in
technology have enhanced all three.
Perhaps no technology initiative of 1997 carried a higher priority
than the bank's efforts to resolve the issues raised by the Year 2000.
Along with dedicating a team of staff members to the task--and siting
them at a special facility--Evergreen has formed employee subcommittees
to address various Year 2000 issues. From these efforts came the
decision to change the bank's core processing system, "which not only
facilitates Year 2000 compliance, but also provides us with the
potential for improved efficiencies," said Anthony J. Koenig, Executive
Vice President, Chief Administrative Officer.
Among the best examples of increased efficiency is the new teller
automation system, which Evergreen installed throughout its operations
in 1997. "This new system automates the teller process more efficiently,
cuts back on losses, improves the audit function, and speeds up
proving," explained Koenig. "Because the same
system is used bankwide, it gives us more flexibility to move
personnel when necessary. All in all, this system should bring us
to a new level of operating efficiency at the branch level."
Customers may take more immediate notice of recent improvements to
the automated telephone banking system. The new upgrades provide 24-hour
instant access to account information, as well as more transaction
and inquiry options. "For the customer, these improvements mean greater
convenience and faster access to accounts--better customer service,
in sum," Koenig said. "Given our market niche as a customer-oriented
bank, such enhancements are critical to maintaining and growing market
share."
While less noticeable, other improvements also moved the bank toward
greater efficiency. A new loan origination and document scanning system
made for faster processing of applications--and faster decisions for
customers. This technology, coupled with a computer program to update
Evergreen's internal credit review process, further enhanced the bank's
ability to process both consumer and commercial loans. Evergreen also
centralized its network communication infrastructure, improving bankwide
communications.
The Growth Continues.
The initiatives of 1997 point to a single truth: that one year's record
earnings aren't enough. "By no means will we rest on
our laurels," emphasizes George Dougan, Evergreen's Chairman, President
and CEO. "Instead, we will continue to maximize new market
opportunities, fill in our natural geographic area, strive for greater
operating efficiency, and remain vigilant in safeguarding asset quality.
Increasing the value of the franchise is an ongoing process--a process
we will continue to undertake with enthusiasm."
"We continuously challenge each area of the bank to produce a return
and ensure the bank's continued performance."
--George L. Fredette, Executive Vice President, Chief Financial
Officer
Evergreen's Leadership
George W. Dougan
Chairman, President and CEO
Evergreen Bancorp, Inc.
John W. Bishop
Construction Executive
Retired
Carl R. DeSantis, Sr.
Vice Chairman and Director
Franchise Associates, Inc.
Robert F. Flacke
President
Fort William Henry Corp.
Director
Finch Pruyn & Co., Inc.
Michael D. Ginsburg
Partner
M & R Ginsburg Partners
Joan M. Mannix
Real Estate Developer
Anthony J. Mashuta
President
Cool Insuring Agency, Inc.
Phillip H. Morse
Chairman of the Board
NAMIC USA Corporation
NAMIC International, Inc.
Retired
William E. Philion
President and CEO
Glens Falls Hospital Retired
Director
Finch Pruyn & Co., Inc.
Alan R. Rhodes
Attorney
Bartlett, Pontiff,
Steward & Rhodes P.C.
Floyd H. Rourke
Chairman of the Board
and President
Sandy Hill Corp. Retired
Director
Finch Pruyn & Co., Inc.
Paul W. Tomlinson
President
Salem Farm Supply, Inc.
Retired
Walter Urda
President
Harpoon of Hudson, Ltd.
Directors Emeriti
F. Earl Bach
Gerald J. Buckley
Dean V. Chandler
Donald S. Creal
John V. Hallett
Donald D. Hanks
Samuel P. Hoopes
Paul E. Lavine
Warren E. Rouillard
Bjarne G. Soderstrom
Henry J.W. Vanderminden III
Executive Officers
George W. Dougan
Chairman, President and CEO
Paul A. Cardinal
Executive Vice President, Corporate Secretary
and General Counsel
Thomas C. Crowley
Executive Vice President
and Chief Credit Officer
George L. Fredette
Executive Vice President, Treasurer
and Chief Financial Officer
Anthony J. Koenig
Executive Vice President
and Chief Administrative Officer
Corporate Management
Larry E. Blanchard
Senior Vice President and Director of Auditing
Michael P. Brassel
Regional President, Plattsburgh Region
Daniel J. Burke
Senior Vice President, Retail Banking
Kenneth J. Cartledge
Senior Vice President, Asset Quality
Patrick T. Day
Vice President and Loan Review Manager
John M. Fullerton
Executive Vice President, Trust & Investment
Barbara B. Glenn
Senior Vice President, Human Resources
Jeffrey B. Rivenburg
Regional President, Capital Region
Douglas P. Sturges
Vice President, Controller
Bank Locations
Glens Falls Region
Glens Falls
Main Office, 237 Glen Street
Glens Falls
Auto Bank, 28 Maple Street*
Bolton Landing
4945 Main Street
Corinth
97 Main Street*
Granville
6 Main Street*
Granville
Auto Bank, 100 Quaker Street*
Greenwich
146 Main Street*
Hudson Falls
124 Main Street
Kingsbury
Main and Washington Streets*
Lake George
350 Canada Street*
Queensbury
Queensbury Plaza, Quaker Road*
Queensbury
Evergreen Plaza, Aviation Road*
Salem
Main Street*
South Glens Falls
99 Main Street*
Warrensburg
137 Main Street*
Capital Region
Albany
125 State Street
Clifton Park
Rt. 146 Shoppers World*
Colonie
1256 Central Avenue*
East Greenbush
71 Troy Road*
Hudson
177 Fairview Avenue*
Latham
One Old Loudon Road*
Mechanicville
3 Park Plaza*
Niskayuna
St. James Square*
*Evergreen ATM locations,
24-hour banking
Capital Region
Advisory Board
J. Eric King
Ronald H. Laberge
Patrick T. Maney
Anthony J. Mashuta
Edward P. McConville
Jeffrey B. Rivenburg
Charles M. Staro
Walter Urda
Plattsburgh Region
Plattsburgh
714 State Route 3*
Plattsburgh
136 Margaret Street*
Keeseville
1744 Route 22*
Peru
2990 Route 22*
Chazy
9679 Route 9*
Plattsburgh Region
Advisory Board
James H. Andre
Michael P. Brassel
Lawrence W. Carpenter
Dean V. Chandler
Henry J. Fortin, Jr.
William O. Morgan
Celine R. Paquette
Peter R. Prescott
Planned for 1998
Current Branches
Evergreen Bancorp
237 Glen Street, Glens Falls, New York 12801 518-792-1151
4510-AR-98
EVERGREEN BANCORP, INC.
FINANCIAL REVIEW
<TABLE>
SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
For the year ended December 31, 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Summary of Operations:
($000 Omitted)
Interest Income $ 76,476 $ 70,533 $ 67,171 $ 60,987 $ 62,612
Interest Expense 34,085 29,349 27,572 21,683 24,532
Net Interest Income 42,391 41,184 39,599 39,304 38,080
Provision for Loan Losses 1,710 1,440 1,800 2,211 15,377
Net Interest Income After
Provision for Loan Losses 40,681 39,744 37,799 37,093 22,703
Other Income 7,031 6,387 6,224 7,516 8,106
Other Expenses 30,917 30,143 32,600 33,528 35,360
Income/(Loss) Before Income Taxes 16,795 15,988 11,423 11,081 (4,551)
Income Tax Expense/(Benefit) 5,468 5,675 3,043 3,816 (1,225)
Net Income/(Loss) $ 11,327 $ 10,313 $ 8,380 $ 7,265 $ (3,326)
Per Share:
Basic Earnings/(Loss) $ 1.26 $ 1.12 $ .89 $ .77 $ (.35)
Diluted Earnings/(Loss) 1.24 1.11 .88 .77 (.35)
Cash Dividends .54 .43 .23 .03 .10
Average Balance Sheet Data (unaudited):
($000 Omitted)
Total Assets $973,448 $889,372 $849,877 $838,236 $871,418
Loans, Net of Unearned Income and Allowance 647,462 616,602 562,368 560,998 584,577
Deposits 839,974 766,474 739,254 740,176 775,359
Stockholders' Equity 86,442 83,985 78,987 72,235 70,739
Return on Equity and Assets:
Return on Average Assets 1.16% 1.16% .99% .87% (.38)%
Return on Average Equity 13.10 12.28 10.61 10.06 (4.70)
Dividend Payout Ratio 42.99 38.58 25.30 3.25 N/A
Average Equity to Average Asset Ratio 8.88 9.44 9.29 8.62 8.12
</TABLE>
Dividend Per Share
1995 0.23
1996 0.43
1997 0.54
Return on Assets Per Share
1995 0.99%
1996 1.16%
1997 1.16%
Return on Equity
1995 10.61%
1996 12.28%
1997 13.10%
Evergreen Bancorp, Inc.
OVERVIEW OF PERFORMANCE
The principal source of earnings for Evergreen Bancorp, Inc. is its single
banking subsidiary, Evergreen Bank, N.A. All discussions herein refer to the
activities of the Company's banking subsidiary unless otherwise noted.
When used in this annual report, the words or phrases "will likely result,"
"are expected to," "will continue," "is anticipated," "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 conditions 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 anticipated 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 obligation
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such events or to reflect the occurrence of anticipated or unanticipated events.
In 1997, the Company earned $11,327,000, or basic earnings per share of
$1.26, compared to 1996 net income of $10,313,000, or $1.12 per share. This
represents a $1,014,000 increase from the prior year. Pretax income in 1997
increased $807,000 to $16,795,000, principally because of increased net interest
income of $1,207,000, offset by an increase in the provision for loan losses of
$270,000. Other income and other expense increased by similar amounts while
taxes declined slightly. Net income for 1996 increased $1,933,000 over 1995
levels due to higher levels of net interest income, a lower provision for loan
losses and lower operating expenses.
Average assets for 1997 totaled $973.4 million, an increase of $84.1
million, or 9.5% from the 1996 average of $889.4 million. This compares to the
1996 increase over 1995 of $39.5 million dollars, or 4.6%. Total assets of the
Company at December 31, 1997 were $1,010.2 million representing the first time
in its history that the Company ended a quarter with assets in excess of one
billion dollars. The return on average assets for 1997 was 1.16% as compared to
1.16% and .99% in 1996 and 1995, respectively.
The return on stockholders' equity improved to 13.1% in 1997 as compared
to 12.3% and 10.6% for 1996 and 1995, respectively. The improvement in
return on equity is primarily due to increased levels of net income.
NET INTEREST INCOME
Net interest income represents the most significant component of the
Company's earnings. Changes in net interest income from period to period result
from increases or decreases in the average balances (volume) of earning assets
and interest bearing liabilities, increases or decreases in the average rates
earned and paid on such assets and liabilities, the Company's ability to manage
its earning asset portfolio and the availability of particular sources of funds
and investment opportunities. The Analysis of Variance in Net Interest Income
Due to Volume and Rates exhibit on page 15 presents an analysis of the increases
and decreases in interest income and interest expense which resulted from
changes in volume and changes in rates during the periods presented therein.
Net interest income on a taxable equivalent basis for 1997 increased
$1,059,000, or 2.5%, from that for 1996. This increase resulted primarily from
an increase in average earning assets. Average earning assets increased $85.8
million or 10.2% from 1996 levels. This increase resulted primarily from higher
levels of taxable loans and securities, which increased $32.7 million and $48.3
million on average, respectively.
The increase in net interest income due to volume was offset by a lower net
interest margin. The net interest margin on a tax equivalent basis decreased by
35 basis points to 4.63% in 1997 compared to 4.98% in 1996. The yield on average
earning assets decreased 16 basis points from 8.47% in 1996 to 8.31% in 1997.
The decrease in yield on taxable loans in 1997 is due to a slightly higher
proportion of lower yielding residential mortgage products.
Average rates paid on interest bearing liabilities increased 18 basis points
to 4.38% in 1997 from 4.20% in 1996. Most of the increased funding in 1997 was
provided by higher yielding time deposits, which increased by $69.8 million on
average over 1996 levels. The significant increase in reliance on time deposits
was related to the Company's promotion of new branches and future increases are
not expected to be as meaningful.
In addition to the effects of the makeup of the loan portfolio and sources
of funding, the margin was also negatively impacted by the relatively flat yield
curve in the latter part of 1997. Many of the Company's loan products, such as
residential mortgage loans, are priced over longer maturity treasury securities,
which did not provide as large an interest rate spread over the Company's
shorter term funding sources as in 1996 and 1995.
In 1996 the net interest margin decreased 9 basis points from 5.07% in 1995.
ANALYSIS OF VARIANCE IN NET INTEREST INCOME DUE TO VOLUME AND RATES
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.
<TABLE>
<CAPTION>
($000 Omitted)
1997 vs. 1996 1996 vs. 1995
Total Increase/(Decrease) Total Increase/(Decrease)
Increase/ Due to Change in Increase/ Due to Change in
(Decrease) Volume Rate (Decrease) Volume Rate
<S> <C> <C> <C> <C> <C> <C>
Interest Income Earned:
Loans
Taxable $1,987 $2,939 $ (952) $4,120 $4,863 $ (743)
Tax-Exempt (125) (120) (5) (534) (280) (254)
Investment Securities
Taxable 3,723 3,287 436 707 384 323
Tax-Exempt (236) (121) (115) (745) (874) 129
Federal Funds Sold/Interest
Bearing Balances 446 425 21 (562) (436) (126)
Change in Total Interest Income 5,795 6,410 (615) 2,986 3,657 (671)
Interest Expense Incurred:
Regular Savings, Interest
Checking and MMDAs 117 115 2 (306) (185) (121)
Time Deposits 4,445 3,903 542 1,704 1,783 (79)
Short-Term Borrowings 126 128 (2) (351) (257) (94)
Long-Term Debt 48 171 (123) 730 709 21
Change in Total Interest Expense 4,736 4,317 419 1,777 2,050 (273)
Change in Net Interest Income $1,059 $2,093 $(1,034) $1,209 $1,607 $ (398)
</TABLE>
<TABLE>
NET INTEREST INCOME -- AVERAGE RATES AND YIELDS
<CAPTION>
($000 Omitted)
1997 1996 1995
Interest Interest Interest
Average Income/ Average Income/ Average Income/
Balance Expense Yield/Rate Balance Expense Yield/Rate Balance Expense Yield/Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans
Taxable $647,233 $ 57,978 8.96% $614,558 $ 55,991 9.11% $561,276 $ 51,871 9.24%
Tax Exempt 12,995 1,005 7.73 14,552 1,130 7.77 17,840 1,664 9.33
Securities
Taxable 233,604 15,966 6.83 185,319 12,243 6.61 179,435 11,536 6.43
Tax Exempt 9,418 798 8.47 10,763 1,034 9.61 19,952 1,779 8.92
Federal Funds Sold/Interest
Bearing Balances 22,994 1,262 5.49 15,248 816 5.35 23,237 1,378 5.93
Total Earning Assets 926,244 77,009 8.31 840,440 71,214 8.47 801,740 68,228 8.51
Allowance for Loan Losses (12,766) (12,508) (16,748)
Cash and Due from Banks 25,048 30,010 28,436
Other Non-Earning Assets 34,559 31,391 36,396
Total Assets $973,085 $889,333 $849,824
Liabilities and
Stockholders' Equity
Regular Savings,
Interest Checking
and MMDAs $345,089 $ 9,612 2.79% $340,951 $ 9,495 2.78% $347,575 $ 9,801 2.82%
Time Deposits 401,196 22,514 5.61 331,403 18,069 5.45 298,703 16,365 5.48
Short-Term Borrowings 6,073 307 5.06 3,536 181 5.12 8,220 532 6.47
Long-Term Debt 25,845 1,652 6.39 23,255 1,604 6.90 12,970 874 6.74
Total Interest-Bearing
Liabilities 778,203 34,085 4.38 699,145 29,349 4.20 667,468 27,572 4.13
Demand Deposits 93,689 94,120 92,976
Other Liabilities 15,114 12,122 9,098
Stockholders' Equity 86,079 83,946 80,282
Total Liabilities and
Stockholders' Equity $973,085 $889,333 $849,824
Net Interest Income
(Tax Equivalent Basis) 42,924 41,865 40,656
Tax Equivalent Adjustment (533) (681) (1,057)
Net Interest Income $ 42,391 $ 41,184 $ 39,599
Net Interest Rate Spread 3.93% 4.27% 4.38%
Net Interest Margin 4.63% 4.98% 5.07%
</TABLE>
Non-accrual loans are included in the above analysis and the related income on
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 statutory Federal income tax rate of 35% in 1997, 1996, and 1995
along with a statutory State income tax rate of 9%, 9.225%, and 9.675% in 1997,
1996 and 1995 respectively.
For the purposes of this analysis, Securities Available for Sale are stated at
average amortized cost and Stockholders' Equity is unadjusted for the effects of
SFAS No. 115.
ALLOWANCE FOR LOAN LOSSES
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 uncollectible 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 Company's allowance for loan losses increased $0.4 million from $12.4
million at December 31, 1996 to $12.8 million at December 31, 1997, reflecting a
stable net charge-off experience notwithstanding a 4.9% increase in average
outstanding loans. At December 31, 1997, the allowance as a percentage of
non-performing loans outstanding was 221.64%, which represents a slight decline
from 232.12% at December 31, 1996. At December 31, 1996 the allowance increased
$0.3 million from $12.1 million at December 31, 1995.
The provision for loan losses amounted to $1.7 million for 1997 compared to
$1.4 million for 1996, an increase of $0.3 million, or 18.8%. The increased
provision, over year earlier levels, was due to increased levels of loan
outstandings and a marginal increase in charge-off experience, primarily in the
installment loan portfolio.
The following table summarizes year-end loan balances, average loans outstanding
and changes in the allowance for loan losses due to loan losses, recoveries and
additions charged to expense:
<TABLE>
<CAPTION>
($000 Omitted)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1997 1996 1995 1994 1993
Amount of Loans Outstanding End of Year
(Less Unearned Income) $679,039 $654,888 $592,198 $577,329 $577,351
Average Loans Outstanding During Year
(Less Average Unearned Income) $660,228 $629,110 $579,116 $580,478 $603,356
Balance of Allowance at Beginning of Year
Loans Charged Off: $ 12,393 $ 12,115 $ 18,752 $ 18,754 $ 13,357
Commercial, Financial and Agricultural (461) (298) (8,569) (4,021) (10,597)
Real Estate (321) (189) (227) (283) (321)
Installment (1,431) (1,227) (742) (477) (919)
Total Loans Charged Off (2,213) (1,714) (9,538) (4,781) (11,837)
Recoveries of Loans Previously Charged Off:
Commercial, Financial and Agricultural 733 389 881 2,275 1,586
Real Estate 9 12 16 84 43
Installment 199 151 204 209 228
Total Recoveries 941 552 1,101 2,568 1,857
Net Loans Charged Off (1,272) (1,162) (8,437) (2,213) (9,980)
Additions to Allowance Charged
to Operating Expense 1,710 1,440 1,800 2,211 15,377
Balance of Allowance at End of Year $ 12,831 $ 12,393 $ 12,115 $ 18,752 $ 18,754
Net Charge-Offs as Percent of Average
Loans Outstanding During Year
(Less Average Unearned Income) .19% .18% 1.46% .38% 1.65%
Net Charge-Offs as Percent of Allowance
at Beginning of Year 10.26 9.59 44.99 11.80 74.72
Allowance as Percent of Loans Outstanding
at End of Year (Less Unearned Income) 1.89 1.89 2.05 3.25 3.25
Allowance as Percent of Non-Performing
Loans Outstanding at End of Year
(Less Unearned Income) 221.64 232.12 204.92 96.54 50.48
</TABLE>
OTHER (NON-INTEREST ) INCOME
Non-interest income increased $644,000, or 10.1%, in 1997 and $163,000, or
2.6%, in 1996 from prior year levels. Trust Department fees increased $205,000,
or 8.6%, in 1997 and $169,000, or 7.6%, in 1996 from prior year levels.
Miscellaneous other income increased $339,000, or 28.3%, in 1997 after a
decrease of $158,000 in 1996, or 11.6%. The increase in other income in 1997
versus 1996 primarily relates to a gain on the sale of leased assets of
$127,000, rental income on ORE property (since sold) of $101,000 and a newly
instituted ATM surcharge that generated $96,000 of income in 1997. The decrease
in other income in 1996 versus 1995 relates to gains on the sale of fixed assets
and additional letter of credit fees in 1995.
<TABLE>
<CAPTION>
($000 Omitted)
1997 1996 1995
<S> <C> <C> <C>
Trust Department
Fees $2,587 $2,382 $2,213
Services Charges on
Deposit Accounts 2,897 2,812 2,791
Net Gain/(Loss) on Security
Transactions 9 (6) (137)
Miscellaneous
Other Income 1,538 1,199 1,357
Total $7,031 $6,387 $6,224
</TABLE>
OTHER (NON-INTEREST) EXPENSE
Non-interest expense increased $774,000, or 2.6%, in 1997 but decreased
$2,457,000, or 7.5%, in 1996 from 1995 levels. The increase from 1996 to 1997
primarily relates to the cost of operating three additional branches in 1997.
The decreases from 1995 to 1996 were primarily due to reductions in FDIC
insurance, a reduction in net loss on other real estate and lower professional
fees during 1996.
Salaries and benefits, which represent over 50% of non-interest expense,
increased $100,000, or 0.6%, in 1997 and $232,000, or 1.5%, in 1996. The
increase in 1997 expense over 1996 relates to merit increases and the staffing
of three new branches established in late 1996 and early 1997, which were
partially offset by lower benefits expense and lower levels of staff in other
areas in 1997. The increase in 1996 over 1995 was primarily the result of merit
increases. The full time equivalent staff was 391, 398 and 392 at year-end 1997,
1996 and 1995, respectively.
FDIC insurance expense was essentially eliminated in 1996 and 1997 for "well
capitalized" banks. However, legislation to recapitalize the Savings and Loan
Insurance Fund requires Bank Insurance Fund members to contribute to the
repayment of FICO bonds. Evergreen's contribution in 1997 was $102,000.
Data processing decreased $40,000, or 1.7%, in 1997, after increasing
$329,000 or 15.7% in 1996. The decrease in 1997 was a result of renegotiating
the contract with the Company's servicer in late 1996. The increase in 1996
relates to the outsourcing of the items processing function in December 1995.
Professional fees increased $40,000 or 3.6% in 1997 after decreasing
$545,000, or 32.9%, in 1996. The increase in 1997 relates to special cost-saving
or revenue enhancing projects that were implemented in 1997. The decrease in
1996 primarily relates to a decreased utilization of outside legal counsel and
consultants engaged to assist in the reduction of non-performing assets.
Occupancy expense increased $347,000 in 1997 after remaining relatively
stable in 1996. The increase in 1997 relates to the three
new branches in the network.
Total non-interest expense as a percentage of average assets was 3.2%, 3.4%
and 3.8% in 1997, 1996 and 1995, respectively. This ratio decreased in 1997 due
to the 9.5% growth in average assets compared to the 2.6% increase in
non-interest expense.
Efficiency Ratio
1995 71.1%
1996 63.4%
1997 62.6%
<TABLE>
<CAPTION>
($000 Omitted)
1997 1996 1995
<S> <C> <C> <C>
Salaries & Benefits $16,141 $16,041 $15,809
Data Processing 2,381 2,421 2,092
Professional Services 1,154 1,114 1,659
Occupancy 2,356 2,009 2,017
Furniture & Equipment 2,001 1,856 1,852
Advertising 877 907 729
Supplies and Printing 864 819 1,038
FICO/FDIC Insurance 102 2 1,065
Net Loss/(Gain) on Other
Real Estate 27 (86) 781
Miscellaneous
Other Expenses 5,014 5,060 5,558
Total $30,917 $30,143 $32,600
</TABLE>
INCOME TAXES
Income tax expense for 1997 was $5.5 million compared to income tax expense
of $5.7 million in 1996.
The effective income tax rates were 33%, 35% and 27% for 1997, 1996 and
1995, respectively. The statutory rate for Federal Income Taxes was 35% in 1997
and 1996, and 34% in 1995. Income taxes for financial reporting purposes differ
from the amount computed by applying the statutory rate to income before taxes.
The difference is due primarily to tax-exempt income from certain loans and
investment securities and non-deductible expenses. The decrease in the effective
tax rate for 1997 is primarily a result of somewhat lower state taxes and the
continuing re-evaluation of reserves related to federal deferred tax assets.
Substantially all of the Company's residential mortgage loan portfolio is held
in a real estate investment trust. The trust provides for improved capital
alternatives and also led to lower income taxes. Refer to Note 10 of the Notes
to Consolidated Financial Statements for a more comprehensive analysis of the
provision for income taxes.
The Company accounts for income taxes in conformity with Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), Accounting for Income
Taxes. This Standard requires what is known as the liability method of
accounting for deferred taxes. The liability method requires recognition of a
tax liability, or asset, for the deferred tax consequences of events as of the
date of the financial statements. Subsequent changes in tax rates and other tax
law provisions are to be reflected in the measurement of those tax liabilities
and assets and are to be recognized in net income when the changes are enacted.
SECURITIES
The Company's securities portfolio in the aggregate totaled $282.9 million
at December 31, 1997, an $85.7 million increase from 1996's balance of $197.2
million. In 1996, the aggregate securities portfolio decreased by $16.7 million
from 1995. The increase during 1997 was the result of a combination of low
commercial and installment loan demand and a significant increase in deposits.
The decrease in the securities portfolio in 1996 was largely attributed to
strong retail loan demand during that year. Securities held to maturity comprise
approximately 12% of the aggregate securities portfolio at December 31, 1997.
This is consistent with management's objective to maintain flexibility and
adequate liquidity by classifying most securities as available for sale. A
portion of the securities portfolio is pledged to secure public deposits,
short-term repurchase agreements and for other purposes. Refer to Note 3 for a
further discussion of pledging.
The following table displays the distribution of the securities portfolio by
major category and maturity:
<TABLE>
<CAPTION>
Securities Available for Sale & Securities Held to Maturity As of December 31,
1997:
($000 Omitted)
U.S. Government State and
& Agency<F1> Political Subdivisions Other Total Securities
Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Yield Value Cost Yield Value Cost Yield Value Cost Yield Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-1 year $ 63,744 6.34% $ 63,881 $ 1,382 6.45% $ 1,397 $ 5 5.44% $ 8 $ 65,131 6.34% $ 65,286
1-5 years 115,212 6.88 115,891 6,402 7.44 6,829 2,141 6.31 2,119 123,755 6.90 124,839
5-10 years 61,354 7.17 61,919 3,549 5.81 3,817 -- -- -- 64,903 7.10 65,736
Over 10
years 25,992 7.55 26,444 1,441 5.41 1,526 -- -- -- 27,433 7.44 27,970
Total $266,302 6.88% $268,135 $12,774 6.65% $13,569 $2,146 6.31% $2,127 $281,222 6.87% $283,831
Avg. Maturity: 3.9 years 5.1 years 2.6 years 3.9years
<FN>
<F1> Includes $141,792 of mortgage-backed securities which are secured by agencies
of the U.S. government.
</FN>
</TABLE>
LOANS
The total loan portfolio, net of unearned income, increased $24.2 million to
$679.0 million at the end of 1997 compared to $654.9 million at year end 1996.
Increases in residential mortgage and commercial loans were offset by decreases
in installment loan balances.
Commercial loans increased by $7.8 million in 1997 to a balance of $232.8
million, following a decrease of $5.4 million in 1996 to $225.0 million. The
increase in the commercial loan portfolio in 1997 is due primarily to the
Company's continued expansion into the Capital Region of New York State. The
current branch expansion into that area has made it more convenient for
previously inaccessible customers to do business with Evergreen. As the economy
of the region as a whole remains flat, meaningful growth in the portfolio
depends on the Company's ability to attract customers from other financial
institutions and/or a significant improvement in the regional economy. The
decrease in the commercial loan portfolio in the years prior to 1997 was
accompanied by significant improvements in the credit quality of the loan
portfolio.
Residential mortgage loans increased to $308.8 million at December 31, 1997,
a $28.0 million increase over 1996's balance of $280.8 million. In 1996,
residential mortgage loans increased by $36.3 million over 1995. The increases
in 1997 and 1996 were attributable to improved efforts in residential mortgage
loan origination.
Installment loans decreased $10.9 million to $135.7 million at December 31,
1997, from $146.5 million as of year end 1996. The decline in installment loan
balances was caused by a payoff of approximately $11.7 million of installment
loans from a car leasing concern acquired by another commercial bank, combined
with average indirect auto demand and below prior year level demand for other
consumer products. A great portion of new installment loans continue to be
secured by first liens on automobiles. During 1997 the Company explored the
possibility of re-entering the credit card receivables business and anticipates
doing so in the first part of 1998. The impact on income in 1998 from this new
line of business is expected to be nominal. Installment loans increased by $31.7
million in 1996 over 1995 primarily due to increased penetration in the
automobile dealer indirect markets and a "Touch-Tone" loan program that made
obtaining small personal loans more convenient for consumers.
<TABLE>
<CAPTION>
The following table sets forth the classification of the Evergreen's
consolidated loans, net of unearned income, by major category:
($000 Omitted)
December 31, 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C
Commercial $232,785 $224,955 $230,373 $257,152 $301,756
Real Estate Construction 1,502 2,265 1,992 2,574 2,538
Residential Mortgage 308,823 280,833 244,575 229,799 204,276
Installment 135,668 146,528 114,874 87,352 67,794
Other 261 307 384 452 987
Total Loans $679,039 $654,888 $592,198 $577,329 $577,351
</TABLE>
NON-PERFORMING ASSETS
Non-performing assets consist of non-performing loans, other real estate and
other forms of repossessed assets. Non-performing loans are composed of: (1)
loans on non-accrual status, (2) loans which are contractually past due 90 days
or more as to interest or principal payments but have not been classified as
non-accrual and (3) loans whose terms have been restructured to provide a
reduction or deferral of interest or principal because of a deterioration in the
financial position of the borrower.
The Company's policy with regard to non-accrual loans varies by the type of
loan involved. Generally, commercial, financial and agricultural loans are
placed on non-accrual status when they are 90 days past due unless they are well
secured and in the process of collection, or when management determines that the
complete recovery of principal and interest is in doubt. As a matter of general
policy, installment loans are charged off after they become 120 days past due
unless they are well secured and in the process of collection; however, in some
instances, installment loans are classified as non-accrual when payments are
past due 120 days. Residential mortgage loans are not generally placed on
non-accrual status unless it is determined that the value or marketability of
real estate securing the loans has deteriorated to the point that a potential
loss of principal or interest exists. Once a loan is placed on non-accrual
status, interest is recorded only as received and only if the loan principal is
deemed fully collectible. Interest payments received on loans not deemed fully
collectible are applied against the principal balance until management
determines that the principal balance is fully collectible. Interest previously
accrued on non-accrual loans which has not been paid is reversed and charged
against income during the period in which the loan is placed on non-accrual
status. Interest on restructured loans is only recognized in current income at
the renegotiated rate and then only to the extent that such interest is deemed
collectible.
Non-performing assets were $7,010,000 at December 31, 1997. This represents
a decrease of $23,000 from $7,033,000 at December 31, 1996. Non-performing loans
increased $450,000 since December 31, 1996 to $5,789,000 at December 31, 1997.
The 1997 decrease in non-performing assets was primarily the result of the sale
of certain OREO properties.
Other real estate net of transfers, losses and write-downs, decreased
$409,000 since December 31, 1996 to $1,067,000 at December
31, 1997.
Non-accrual loans increased $1,046,000 from $3,792,000 at December 31, 1996
to $4,838,000 at December 31, 1997. Management continually evaluates the
adequacy of the collateral on non-performing loans and charges off that portion
of the loan not considered recoverable.
Management considers restructuring a loan when the facts and circumstances
indicate that working with the borrower will maximize potential for principal
repayment while minimizing the risk of loss. At December 31, 1997 the Company
had no restructured loans.
<TABLE>
<CAPTION>
The following table presents information concerning non-performing assets:
($000 Omitted)
December 31, 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Commercial Loans
Non-Accrual $3,887 $3,425 $4,191 $13,951 $32,299
Past Due 90 Days and Still Accruing 424 45 387 1,053 1,430
Restructured -- 133 138 2,656 1,476
Total Non-Performing Commercial 4,311 3,603 4,716 17,660 35,205
Residential Mortgage Loans
Non-Accrual 783 180 334 188 406
Past Due 90 Days and Still Accruing 389 946 491 1,172 1,255
Total Non-Performing Residential Mortgage 1,172 1,126 825 1,360 1,661
Installment Loans
Non-Accrual 168 187 46 -- --
Past Due 90 Days and Still Accruing 138 423 325 405 282
Total Non-Performing Installment 306 610 371 405 282
Total Non-Performing Loans 5,789 5,339 5,912 19,425 37,148
Other Real Estate 1,067 1,476 3,784 10,319 2,750
Repossessed Assets - Other 154 218 76 178 606
Total Non-Performing Assets $7,010 $7,033 $9,772 $29,922 $40,504
Non-Performing Assets as a Percent of Total Loans-
Net of Unearned Income 1.03% 1.07% 1.65% 5.18% 7.02%
Non-Performing loans as a Percent of Total Loans-
Net of Unearned Income .85% .82% 1.00% 3.36% 6.43%
</TABLE>
Of the $4.8 million of loans in non-accrual status as of December 31, 1997,
approximately $3.8 million represents loans which are secured, primarily by real
estate.
At December 31, 1997, the allowance for loan losses as a percent of total
non-performing loans was 221.6 percent which represents a slight decrease from
232.1 percent at December 31, 1996.
In addition to the total non-performing loans set forth above, other
"classified" loans were $8.0 million at December 31, 1997, compared to $15.6
million at December 31, 1996. These are loans for which management has
information which indicates that the borrower may not be able to comply with
present payment terms. Since there is some doubt about the ability of these
borrowers to comply with payment terms, management has taken these loans under
greater consideration in determining the adequacy of the allowance for loan
losses.
CAPITAL
At December 31, 1997, and 1996, stockholders' equity was $88.3 million and
$85.4 million, respectively. This represents an increase of $2.8 million, or
3.3%. This compares to an increase of $2.4 million, or 2.9%, for 1996 versus
1995. The 1997 increase primarily represents the retention of $6.5 million of
earnings in 1997. During 1997, the Company paid $4.9 million in dividends, or
$.54 per share, and purchased approximately 328,500 shares of treasury stock at
an aggregate cost of $5.9 million. The adequacy of the Company's capital is
reviewed by management on an ongoing basis in relation to the size, composition
and quality of the Company's resources and in conjunction with regulatory
guidelines and industry standards.
In early 1990, United States bank regulators issued revised guidelines with
respect to the capital adequacy of banks and bank holding companies. These
guidelines supplement the existing definitions of capital for regulatory
purposes and establish minimum capital standards related to the level of assets
and off-balance sheet exposures, adjusted for credit risk. Specifically, the
guidelines categorize assets on and off-balance sheet into four risk-weightings
and require banking institutions to maintain minimum ratios of capital to
risk-weighted assets. Tier 1 capital is essentially comprised of tangible
stockholders' equity for common stock and certain perpetual preferred stock.
Total Capital includes a portion of the allowance for loan losses, certain
qualifying long-term debt and preferred stock that does not qualify as Tier 1.
The regulatory minimum for Tier 1 capital is 4.0% of risk-adjusted assets while
the minimum for Total Capital is 8.0%.
The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and
the Federal Deposit Insurance Corporation Improvement Act (FDICIA) are laws
enacted that have or will change various aspects of the banking industry (see
Note 13 to the financial statements). In part these laws deal with regulatory
oversight and reporting.
<TABLE>
<CAPTION>
The following table sets forth the Company's risk based capital ratios as of
December 31, 1997 and 1996, and the related minimum
regulatory guidelines:
Evergreen Evergreen Minimum
Regulatory Bancorp, Inc. Bancorp, Inc. Regulatory
Ratios Dec. 31, 1997 Dec. 31, 1996 Guidelines
<S> <C> <C> <C>
Leverage 8.6% 9.2% 3.0%
Tier 1 Capital 13.5 13.7 4.0
Total Capital 14.8 14.9 8.0
Rate of Internal Capital Generation
1997 1996 1995
Return on Average Assets 1.16% 1.16% .99%
Average Equity to
Average Assets 8.88 9.44 9.29
Return on Average Equity 13.10 12.28 10.61
Earnings Retention Ratio 57.01 61.42 74.70
Internal Capital
Generation Ratio<F1> 7.47 7.54 7.93
<FN>
<F1> Return on average equity times the earnings retention ratio equals the
internal capital generation ratio.
</FN>
</TABLE>
LIQUIDITY
Liquidity represents a banking enterprise's continuing ability to meet its
funding needs, such as loan demand and the maturity or withdrawal of deposits
and other financial obligations. In addition to maintaining liquid assets,
factors such as capital position, profitability, asset quality and availability
of funding, affect a bank's ability to meet its liquidity needs. The Company's
primary sources of liquidity continue to be federal funds sold, securities
available for sale and investment securities maturing within one year.
Other sources of liquidity include repayment of loans and the federal funds
market (a system that banks use to trade surplus funds). There is also balance
sheet liquidity in the form of assets that can collateralize securities to be
offered for sale or borrowings. The Company has the availability to borrow up to
$90.1 million from the Federal Home Loan Bank of New York (FHLB) (upon purchase
of required FHLB stock) through its line of credit program. In addition, the
bank is eligible to borrow up to 30% of assets under the FHLB advance program
subject to FHLB stock level requirements, collateral requirements and individual
advance approvals based on FHLB credit standards. The Company also has the
availability to borrow up to $11.6 million at the Federal Reserve Discount
Window along with informal federal funds purchase agreements with correspondent
banks of up to $30.5 million. When the Company experiences a net outflow of
funds, maturing investments are not reinvested until sufficient excess funds are
available. The Company sold on average $22.7 million daily in federal funds
during 1997. In contrast, purchases and other short-term borrowings averaged
$6.1 million during 1997. Net cash provided by operating activities was $17.0
million for 1997 as compared to $15.3 million for 1996. Net cash used by
investing activities was $112.7 million in 1997 compared to net cash used of
$49.3 million in 1996. This is primarily a result of increased purchases of
securities available for sale and held to maturity of $96.1 million, compared to
the prior year. Net cash provided by financing activities increased $19.6
million to $66.2 million in 1997. This increase is primarily a result of a $23.4
million increase in short-term borrowings. The level of cash and cash
equivalents was $26.6 million at December 31, 1997.
The Parent Company (see Note 18 to the financial statements) held cash and
liquid assets of $3.1 million at December 31, 1997.
ASSET/LIABILITY MANAGEMENT
The Company, in order to insure that the risk to earnings from changes in
interest rates is maintained within acceptable limits, manages these risks
through its Asset/Liability management function.
Asset/Liability management at Evergreen consists primarily of interest rate
sensitivity "gap" analysis and simulations of net interest income under
alternative balance sheet structures incorporating a "rate shock" to measure
earnings volatility due to an immediate increase or decrease in market interest
rates of up to 200 basis points. The Company has established guidelines for
acceptable levels of interest rate risk and monitors the effects of changing
interest rates and potential changes in interest rates on a continuous basis
under the supervision of the corporate Asset/Liability Committee.
<TABLE>
<CAPTION>
The following table shows the interest rate sensitivity gaps as of December 31,
1997:
($000 Omitted)
Balance Maturing or Subject to Repricing
After 3 Mo. After 1 Year
Within But Within But Within After
3 Months 1 Year 5 Years 5 Years Total
at December 31, 1997
<S> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Securities Available for Sale at Amortized Cost $ 44,963 $ 44,092 $143,141 $ 14,371 $ 246,567
Securities Held to Maturity 7,664 14,086 7,915 4,990 34,655
Total Loans 202,778 120,788 266,608 88,865 679,039
Other Earning Assets 162 -- -- -- 162
Total Interest-Earning Assets $255,567 $178,966 $417,664 $108,226 $ 960,423
Excess Fair Value Over Cost of Securities
Available for Sale 1,678
Other Assets 48,060
Total Assets $1,010,161
Interest-Bearing Liabilities:
Savings, Interest Checking and MMDA $138,113 $ -- $201,357 $ -- $ 339,470
Time Deposits 138,379 141,322 129,140 3,020 411,861
Short-Term Debt 27,108 100 -- -- 27,208
Long-Term Debt 245 215 17,809 7,441 25,710
Total Interest-Bearing Liabilities $303,845 $141,637 $348,306 $ 10,461 $ 804,249
Demand Deposits 102,345
Other Liabilities & Equity 103,567
Total Liabilities & Equity $1,010,161
Interest Rate Sensitivity Gap $(48,278) $37,329 $ 69,358 $ 97,765
Cumulative Interest Rate Sensitivity Gap $(48,278) $(10,949) $58,409 $156,174 $ 156,174
</TABLE>
Interest rate gap analysis provides a static viewpoint of the repricing
characteristics of the entire balance sheet. It is prepared by scheduling assets
and liabilities into time bands based on their next opportunity to reprice.
In computing the interest rate sensitivity gap, securities available for
sale and securities held to maturity are determined to reprice at the earlier of
maturity (including scheduled monthly principal repayments and anticipated
principal prepayments of securities collateralized by mortgages) or the
contractual repricing date. Monthly amortization of fixed rate mortgage loans
has been adjusted to reflect anticipated principal prepayments. All other loans
are presented based on contractual terms. Savings, Interest Checking and Money
Market Deposit Accounts are allocated based on management assumptions as to
their interest rate sensitivity over an entire interest rate cycle even though
they are subject to immediate withdrawal.
At December 31, 1997 the Company exhibited a slightly negative, or liability
sensitive, cumulative one year gap position. Consequently, if interest rates
fall, and all other variables remained fixed, it may be assumed that net
interest income would increase. Were rates to increase, net interest income
might be expected to decrease if all other variables remained constant.
Simple gap analysis measures the Company's exposure at a particular point in
time. Moreover, gap analysis does not adequately reveal timing differences
within broad time frames, delays in the repricing of certain assets or
liabilities when market rates change, or changes in spreads between different
markets. Accordingly, management supplements its gap analysis with simulation
analysis of net interest income under a variety of alternative market interest
rate scenarios. The Company's simulation modeling indicates the potential
changes to net interest income under the various rate shock scenarios employed
are well within the guidelines of acceptable levels.
The Company does not currently utilize derivative instruments such as
interest rate options, futures, or swaps to manage the Company's interest rate
risk, although it may do so from time to time in the future.
<TABLE>
<CAPTION>
The following table sets forth the maturities of the Company's consolidated loan
portfolio, excluding Real Estate Mortgage, Installment, and Other Loans (loans
are categorized based on the contract time period rather than based on when the
loan reprices):
($000 Omitted)
Within Within After
Loans at December 31, 1997, Maturing: 1 Year<F1> 1 to 5 Years 5 Years Total
<S> <C> <C> <C> <C>
Commercial $ 51,916 $ 87,802 $ 93,067 $ 232,785
Real Estate Construction 1,502 -- -- 1,502
Total $ 53,418 $ 87,802 $ 93,067 $ 234,287
Loans Maturing After 1 Year:
With Pre-Determined Interest Rate $ 33,559
With Floating Interest Rate 147,310
Total $ 180,869
<FN>
<F1> Includes demand loans having no stated schedule of prepayments and no stated
maturity and certain time loans that, in the ordinary course of business,
will be renewed, in whole or in part as to principal amount, at interest
rates prevailing at the date of renewal.
</FN>
</TABLE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A derivative financial instrument includes futures, forwards, interest rate
swaps, option contracts, and other financial instruments with similar
characteristics. The Company currently does not enter into futures, forwards,
swaps, or options. However, the Company is party to financial instruments with
off-balance sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include commitments to
extend credit and standby letters of credit. These instruments involve to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated balance sheets. Commitments to extend
credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have fixed
expiration dates and may require collateral from the borrower if deemed
necessary by the Company. Standby letters of credit are conditional commitments
issued by the Company to guarantee the performance of the customer to a third
party up to a stipulated amount and with specified terms and conditions.
Commitments to extend credit and standby letters of credit are not recorded
as an asset or liability by the Company until the instrument is exercised.
The Company's exposure to market risk is reviewed on a regular basis by the
Asset/Liability Committee. Interest rate risk is the potential of economic
losses due to future interest rate changes. These economic losses can be
reflected as a reduction in future net interest income and/or a decrease of
current fair market values. The objectives are to measure the effect on net
interest income in order to appropriately adjust the balance sheet to minimize
the inherent risk and at the same time maximize income. Management realizes
certain risks are inherent and that the goal is to identify and minimize the
risks. Tools used by management include the standard GAP report and interest
rate shock simulation reports. The Company has no market risk sensitive
instruments held for trading purposes. Management believes the Company's market
risk is reasonable at this time.
<TABLE>
<CAPTION>
The following table presents the scheduled maturity of market risk sensitive
instruments at December 31, 1997:
($000 Omitted)
Table of Market Risk Sensitive Instruments
Maturing in: Year 1 Year 2 Year 3 Year 4 Year 5 Thereafter Total
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Securities $110,805 $ 74,674 $ 49,765 $19,833 $ 6,784 $ 21,039 $282,900
Loans 189,904 95,072 74,097 62,763 38,392 218,811 679,039
Total $300,709 $169,746 $123,862 $82,596 $45,176 $239,850 $961,939
Liabilities
Savings, Interest Checking and
Money Market Deposits $138,113 $201,357 $ -- $ -- $ -- $ -- $339,470
Time Deposits 279,701 89,462 25,950 8,600 5,128 3,020 411,861
Short-Term Borrowings 27,208 -- -- -- -- -- 27,208
Long-Term Borrowings 460 487 6,604 10,347 371 7,441 25,710
Total $445,482 $291,306 $ 32,554 $18,947 $ 5,499 $ 10,461 $804,249
</TABLE>
<TABLE>
Table of Market Sensitive Instruments Total Average Interest Rate Estimated Fair Value
<S> <C> <C> <C>
Assets
Securities $282,900 6.87% $283,831
Loans 679,039 8.89 671,630
Liabilities
Savings, Interest Checking and Money Market Deposits $339,470 2.78% $339,470
Time Deposits 411,861 5.61 411,663
Short-Term Borrowings 27,208 6.21 27,208
Long-Term Borrowings 25,710 6.39 26,072
</TABLE>
CAPITAL EXPENDITURES AND COMMITMENTS
During 1997, the Company incurred approximately $2.9 million in capital
expenditures. These expenditures included $1.3 million spent on two new branch
locations in the Capital Region of New York State, the relocation of a third
branch in that region and additional improvements to the regional headquarters
in Latham, New York. The balance of capital expenditures was utilized to
purchase data processing equipment and software, upgrade teller platforms,
replace company vehicles, purchase ATM's and improve building facilities.
Capital expenditures of $3.3 million in 1996 consisted of substantially the same
type of items as 1997 with the exception of the purchase and refurbishing of the
Latham, New York branch and regional headquarters totaling $1.8 million.
The Company has committed to certain capital expenditures as of December 31,
1997. The Company anticipates the opening of two new branches in 1998, requiring
$0.8 million in capital expenditures. In addition, technology improvements are
anticipated to cost $0.5 million while general branch and facilities upgrades
and furniture/fixtures and equipment expenditures are estimated at $0.6 million
during 1998.
Like other financial institutions, the Company expects to incur substantial
costs to assure that its computer operating systems are Year 2000 compliant. The
Company has developed a detailed plan, involving senior management, staff and
outside vendors, designed to bring the Company into compliance by December 1998.
As part of the Year 2000 compliance program, management has determined that
the Company should convert core computer systems and change item processing
vendors during 1998. The new systems will enhance the Company's computer and
item processing capabilities and will provide for a base operating system that
is Year 2000 compliant. Capitalized costs resulting from the conversions are
expected to approximate $0.9 million. In addition, one-time expenses related to
the conversions are estimated to total approximately $0.4 million in 1998. These
preliminary cost estimates will change as the Company enters into contracts with
outside vendors and as assessments of the project are modified.
DESCRIPTION OF BUSINESS
Evergreen Bancorp, Inc. is registered as a bank holding company with the
Board of Governors of the Federal Reserve System under the Bank Holding Company
Act of 1956. It is regulated and supervised by the Board of Governors of the
Federal Reserve System. The Company has as its principal assets, the outstanding
shares of Evergreen Bank, N.A. Outside of its ownership of Evergreen Bank, N.A.,
the Company owns only a nominal amount of assets, including an inactive venture
capital subsidiary.
Evergreen Bank, N.A.'s principal banking office is located at 237 Glen
Street, Glens Falls, New York. In addition it operates 25 branches located in
eight counties in northeastern New York State as well as drive-in facilities in
Glens Falls and Granville and a separate operations center in downtown Glens
Falls. At December 31, 1997 Evergreen Bank, N.A. had assets of $1,002.1 million,
deposits of $853.7 million and equity of $83.4 million.
Evergreen Bank, N.A. is a member of the Federal Reserve System and is
subject to regulations and supervision by the Federal Reserve and the Office of
the Comptroller of the Currency. Through Evergreen Bank, N.A., the holding
company engages in commercial and retail banking as well as trust services. A
complete range of banking services is provided including all forms of demand
deposits, time deposits and repurchase agreements as well as installment,
residential mortgage and business loans.
Evergreen Bank, N.A. offers safe deposit facilities, night depository,
debit and credit cards and collection services. In
addition, Evergreen Bank, N.A. facilitates municipal bond transactions for
customers and provides computer services with respect to
payroll processing and account reconciliation.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
($000 Omitted)
(Except Per Share Data)
<S> <C> <C> <C>
For the year ended December 31, 1997 1996 1995
Interest Income
Interest and Fees on Loans $58,692 $56,794 $52,971
Interest and Dividends on Securities Available
for Sale and Held to Maturity:
U.S. Government and Agency Obligations 15,212 11,369 10,550
State and Municipal Obligations 872 1,095 1,718
Other 438 459 554
Interest on Balances with Banks 23 4 17
Interest on Federal Funds Sold 1,239 812 1,361
Total Interest Income 76,476 70,533 67,171
Interest Expense
Interest on Deposits:
Regular Savings, Interest Checking and
Money Market Deposit Accounts 9,612 9,495 9,801
Certificates of Deposit (in Denominations of
$100,000 or More) 5,060 3,713 3,492
Other Time 17,454 14,356 12,873
Interest on Short-Term Borrowings 307 181 532
Interest on Long-Term Debt 1,652 1,604 874
Total Interest Expense 34,085 29,349 27,572
Net Interest Income 42,391 41,184 39,599
Provision for Loan Losses 1,710 1,440 1,800
Net Interest Income after Provision for Loan Losses 40,681 39,744 37,799
Other Income
Trust Department Income 2,587 2,382 2,213
Service Charges on Deposit Accounts 2,897 2,812 2,791
Net Gain/(Loss) on Security Transactions 9 (6) (137)
Other 1,538 1,199 1,357
Total Other Income 7,031 6,387 6,224
Other Expense
Salaries and Employee Benefits 16,141 16,041 15,809
Data Processing 2,381 2,421 2,092
Professional Services 1,154 1,114 1,659
Net Occupancy Expense of Bank Premises 2,356 2,009 2,017
Furniture and Equipment Expense 2,001 1,856 1,852
Net Loss/(Gain) on Other Real Estate 27 (86) 781
Other 6,857 6,788 8,390
Total Other Expense 30,917 30,143 32,600
Income Before Income Taxes 16,795 15,988 11,423
Income Tax Expense 5,468 5,675 3,043
Net Income $11,327 $10,313 $ 8,380
Average Shares Outstanding 8,995 9,229 9,430
Basic Earnings Per Share $ 1.26 $ 1.12 $ .89
Diluted Earnings Per Share $ 1.24 $ 1.11 $ .88
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
CONSOLIDATED STATEMENTS OF CONDITION
<CAPTION>
($000 Omitted)
As of December 31, 1997 1996
<S> <C> <C>
Assets
Cash and Cash Equivalents:
Cash and Due from Banks $ 26,596 $ 33,430
Federal Funds Sold -- 22,700
Total Cash and Cash Equivalents 26,596 56,130
Securities Available for Sale 248,245 177,140
Securities Held to Maturity 34,655 20,028
Loans 680,878 659,153
Less: Allowance for Loan Losses (12,831) (12,393)
Less: Unearned Income (1,839) (4,265)
Net Loans 666,208 642,495
Bank Premises and Equipment, Net 16,308 15,278
Other Real Estate Owned 1,067 1,476
Other Assets 17,082 16,102
Total Assets $1,010,161 $928,649
Liabilities
Deposits:
Demand $ 102,345 $ 92,737
Regular Savings, Interest Checking Accounts and Money
Market Deposit Accounts 339,470 350,762
Certificates of Deposit (In Denominations of $100,000 or More) 110,189 79,808
Other Time 301,672 277,549
Total Deposits 853,676 800,856
Short-Term Borrowings 27,208 3,846
Accrued Taxes and Other Liabilities 15,311 12,270
Long-Term Debt 25,710 26,238
Total Liabilities 921,905 843,210
Stockholders' Equity
Common Stock $3.33 Par Value: Shares Authorized 20,000,000,
Shares Issued 9,633,966 in 1997 and 1996 32,113 32,113
Surplus 6,787 6,787
Undivided Profits 59,225 53,149
Market Over Cost of Securities Available For Sale Net
of Deferred Tax 1,007 24
Common Stock Subscribed by ESOP (640) (808)
Treasury Stock (727,256 shares in 1997 and 514,158 shares in 1996) (10,236) (5,826)
Total Stockholders' Equity 88,256 85,439
Total Liabilities and Stockholders' Equity $1,010,161 $928,649
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
($000 Omitted)
Market Common
Over/(Under) Stock
Common Undivided Cost of Subscribed Treasury
Stock Surplus Profits Securities By ESOP Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 15,884 $ 6,141 $ 56,811 $ (3,857) $ (1,120) $ (258) $ 73,601
Net Income--1995 -- -- 8,380 -- -- -- 8,380
Cash Dividends
($.23 per share) -- -- (2,126) -- -- -- (2,126)
Stock Issued (91,460 shares) 152 539 -- -- -- -- 691
Purchase of Treasury Stock
( 205,818 shares) -- -- -- -- -- (1,985) (1,985)
Stock Vested in ESOP -- -- -- -- 153 -- 153
Change in Valuation
Allowance on Securities
Available for Sale -- -- -- 4,331 -- -- 4,331
Balance at December 31, 1995 16,036 6,680 63,065 474 (967) (2,243) 83,045
Net Income--1996 -- -- 10,313 -- -- -- 10,313
Cash Dividends
($.43 per share) -- -- (3,979) -- -- -- (3,979)
Stock Issued (12,000 shares) 21 107 -- -- -- -- 128
Two-for-One Stock Split 16,056 -- (16,056) -- -- -- --
Stock Grants, Awards and Options
Exercised (75,392 shares) -- -- (194) -- -- 803 609
Purchase of Treasury Stock
( 345,012 shares) -- -- -- -- -- (4,386) (4,386)
Stock Vested in ESOP -- -- -- -- 159 -- 159
Change in Valuation
Allowance on Securities
Available for Sale -- -- -- (450) -- -- (450)
Balance at December 31, 1996 32,113 6,787 53,149 24 (808) (5,826) 85,439
Net Income--1997 -- -- 11,327 -- -- -- 11,327
Cash Dividends
($ .54 per share) -- -- (4,869) -- -- -- (4,869)
Stock Grants, Awards and Options
Exercised (115,402 shares) -- -- (382) -- -- 1,467 1,085
Purchase of Treasury Stock
(328,500 shares) -- -- -- -- -- (5,877) (5,877)
Stock Vested in ESOP -- -- -- -- 168 -- 168
Change in Valuation
Allowance on Securities
Available for Sale -- -- -- 983 -- -- 983
Balance at December 31, 1997 $ 32,113 $ 6,787 $ 59,225 $ 1,007 $ (640) $(10,236) $ 88,256
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
($000 Omitted)
For the Year Ended December 31, 1997 1996 1995
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 11,327 $ 10,313 $ 8,380
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Net Change in Unearned Loan Fees 53 50 52
Net Change in Other Assets and Other Liabilities 1,948 2,308 707
(Gain)/Loss on Sale of Loans, Securities and Other Real Estate (45) (287) 136
(Increase)/Decrease in Net Deferred Tax Asset (541) (932) 1,489
Write-Down of Other Real Estate 144 279 781
Loss on Disposition of Assets 36 164 --
Depreciation 1,791 1,533 1,515
Provision for Loan Losses 1,710 1,440 1,800
Amortization of Premiums & Accretion of Discounts
on Securities, Net 583 433 214
Net Cash Provided By Operating Activities 17,006 15,301 15,074
Cash Flows From Investing Activities:
Proceeds from Sales of Securities Available for Sale 532 6,753 8,404
Proceeds from Maturities of Securities Available for Sale 54,423 51,517 42,278
Purchases of Securities Available for Sale (124,951) (45,794) (73,505)
Proceeds of Maturities of Securities Held to Maturity 7,230 8,077 23,021
Purchases of Securities Held to Maturity (21,903) (4,996) (10,361)
Proceeds from Sales of Loans 2,596 3,124 18,480
Change in Check Overdraft Receivables (49) 223 331
Proceeds from Sales of Other Real Estate 1,654 2,911 8,340
Net Increase in Loans (29,376) (67,838) (44,754)
Capital Expenditures (2,857) (3,281) (1,263)
Net Cash Used by Investing Activities (112,701) (49,304) (29,029)
Cash Flows From Financing Activities:
Net Increase in Deposits 52,820 50,632 14,403
Net Increase/(Decrease) in Short-Term Borrowings 23,362 586 (1,158)
Payments on Long-Term Debt (360) (7,078) (341)
Proceeds from Issuance of Long-Term Debt -- 10,000 13,500
Proceeds from Sale of Common or Treasury Stock 1,085 737 691
Payments for Purchase of Treasury Stock (5,877) (4,386) (1,985)
Dividends Paid (4,869) (3,979) (2,126)
Net Cash Provided by financing Activities 66,161 46,512 22,984
Net (Decrease)/Increase in Cash and Cash Equivalents (29,534) 12,509 9,029
Cash and Cash Equivalents at Beginning of Year 56,130 43,621 34,592
Cash and Cash Equivalents at End of Year $ 26,596 $ 56,130 $ 43,621
Supplemental Disclosure of Cash Flows:
Interest Paid $ 33,651 $ 28,973 $ 28,271
Taxes Paid $ 3,803 $ 6,678 $ 3,388
</TABLE>
Certain properties which were foreclosed upon or title was otherwise transferred
to the Company were transferred from loans to other real estate in the amount of
$1,374,000, $589,000 and $2,586,000 in 1997, 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
$168,000, $159,000 and $153,000 in 1997, 1996 and 1995, respectively.
As a result of the adoption of SFAS No. 115, securities available for sale are
recorded at fair value. The unrealized gain on these securities was $1,678,000
at December 31, 1997. The adjustment to stockholders' equity for the unrealized
gain was $1,007,000 net of deferred income tax expense of $671,000 which is
included as a decrease in the deferred tax asset. At December 31, 1996
securities available for sale had an unrealized gain of $41,000. The adjustment
to stockholders' equity, net of deferred income tax expense of $17,000, was
$24,000.
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Evergreen Bancorp, Inc. (Company) and
its subsidiaries, are in accordance with generally accepted accounting
principles and general practices within the banking industry. The following is a
summary of the significant accounting policies used in the preparation of the
consolidated financial statements.
Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries after elimination of significant inter-company
accounts and transactions.
Securities
Management determines the appropriate classification of securities at the time
of purchase. If management has the positive intent and the Company has the
ability at the time of purchase to hold securities until maturity, they are
classified as securities held to maturity and carried at amortized historical
cost. If securities are purchased for the purpose of selling them in the near
term, they are classified as trading securities and are reported at fair value
with unrealized holding gains and losses reflected in current earnings. All
other debt and equity securities are classified as securities available for sale
and are reported at fair value, with net unrealized gains and losses reported,
net of income taxes, as a separate component of stockholders' equity. Premiums
are amortized and discounts accreted using a method which approximates the
level-yield method. Gains or losses on security transactions are based on the
adjusted cost of specific securities sold. Securities gains and losses are
included in other income.
Loans
Loans are stated at the principal amount outstanding, net of unearned discount
and deferred fees. Interest on loans is computed by methods which result in
level rates of return on principal amounts outstanding. Net deferred fees are
amortized as yield adjustments using methods that provide for a constant
level-yield on the loan.
Commercial loans which are 90 days past due are placed on non-accrual status
unless they are well secured and in the process of collection, or when
management determines that the complete recovery of principal and interest is in
doubt. Installment loans are generally charged off after they become 120 days
past due. Residential mortgage loans are not generally placed on non-accrual
status unless the value of the real estate has deteriorated to the point that a
potential loss of principal or interest exists. Amortization of related deferred
fees is suspended when a loan is placed on non-accrual status.
Allowance for Loan Losses
The allowance for loan losses is utilized to absorb losses in the loan
portfolio. Provisions for loan losses are charged to operating expense and added
to the allowance for loan losses. Losses are charged and recoveries are credited
to the allowance for loan losses. In accordance with SFAS No. 114 and SFAS No.
118, the allowance on loans that are identified for evaluation by the standards,
primarily commercial loans, is based on discounted cash flows using the initial
effective interest rate or the fair value of the collateral for certain
collateral dependent loans. The allowance is maintained at a level deemed
appropriate by management to adequately provide for known and inherent risks in
the present portfolio. This evaluation is inherently subjective as it requires
material estimates including the amounts and timing of future cash flows
expected to be received on impaired loans that may be susceptible to significant
change. While management uses available information to recognize losses on
loans, future additions to the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Company's allowance
for losses on loans. Such agencies may require the Company to recognize
additions to the allowance based on their judgements of information available to
them at the time of examination.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation and amortization of bank premises and equipment and leasehold
improvements are calculated primarily by the straight-line method over an
estimated useful life ranging from 3 to 40 years for financial reporting
purposes and by accelerated methods for income tax purposes.
Other Real Estate
Includes real estate held for sale which has been acquired through foreclosure
or a similar conveyance of title. These assets are reported at the lower of the
carrying value of the loan or the fair value less estimated costs to sell. Fair
value is determined by appraisal of the asset. Any asset write down within 90
days of the date of acquisition is charged to the allowance for loan losses.
Subsequent write down, gain or expense incurred is included in other
non-interest expense.
Income Taxes
In accordance with SFAS No. 109, certain income and expense items are reported
in different time periods for financial statement purposes, than for income tax
purposes. Deferred income taxes are provided in recognition of such differences.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 125 (SFAS No.
125), which provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishment of liabilities based
on consistent application of a financial components approach that focuses
on control. The Company adopted SFAS No. 125 as of January 1, 1997. The
adoption of SFAS No. 125 did not have a material impact on the consolidated
financial statements.
Earnings Per Share
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share," which
establishes standards for computing and presenting earnings per share (EPS).
This Statement supersedes Accounting Principals Board Opinion No. 15, "Earnings
per Share," and related interpretations. SFAS No. 128 replaces the presentation
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 computation to the numerator and
denominator of the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
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 that then shared in the earnings of the entity. This Statement
is effective for financial statements issued for periods ending after December
15, 1997, including interim periods. The Company adopted SFAS No. 128 and has
reported and displayed EPS in accordance with the new Statement.
Statement of Cash Flows
Cash and cash equivalents as shown in the Consolidated Statements of Condition
and Statements of Cash Flow consist of cash, balances due from banks and federal
funds sold.
Financial Instruments
The Company is a party to certain financial instruments with offbalance sheet
risk such as commitments to extend credit and standby letters of credit. The
Company's policy is to record such instruments when funded.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
Recent Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standard No. 130
(SFAS No. 130), "Reporting Comprehensive Income," which establishes standards
for reporting and display of comprehensive income and its components in
financial statements. SFAS No. 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. This Statement is effective for both
interim and annual periods beginning after December 15, 1997. As required, the
Company will adopt the reporting requirements of this Statement in the first
quarter of 1998.
In June 1997, the FASB issued Statement of Financial Accounting Standard No.
131 (SFAS No. 131), "Disclosures about Segments of an Enterprise and Related
Information," which establishes standards for reporting by public companies
about operating segments of their business. SFAS No. 131 also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. This Statement is effective for periods
beginning after December 15, 1997. As required, the Company will adopt the
reporting requirements of this Statement in the first quarter of 1998.
NOTE 2 CASH BALANCES
Cash balances on deposit at the Federal Reserve to meet regulatory
requirements amounted to $1,441,000 on December 31, 1997 and
$7,207,000 on December 31, 1996.
NOTE 3 SECURITIES
The amortized cost and estimated fair value of securities available for sale at
December 31, 1997 by maturity, are shown in the accompanying table. Securities
available for sale are listed by contractual maturity except for collateralized
mortgage obligations which are listed by average life. Expected maturities will
differ from contractual maturities because issuers may have the right to call
or prepay obligations with or without call or prepayment penalties.
Securities available for sale carried at $170,394,000 on December 31, 1997
and $159,197,000 on December 31, 1996 were pledged to secure public deposits,
short-term repurchase agreements, and for other purposes.
Proceeds from sales of securities available for sale during 1997, 1996 and
1995 were $532,000, $6,753,000, and $8,404,000 respectively. Gross gains of
$9,000, $31,000 and $31,000 were realized on those sales during 1997, 1996 and
1995, respectively. No gross losses were realized in 1997, and gross losses of
$57,000 and $168,000 were realized during 1996 and 1995, respectively.
<TABLE>
<CAPTION>
($000 Omitted)
Estimated
Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 63,749 $ 63,889
Due after one year
through five years 112,352 112,995
Due after five years
through ten years 49,346 49,855
Due after ten years 4,000 4,170
Mortgage-backed securities due
after ten years 17,120 17,336
Total $ 246,567 $248,245
</TABLE>
<TABLE>
<CAPTION>
Securities Available For Sale at December 31, 1997, and 1996 were as follows:
($000 Omitted)
1997 1996
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
& Agency Obligations $102,629 $1,008 $ 3 $103,634 $ 33,049 $156 $ 18 $ 33,187
Mortgage-backed
Securities 141,792 1,144 452 142,484 141,021 803 858 140,966
Other Securities 2,146 3 22 2,127 3,029 2 44 2,987
Total $246,567 $2,155 $477 $248,245 $177,099 $961 $920 $177,140
</TABLE>
Securities Held to Maturity at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
($000 Omitted)
1997 1996
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
& Agency Obligations $21,881 $141 $ 5 $22,017 $ 9,046 $170 $-- $ 9,216
State & Political
Subdivisions 12,774 795 -- 13,569 10,982 818 -- 11,800
Total $34,655 $936 $ 5 $35,586 $20,028 $988 $-- $21,016
</TABLE>
The amortized cost and estimated fair value of Securities Held to Maturity
at December 31, 1997 by maturity, are shown in the accompanying table.
Securities Held to Maturity are listed by contractual maturity. Expected
maturities will differ from contractual maturity because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
Securities Held to Maturity carried at $32,472,000 on December 31, 1997 and
$17,744,000 on December 31, 1996 were pledged to secure public deposits,
short-term repurchase agreements, and for other purposes.
There were no proceeds from sales recorded during 1997, 1996 or 1995.
During 1996, gross gains of $20,000 were realized on
securities called prior to maturity.
<TABLE>
<CAPTION>
($000 Omitted)
Estimated
Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 1,382 $ 1,397
Due after one year
through five years 11,403 11,844
Due after five years
through ten years 15,557 15,881
Due after ten years 6,313 6,464
Total $34,655 $35,586
</TABLE>
<TABLE>
NOTE 4 LOANS
<CAPTION>
Loans at December 31, 1997 and 1996 were as follows:
($000 Omitted)
1997 1996
<S> <C> <C>
Commercial $233,296 $225,420
Residential Mortgage 310,839 283,664
Installment 136,480 149,745
Other 263 324
680,878 659,153
Less:
Allowance for Loan Losses 12,831 12,393
Unearned Income 1,839 4,265
14,670 16,658
Net Loans $666,208 $642,495
</TABLE>
The following table presents information concerning non-performing loans:
<TABLE>
<CAPTION>
($000 Omitted)
December 31, 1997 1996 1995
<S> <C> <C> <C>
Non-Accrual $ 4,838 $ 3,792 $ 4,571
Past Due 90 Days 951 1,414 1,203
Restructured -- 133 138
Total $ 5,789 $ 5,339 $ 5,912
</TABLE>
At December 31, 1997 and 1996 the recorded investment in loans considered
to be impaired under SFAS No. 114 was $4,838,000 and $3,792,000, respectively.
Included in these amounts is $724,000 and $586,000, respectively, of impaired
loans for which the related allowance for credit losses is $310,000 and
$134,000, respectively. Also included are $4,114,000 and $3,206,000,
respectively of impaired loans, that as a result of write downs, do not have a
specific allowance for credit losses. The average recorded investment in
impaired loans during the years ended December 31, 1997, 1996 and 1995 was
approximately $4,715,000, $4,151,000 and $10,708,000 respectively. For the
years ended December 31, 1997, 1996 and 1995 the Company recognized interest
income on impaired loans of $380,000, $342,000 and $41,000, respectively,
using the cash basis method of income recognition.
Interest that would have been recorded on the non-accrual and restructured
loans had they remained current, would have been $603,000, $454,000, and
$634,000, in 1997, 1996 and 1995, respectively. Of those amounts, $168,000,
$140,000, and $195,000 were recognized as interest income. There were no
unused loan commitments on non-accrual or restructured loans at December
31, 1997.
Certain directors and executive officers of the Company and its
subsidiaries, including their immediate families and companies of which they
were principal owners, had loan transactions with the subsidiary bank. Such
loans were made in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as comparable loans made to
others. Total loans to these persons and companies at December 31, 1997 and
1996, respectively, amounted to $11,305,000 and $11,800,000. During 1997,
$178,000 of new loans were made, and repayments of $673,000 were received.
<TABLE>
NOTE 5 ALLOWANCES FOR LOAN LOSSES
<CAPTION>
Changes in the allowance for loan losses for the years ended December 31, 1997,
1996 and 1995 were as follows:
($000 Omitted)
1997 1996 1995
<S> <C> <C> <C>
Balance at beginning of year $12,393 $12,115 $18,752
Provision for loan losses 1,710 1,440 1,800
Recoveries during period 941 552 1,101
Losses charged to allowance (2,213) (1,714) (9,538)
Balance at end of year $12,831 $12,393 $12,115
</TABLE>
<TABLE>
NOTE 6 BANK PREMISES AND EQUIPMENT
<CAPTION>
Premises and equipment at December 31, 1997 and 1996 were as follows:
($000 Omitted)
1997 1996
<S> <C> <C>
Land $ 2,230 $ 2,230
Buildings 16,267 16,342
Furniture, fixtures and equipment 13,514 11,762
32,011 30,334
Less accumulated depreciation (15,703) (15,056)
Premises and equipment, net $ 16,308 $ 15,278
Depreciation expense amounted to $1,791,000 in 1997, $1,533,000 in 1996, and $1,515,000 in 1995.
</TABLE>
<TABLE>
NOTE 7 TIME DEPOSITS
<CAPTION>
As of December 31, 1997, contractual maturities of time deposits were as follows:
<S> <C>
($000 Omitted)
1998 $279,701
1999 89,462
2000 25,950
2001 8,600
2002 5,128
2003 and years thereafter 3,020
$411,861
</TABLE>
<TABLE>
NOTE 8 SHORT-TERM BORROWINGS
<CAPTION>
Short-term interest bearing liabilities, including Securities Sold Under
Agreements to Repurchase, with maturities of less than one year and their
related average interest rates for the years ended December 31, 1997, 1996 and
1995 were as follows:
($000 Omitted)
1997 1996 1995
Average Average Average
Amount outstanding at December 31, Amount Int. Rate Amount Int. Rate Amount Int. Rate
<S> <C> <C> <C> <C> <C> <C>
Federal Funds Purchased $19,100 6.81% $ -- --% $ -- --%
Securities Sold Under Agreement
to Repurchase 5,626 4.59 1,016 4.85 400 5.23
Other 2,482 5.25 2,830 5.15 2,860 5.15
Total $27,208 6.21% $ 3,846 5.07% $ 3,260 5.16%
Maximum amount outstanding at
any month end $27,208 6.21% $14,997 5.55% $13,225 5.63%
Average amount outstanding
during the year $ 6,073 5.06% $ 3,536 5.12% $ 8,220 6.47%
</TABLE>
The underlying securities associated with securities sold under agreement to
repurchase are under the control of the company.
<TABLE>
NOTE 9 LONG-TERM DEBT
<CAPTION>
Long-term debt at December 31, 1997 and 1996 consisted of:
($000 Omitted)
1997 1996
<S> <C> <C>
Fixed Rate Note $ -- $ 96
Federal Home Loan Bank 25,070 25,334
ESOP Loan 640 808
Total long-term debt $25,710 $26,238
</TABLE>
As of December 31, 1997, contractual principal payments
due under long-term debt were as follows:
($000 Omitted)
1998 $ 460
1999 487
2000 6,604
2001 10,347
2002 371
2003 and years thereafter 7,441
The ESOP loan is an adjustable rate loan which carried a rate of 8.50% at
December 31, 1997, and matures in the year 2000. The Federal Home Loan Bank of
New York debt consists of four separate advances with terms as follows: a
$6,000,000 note with a fixed rate of 5.94% maturing in December of the year
2000; an amortizing advance with a current balance of $7,082,000 with a rate of
6.67% and a final maturity in October of the year 2005; an amortizing advance
with a current balance of $1,988,000, a rate of 6.97% and a final maturity in
April of the year 2009; and a $10,000,000 note with a fixed rate of 6.44% which
matures in November of the year 2001. The fixed rate note, issued in connection
with the purchase of an operational facility, was paid off in February, 1997.
<TABLE>
NOTE 10 INCOME TAXES
<CAPTION>
Deferred income tax assets and liabilities are computed based on temporary
differences between the financial reporting basis and tax basis of assets and
liabilities that result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to periods in which the differences are
expected to affect taxable income. The components of the income tax provision
are presented as follows:
($000 Omitted)
Year Ended December 31, 1997 1996 1995
<S> <C> <C> <C>
Current tax expense:
Federal $5,489 $5,190 $1,162
State 520 1,417 392
Total current tax expense 6,009 6,607 1,554
Deferred Federal tax (benefit)/expense (541) (932) 1,489
Total income tax expense $5,468 $5,675 $3,043
</TABLE>
A reconciliation of tax expense at the statutory rate to the income tax expense
included in the Consolidated Statement of Income for the years ended December
31, 1997, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
($000 Omitted)
1997 1996 1995
% Pretax % Pretax % Pretax
Amount Income Amount Income Amount Income
<S> <C> <C> <C> <C> <C> <C>
Tax expense at statutory rate $ 5,878 35% $ 5,596 35% $ 3,851 34%
Effect of tax exempt interest income (295) (1) (408) (3) (699) (6)
State income taxes, net of federal
income tax benefit 338 2 921 6 259 2
Deferred tax asset valuation
reserve decrease (487) (3) (143) (1) (425) (3)
Other, net 34 -- (291) (2) 57 --
Total income tax expense $ 5,468 33% $ 5,675 35% $ 3,043 27%
</TABLE>
Under SFAS No. 109, the tax effects of temporary differences that gave
rise to significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
($000 Omitted)
1997 1996 1995
Deductible Taxable Deductible Taxable Deductible Taxable
Temporary Temporary Temporary Temporary Temporary Temporary
Differences Differences Differences Differences Differences Differences
<S> <C> <C> <C> <C> <C> <C>
Pension and deferred
remuneration $2,915 $ -- $ 2,598 $ -- $ 2,235 $ --
Deferred loan fees, net 192 -- 211 -- 394 --
Provision for loan losses 4,059 -- 3,906 -- 3,700 --
Valuation of other real estate 25 -- 415 -- 395 --
Lease financing -- -- -- -- -- 14
Depreciation -- 381 -- 372 -- 351
Prepaid expenses -- 183 -- 183 -- 291
Other, net 289 -- 287 -- 5 --
Total 7,480 564 7,417 555 6,729 656
Valuation reserve (824) (1,311) -- (1,454) --
Deferred tax asset 6,656 -- 6,106 -- 5,275 --
Deferred tax liability -- $ 564 -- $ 555 -- $ 656
Net deferred tax asset
at December 31, 6,092 5,551 4,619
Net deferred tax asset
at January 1, 5,551 4,619 6,108
Deferred tax benefit/(expense)
year ended December 31, $ 541 $ 932 $(1,489)
</TABLE>
The net deferred tax asset, as shown above, does not include the deferred
tax liability of $671,000, $17,000, and $316,000 at December 31, 1997, 1996, and
1995 respectively related to the tax effects of the unrealized appreciation in
the securities available for sale portfolio.
The valuation reserve, established by management at December 31, 1997, 1996
and 1995 considered the historical level of taxable income in the prior years as
well as the time period that the items giving rise to the net deferred tax asset
will turn around. The net deferred tax asset at December 31, 1997, 1996 and 1995
does not reflect the potential state deferred tax benefit of the net deductible
temporary differences noted above.
<TABLE>
NOTE 11 OTHER OPERATING EXPENSE
<CAPTION>
The components of Other Operating Expense are as follows:
($000 Omitted)
1997 1996 1995
<S> <C> <C> <C>
FICO/FDIC Insurance $ 102 $ 2 $1,065
Advertising 877 907 729
Supplies and printing 864 819 1,038
Other 5,014 5,060 5,558
Total $6,857 $6,788 $8,390
</TABLE>
NOTE 12 DIVIDEND RESTRICTIONS
Under the National Bank Act, the approval of the Office of the Comptroller of
the Currency ("OCC") is required if dividends declared by a subsidiary bank in
any year exceed the net profits of that year, as defined, combined with the
retained net profit for the two preceding years. At December 31, 1997, the
Company's subsidiary bank could, without approval of the OCC, declare dividends
aggregating $3,116,000, plus 1998 income.
NOTE 13 STOCKHOLDERS' EQUITY
The Company has established stock option plans under which nonqualified and
incentive stock options may be granted to employees and directors for the
purchase of the Company's stock at fair value as of the date of the grant. All
stock options have ten year terms and, except for a one time grant of
"opportunity shares" made in 1996, vest and become exercisable one year from the
date of grant. Opportunity shares became exercisable on November 24th, 1997 when
the closing price of the Company's stock equaled or exceeded $20.75 for three
consecutive days. At December 31, 1997 there were 490,463 options outstanding,
of these 384,513 are exercisable. At December 31, 1997, there were 674,866
additional shares available for grant under the plans.
<TABLE>
<CAPTION>
The following table summarizes information about stock options as of
December 31,:
1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 546,432 $ 10.40 367,800 $ 7.42 382,300 $7.27
Granted 109,450 15.62 248,932 13.88 65,000 8.06
Exercised (115,171) 9.38 (70,300) 7.16 (77,500) 7.19
Forfeited (50,248) 15.66 -- -- (2,000) 7.65
Outstanding at end of year 490,463 $ 11.26 546,432 $ 10.40 367,800 $7.42
</TABLE>
The following table summarizes information about stock options at
December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Prices Outstanding Contractual Life Exercise Price Outstanding Exercise Price
<S> <C> <C> <C> <C> <C>
$5-8 118,750 5.9 years $ 7.00 118,750 $ 7.00
$8-12 185,250 7.1 years 9.55 185,250 9.55
$12-16 186,463 9.0 years 15.67 80,513 15.75
Total 490,463 7.5 years $11.26 384,513 $10.06
</TABLE>
The per share weighted average fair value of stock options granted during
1997 and 1996 was $3.98 and $3.71 on the date of grant using the Black Scholes
option pricing model. The weighted average assumptions used for 1997 and 1996
included an expected dividend yield of 2.61% and 3.63%, respectively, risk free
interest rates of 6.37% and 5.64%, respectively, expected lives of 5.0 and 4.9
years, respectively, and an expected stock volatility of 28.8% and 32.8%,
respectively.
The Company applies APB Opinion No. 25 in accounting for its plans and,
accordingly no compensation cost has been recognized in the consolidated
financial statements for stock options granted. Had the Company recorded
compensation costs based on the estimated fair value at the grant date for its
stock options under SFAS No. 123, the Company's net income and earnings per
share, net of tax effect, would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
($000 Omitted)
(Except Per Share Data)
1997 1996 1995
<S> <C> <C> <C>
Net Income - As Reported $11,327 $10,313 $ 8,380
Net Income - Pro Forma 11,066 9,758 8,320
Earnings Per Share:
Basic Earnings Per Share
Net Income - As Reported 1.26 1.12 .89
Net Income - Pro Forma 1.23 1.06 .88
Diluted Earnings Per Share
Net Income - As Reported 1.24 1.11 .88
Net Income - Pro Forma 1.21 1.05 .88
</TABLE>
Pro forma net income and earnings per share reflect all options granted in
1997, 1996, and 1995 as if they vested within one year. Therefore, the full
impact of calculating compensation cost for stock options under SFAS No. 123 is
reflected in the pro forma amounts presented.
During 1996 the Company granted certain executive officers the right to
receive 16,000 shares of common stock. In accordance with the terms of the grant
the officers received 1/3 of the shares granted during 1997 and will receive 1/3
of the shares granted in each 1998 and 1999 depending on their continued
employment through those years.
On July 18, 1996 the Company indicated its intent to repurchase up to 4% of
issued shares or approximately 386,000 shares, at market prices. Under the
program, shares were repurchased from time to time, at management's discretion,
in the open market. The Company completed this program in the third quarter of
1997 having purchased 385,500 shares at an aggregate cost of $6,168,000,
effectively completing the July 1996 program.
On October 16, 1997 the Company announced a new repurchase program,
authorizing purchases of an additional 5% of issued shares or approximately
482,000 shares at market prices. Since the implementation of the program the
Company has purchased 57,000 shares at a cost of $1,352,000.
On August 15, 1996 the Company's Board of Directors approved a two-for-one
stock split effected in the form of a 100% stock dividend. 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.
The closing market price per share for the Company's stock was $24.88 at
December 31, 1997.
<TABLE>
<CAPTION>
The following table shows the reconciliation of basic to diluted earnings per
share:
($000 Omitted)
(Except Per Share Data)
Year Ended December 31, 1997 1996 1995
<S> <C> <C> <C>
Basic Earnings Per Share
Net Income $11,327 $10,313 $8,380
Average Shares Outstanding 8,995 9,229 9,430
Basic Earnings Per Share $ 1.26 $ 1.12 $ .89
Diluted Earnings Per Share
Net Income $11,327 $10,313 $8,380
Average Shares Outstanding 8,995 9,229 9,430
Dilutive Effect of Stock Options 127 95 60
Average Potential Shares 9,122 9,324 9,490
Diluted Earnings Per Share $ 1.24 $ 1.11 $ .88
</TABLE>
Regulatory Capital Requirements
OCC capital regulations require banks to maintain minimum levels of regulatory
capital. Under the regulations in effect at December 31, 1997, the Bank was
required to maintain a minimum leverage ratio of Tier I (core or leverage)
capital to total adjusted assets of 3.00%; and minimum ratios of Tier I capital
and total capital to risk weighted assets of 4.00% and 8.00%, respectively. The
Federal Reserve Board ("FRB") has adopted similar requirements for the
consolidated capital of bank holding companies.
Under its prompt corrective action regulations, the OCC is required to take
certain supervisory actions(and may take additional discretionary actions) with
respect to an under capitalized institution. Such actions could have a direct
material effect on an institution's financial statements. The regulations
establish a framework for the classification of banks into five categories: well
capitalized, adequately capitalized, under capitalized, significantly under
capitalized and critically under capitalized. Generally, an institution is
considered well capitalized if it has a Tier I (leverage) capital ratio of at
least 5.0% (based on total adjusted assets), a Tier I risk based capital ratio
of at least 6.0%, and a total risked based capital ratio of at least 10.0%.
The foregoing capital ratios are based in part on specific quantitative
measures of assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by the OCC about
capital components, risk weighting and other factors.
As of December 31, 1997 and 1996, the Bank and Company met all capital
adequacy requirements to which they are subject. Further, the most recent OCC
notification categorized the Bank as a well-capitalized institution under the
prompt corrective action regulations. There have been no conditions or events
since that notification that management believes have changed the Bank's capital
classification.
The following is a summary of actual capital amounts and ratios as of
December 31, 1997 and 1996 for the Bank and the Company (on a consolidated
basis), compared to the requirements for minimum capital adequacy and for
classification as well capitalized.
For the year ended December 31, 1996 there were approximately 146,000
anti-dilutive shares that were not included in the calculation of diluted
earnings per share. There were no anti-dilutive shares for the years ended
December 31, 1997 or 1995.
<TABLE>
<CAPTION>
Requirements
For Classification
1997 Actual 1996 Actual Minimum Capital As Well
($000 Omitted) Amount Ratio Amount Ratio Adequacy Ratio Capitalized Ratio
<S> <C> <C> <C> <C> <C> <C>
Leverage Capital:
Evergreen Bank, N.A. $82,176 8.2% $81,067 8.8% 3.0% 5.0%
Evergreen Bancorp, Inc. 87,049 8.6 85,152 9.2 3.0 5.0
Tier I Capital:
Evergreen Bank, N.A. $82,176 12.9% $81,067 13.2% 4.0% 6.0%
Evergreen Bancorp, Inc. 87,049 13.5 85,152 13.7 4.0 6.0
Total Capital:
Evergreen Bank, N.A. $90,186 14.2% $88,816 14.4% 8.0% 10.0%
Evergreen Bancorp, Inc. 95,160 14.8 93,005 14.9 8.0 10.0
</TABLE>
NOTE 14 EMPLOYEE BENEFIT PLANS
Defined Benefit Plan
The Company maintains a trusteed non-contributory pension plan covering
substantially all full-time employees. Assuming retirement at age 65 after 30
years or more of service, the benefits are computed as the sum of forty three
and one-half percent of average compensation, as defined in the plans, for the
highest three consecutive years in the final ten years of service ("compensation
base") plus fifteen percent of such compensation base in excess of covered
compensation. The annual benefit is proportionately reduced for each year of
credited service less than thirty years. The amounts contributed to the plan are
determined annually on the basis of (a) the maximum amount that can be deducted
for federal income tax purposes or (b) the amount certified by a consulting
actuary as necessary to avoid an accumulated funding deficiency as defined by
the Employee Retirement Income Security Act of 1974. Contributions are intended
to provide not only for benefits attributed to service to date but also for
those expected to be earned in the future. Assets of the plan are primarily
invested in common stock and U.S. Government securities.
<TABLE>
<CAPTION>
The plan's funded status and amounts recognized in the Company's consolidated
financial statements are as follows:
($000 Omitted)
As of December 31, 1997 1996 1995
<S> <C> <C> <C>
Actuarial Present Value of Benefit Obligations:
Accumulated benefit obligation, including vested benefits of
$10,590 in 1997, $9,451 in 1996, and $9,834 in 1995 $ (10,776) $ (9,547) $ (9,886)
Projected benefit obligation for service rendered to date $ (13,236) $(11,496) $(12,298)
Plan assets at fair value 15,998 13,777 12,239
Plan assets in excess/(deficit) of projected benefit obligation 2,762 2,281 (59)
Unrecognized prior service cost 135 144 153
Unrecognized net gain from past experiences different from
that assumed (4,428) (3,846) (1,519)
Unrecognized net asset at January 1, 1987 being recognized
over 22.5 years (176) (191) (206)
Accrued Pension Cost $ (1,707) $ (1,612) $ (1,631)
Net Pension Cost Included the Following Components:
Service cost-benefits earned during the period $ 594 $ 591 $ 414
Interest cost on projected benefit obligation 848 794 794
Actual return on plan assets (2,968) (2,005) (881)
Net amortization and deferral 1,622 1,001 (13)
Net Periodic Pension Cost $ 96 $ 381 $ 314
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.0 percent and 4.0 percent for 1997, 7.5
percent and 4.0 percent for 1996, and 7.0 percent and 4.0 percent for 1995. The
expected long-term rate of return on assets was 9.0 percent in 1997, 8.0 percent
in 1996 and 1995. During 1995, in addition to the net periodic pension cost, the
Company recognized pension expense of $137,000 from curtailments and special
termination benefits associated with the Company's reduction in force.
The Company also maintains a profit sharing plan covering substantially all
employees. For the years 1997, 1996 and 1995 there was
no provision charged to operations for the profit sharing plan.
<TABLE>
Supplemental Retirement Plans
<CAPTION>
There are also executive supplemental retirement plans. The plans' funded status
and amounts recognized in the Company's consolidated financial statements are as
follows:
($000 Omitted)
<S> <C> <C> <C>
As of December 31, 1997 1996 1995
Actuarial Present Value of Benefit Obligations:
Accumulated benefit obligation including vested benefits of
$1,631 in 1997, $1,354 in 1996 and $1,433 in 1995 $ (2,654) $ (1,820) $ (1,509)
Projected benefit obligation for service rendered to date $ (2,939) $ (1,957) $ (1,509)
Plan assets at fair value -- -- --
Projected benefit obligation in excess of plan assets (2,939) (1,957) (1,509)
Unrecognized prior service cost 876 359 --
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions 224 176 250
Unrecognized net obligations at the beginning of the year
being recognized over 15 years -- 82 99
Additional liability recognized (815) (480) (349)
Accrued Pension Cost $ (2,654) $ (1,820) $ (1,509)
Net Pension Cost Included the Following Components:
Service cost-benefits earned during the period $ 25 $ 212 $ 76
Interest cost on projected benefit obligation 176 119 97
Net amortization 142 70 16
Net Periodic Pension Cost $ 643 $ 401 $ 189
</TABLE>
The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.0 percent, 7.5 percent and 7.0
percent for 1997, 1996 and 1995 respectively.
The rate of increase in future compensation levels used in determining the
actuarial present value of the projected benefit obligation was 4.0 percent for
1997, 1996 and 1995.
In addition to the Company's non-contributory defined benefit retirement
plan, the Company provides a defined benefit postretirement plan which provides
medical benefits to employees, who have at least attained 55 years of age and 15
years of service (provided the sum of age and service is at least 75), as well
as life insurance benefits to employees who, at a minimum, have attained 55
years of age and have 10 years of service. The postretirement health care
portion of the plan is contributory, with participant contributions adjusted
annually, and contains other cost-sharing features such as deductibles and
coinsurance. While the amount of a participant's contribution varies depending
upon age and service, the Company has set a maximum dollar amount it will pay
for medical benefits regardless of age or service. The accounting for the plan
is based on the level of cost sharing as of January 1, 1996. The funding policy
of the plan is to pay claims and/or insurance premiums as they come due.
Post Retirement Benefits
The Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for postretirement Benefits Other Than Pensions" (SFAS
No. 106) as of January 1, 1993. As permitted under the transition provisions of
SFAS No. 106, the Company opted to amortize the accumulated postretirement
benefit obligation as of the January 1, 1993 adoption date (the transition
obligation) over a period of twenty years, as a component of net periodic
postretirement benefit cost.
<TABLE>
<CAPTION>
The amounts recognized in the Company's consolidated financial statements are as follows:
($000 Omitted)
December 31, 1997 1996 1995
<S> <C> <C> <C>
Accumulated Postretirement Benefit Obligation:
Retirees $(1,634) $(1,804) $(1,716)
Fully eligible active plan participants (129) (98) (170)
Other active plan participants (309) (299) (294)
(2,072) (2,201) (2,180
Plan assets at fair value) -- -- --
Accumulated postretirement benefit obligation (2,072) (2,201) (2,180)
Unrecognized transition obligation 1,628 1,736 1,844
Unrecognized past service costs (138) (152) (166)
Unrecognized (gain)/loss from changes in assumptions (190) (27) 3
Accrued postretirement benefit cost included
in other liabilities $ (772) $ (644) $ (499)
Net Periodic Postretirement Benefit Cost Included the
Following Components:
Service cost $ 35 $ 36 $ 34
Interest cost 139 150 143
Net amortization and deferral of actual results
differing from assumptions (19) (14) (14)
Net amortization of transition amount 108 108 108
Net periodic postretirement benefit cost $ 263 $ 280 $ 271
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.0%, 7.5%, and 7.0% at December 31, 1997, 1996 and 1995,
respectively. For measurement purposes, a 6%, annual rate of increase in the per
capita cost of covered health care benefits were assumed for pre-age 65 medical
coverage for each of the years 1997, 1996 and 1995, respectively. The health
care cost trend rate assumption has a significant effect on the amounts
reported. To illustrate, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1997, by approximately 7.5% and the net
periodic postretirement benefit cost by approximately 9.9%.
Other Employee Benefits
The Company has an Employee Stock Purchase Plan which all employees are eligible
to join after six months of service. Employees may authorize the bank to
withhold up to $200 biweekly from salary to be deposited with the plan's agent.
The plan provides that the Company contribute an amount equal to 33% of each
participant's contribution up to a maximum employee investment of $100 biweekly.
Company contributions under the plan amounted to $81,000 for 1997, $101,000 for
1996, and $79,000 for 1995. The Company also maintains a 401(k) plan. All
employees are eligible to join after specific service requirements. The Company
contributed 25% of the first seven percent of contributions made by each
employee for the year. Total 401(k) expense for 1997 was $150,000, the expense
for 1996 and 1995 totaled $132,000 and $69,000, respectively.
NOTE 15 EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
On December 15, 1989, the Company established an Employee Stock Ownership
Plan (ESOP) which purchased 200,000 newly issued and 119,400 outstanding shares
of the Company's common stock. Funds for the purchase of these shares were
obtained through a borrowing from an unrelated financial institution. The shares
issued to the ESOP and the related borrowing are reflected in the Company's
statements of financial condition as common stock subscribed and long-term debt.
During 1997, a portion of the borrowing was paid off by the Company releasing
approximately 32,000 shares which were allocated to participating employees.
The following table represents the expenses related to the ESOP, including
principal repayments net of dividends received.
($000 Omitted)
1997 1996
Administration $ 18 $ 19
Interest expense 88 110
Principal repayment, net 191 181
NOTE 16 COMMITMENTS AND CONTINGENT LIABILITIES
The Company (through its subsidiary bank) is a party to certain financial
instruments with off-balance sheet risk in the normal course of business to meet
the financing needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit. Those instruments
involve, to varying degrees, elements of credit risk in excess of the amount
recognized on the statement of financial condition. The contract amounts of
those instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the commitments to extend credit and standby letters of credit is
represented by the contractual notational amount of those instruments. The
Company uses the same credit policies in making commitments as it does for
on-balance sheet instruments.
Unless otherwise noted, the Company does not require collateral or other
security to support off-balance sheet financial instruments with credit risk.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being fully drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral, if any,
required by the Company upon the extension of credit is based on management's
credit evaluation of the customer. Residential mortgage and construction loan
commitments are secured by a lien on real estate. Collateral on extensions of
credit for commercial loans varies but may include accounts receivable,
inventory, property, plant and equipment, and income producing commercial
property.
Standby letters of credit are conditional commitments issued to guarantee
the performance of a customer to a third party. Those guarantees are primarily
issued to support borrowing arrangements. The credit risk involved in issuing
standby letters of credit is essentially the same as that involved in extending
loan facilities to customers.
The Company grants commercial, installment and residential loans to
customers throughout its marketing area. Although the Company has a diversified
loan portfolio, a substantial portion of its debtor's ability to honor their
contracts is dependent upon the real estate and construction related sectors of
economy and the tourism industry. Variable rate mortgage loans are granted with
terms which set various interest rate caps for annual and life of the loan
interest rate changes.
There are no legal proceedings against the Company or its subsidiaries in
1997 or 1996 which in the opinion of management would result in a liability
which would have a significant effect on the consolidated financial position of
the Company.
<TABLE>
<CAPTION>
Contract amounts of financial instruments that represent credit risk as of
December 31, 1997 and 1996 are as follows:
($000 Omitted)
December 31, 1997 1996
<S> <C> <C>
Commercial Commitments $ 56,112 $ 51,918
Unused Home Equity Lines 39,444 37,814
Unused Overdraft Lines 6,848 6,879
Mortgage Commitments 4,263 3,502
Standby Letters of Credit 6,168 6,680
Total $112,835 $106,793
</TABLE>
NOTE 17 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board issued Statement No. 107,
Disclosures about Fair Value of Financial Instruments, (SFAS No. 107), which
requires that the Company disclose estimated fair values for its financial
instruments. SFAS No. 107 defines fair value of financial instruments as the
amount at which the instrument could be exchanged in a current transaction
between willing parties other than in a forced or liquidation sale. SFAS No. 107
defines a financial instrument as cash, evidence of ownership interest in an
entity, or a contract that imposes on one entity a contractual obligation to
deliver cash or another financial instrument to a second entity or to exchange
other financial instruments on potentially unfavorable terms with a second
entity and conveys to that second entity a contractual right to receive cash or
another financial instrument from the first entity or to exchange other
financial instruments on potentially favorable terms with the first entity.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgements regarding
future expected net cash flows, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgement and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Fair value estimates are based on existing, on and off-balance sheet,
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial assets or liabilities include the deferred tax assets and
property, plant and equipment. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in the estimates of fair value
under SFAS No. 107.
<TABLE>
<CAPTION>
The following table presents the carrying amounts and
fair values of the
Company's financial
instruments at
December 31, ($000 Omitted)
1997 1996
Footnote Carrying Estimated Carrying Estimated
Number Value Fair Value Value Fair Value
<S> <C> <C> <C> <C> <C>
Derivatives None -- -- -- --
Trading instruments None -- -- -- --
Nontrading instruments:
Cash and cash equivalents 17 $ 26,596 $ 26,596 $ 56,130 $ 56,130
Loans (net) 4 666,208 671,630 642,495 648,266
Securities 3 282,900 283,831 197,168 198,156
Deposit Liabilities 17 (853,676) (853,478) (800,856) (800,631)
Short-Term Borrowings and Long-Term Debt 17 (52,918) (53,280) (30,084) (29,688)
</TABLE>
Securities
The carrying amounts for short-term investments approximate fair value
because they mature in 90 days or less and do not present unanticipated credit
concerns. The fair value of longer-term investments and mortgage-backed
securities, except certain state and municipal securities, is estimated based on
bid prices published in financial newspapers or bid quotations received from
securities dealers. The estimated fair value of certain state and municipal
securities is not readily available through market sources, therefore, the fair
value estimates are based on quoted market prices of similar instruments,
adjusted for differences between the quoted instruments and the instruments
being valued. See Note 3 Securities for detail disclosure of investment and
mortgage-backed securities.
Loans
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, installment,
real estate, and other loans. Each loan category is further segmented into fixed
and adjustable rate interest terms and by performing and non-performing
categories.
<TABLE>
<CAPTION>
The following table presents information for loans at December 31,:
($000 Omitted)
1997 1996
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Commercial $ 232,785 $224,792 $224,955 $220,206
Real Estate Mortgage 310,325 315,119 283,098 285,854
Installment 135,668 131,458 146,528 141,894
Other 261 261 307 312
Loans (net of unearned income) 679,039 671,630 654,888 648,266
Less: allowance for loan losses (12,831) -- (12,393) --
Total $ 666,208 $671,630 $642,495 $648,266
</TABLE>
The estimated fair value of performing commercial loans, lease finance
receivables and installment loans is calculated by discounting scheduled cash
flows through the estimated maturity using estimated market discount rates that
reflect the credit and interest rate risk inherent in the loan. The estimate of
maturity is based on the contractual term of the loans to maturity. The fair
value of performing real estate loans is estimated based on dealer quotations
for conforming loans adjusted for a factor based on the Company's loans
primarily being non-conforming. The fair value of the loans not readily
available through market sources is estimated by discounting anticipated cash
flows using an appropriate current discount rate.
Estimated fair value for significant non-performing loans is based on recent
external appraisals and discounting of cash flows. Estimated cash flows are
discounted using a rate commensurate with the risk associated with the estimated
cash flows. Assumptions regarding credit risk, cash flows and discount rates are
judgmentally determined using available market information and specific borrower
information.
Deposit Liabilities and Long-Term Debt
Under SFAS No. 107, the fair value of deposits with no stated maturity, such
as non-interest bearing demand deposits, savings, money market and checking
accounts, is estimated to be the amount payable on demand as of December 31,
1997 and 1996. The estimated fair value of certificates of deposit is based on
the discounted value of contractual cash flows. The discount rate is estimated
using the rates currently offered for deposits of similar remaining maturities.
The fair value estimates do not include the benefit that results from the
low-cost funding provided by the deposit liabilities compared to the cost of
borrowing funds in the market.
The estimated fair value of long-term debt is based on the discounted value
of contractual cash flows. The discount rate is estimated using the current
rates offered to the Company for debt with the same remaining maturities.
Other Financial Instruments
The fair value of cash and cash equivalents, accrued interest receivable,
accrued interest payable and short-term borrowings are estimated to be carrying
value at December 31, 1997 and 1996, respectively.
Commitments to Extend Credit, Standby Letters of Credit, and Financial
Guarantees Written
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed rate loan commitments, fair value also considers the
difference between current levels of interest rates and the committed rates. The
estimated fair value of financial guarantees written and letters of credit is
based on fees currently charged for similar agreements or on the estimated cost
to terminate them or otherwise settle the obligations with the counterparties.
Fees, such as these, are not a major part of the Company's business and in the
Company's business territory are not a "normal business practice," therefore,
carrying value approximates fair value.
<TABLE>
<CAPTION>
The following table presents information for deposits and debt at December 31,
($000 Omitted)
1997 1996
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
<S> <C> <C> <C> <C>
Non-interest bearing demand $102,345 $102,345 $ 92,737 $ 92,737
Savings and Interest Checking 260,916 260,916 261,064 261,064
Money Market Deposit Accounts 78,554 78,554 89,698 89,698
Time Deposits:
Maturing in six months or less 194,513 194,541 181,947 181,962
Maturing between six months and one year 85,188 85,176 56,146 56,121
Maturing between one and three years 115,412 115,330 94,660 94,528
Maturing beyond three years 16,748 16,616 24,604 24,521
Short-Term Borrowings and Long-Term Debt 52,918 53,280 30,084 29,688
</TABLE>
<TABLE>
NOTE 18 PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS
<CAPTION>
Condensed Statements of Income
($000 Omitted)
Year Ended December 31, 1997 1996 1995
<S> <C> <C> <C>
Income
Dividends from Banking Subsidiary $11,100 $8,900 $4,200
Interest on Securities and Time Deposits 22 29 43
Interest on Securities Purchased Under Agreement to Resell 137 89 43
Other Income -- 20 3
Total Income 11,259 9,038 4,289
Expenses
Employee Benefits 1,077 644 605
Other Expenses 294 533 668
Total Expenses 1,371 1,177 1,273
Income Before Income Tax Benefit and Equity in
Undistributed Net Income of Subsidiaries 9,888 7,861 3,016
Income Tax Benefit 393 382 406
Income Before Equity in Undistributed Net Income of Subsidiaries 10,281 8,243 3,422
Equity in Undistributed Net Income of Subsidiaries 1,046 2,070 4,958
Net Income $11,327 $10,313 $8,380
</TABLE>
<TABLE>
Condensed Statements of Condition
<CAPTION>
($000 Omitted)
December 31, 1997 1996
<S> <C> <C>
Assets
Cash $ 50 $ 50
Investments in Subsidiaries 83,382 81,353
Securities 8 258
Securities Purchased Under Agreement to Resell 3,055 1,788
Premises and Equipment 6,316 6,544
Other Assets 1,779 1,767
Total Assets $94,590 $91,760
Liabilities
Long-Term Debt $ 640 $ 904
Other Liabilities 5,694 5,417
Total Liabilities 6,334 6,321
Stockholders' Equity 88,256 85,439
Total Liabilities and Stockholders' Equity $94,590 $91,760
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
($000 Omitted)
Year Ended December 31, 1997 1996 1995
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $11,327 $10,313 $8,380
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Loss/(Gain) on Sale of Assets -- 2 (3)
Decrease in Interest Receivable 4 5 --
Net Amortization 18 5 5
Depreciation 220 211 228
Increase/(Decrease) in Accrued Expenses 450 353 (57)
(Decrease)/Increase in Accrued Taxes Payable (173) 217 787
Decrease/(Increase) in Prepaid Expenses 55 (43) 76
Decrease/(Increase) in Taxes Receivable 55 2,290 (1,172)
Increase in Cash Surrender Value (144) (130) (95)
Undistributed Earnings of Affiliates (1,046) (2,070) (4,958)
Liquidation of Subsidiary -- -- 120
Net Cash Provided By Operating Activities 10,766 11,153 3,311
Cash Flows From Investing Activities:
Proceeds From Maturities of Investment Securities 250 250 --
Net Change in Short-Term Investments (1,267) (883) (905)
Proceeds from Sales of Fixed Assets 8 -- 71
Capital Expenditures -- (1,060) (70)
Net Cash Used by Investing Activities (1,009) (1,693) (904)
Cash Flows From Financing Activities:
Principal Payments on Long-Term Debt (96) (1,832) (260)
Payments for Purchase of Treasury Shares (5,877) (4,386) (1,985)
Proceeds from Issuance of Common Stock and Treasury Stock 1,085 737 691
Dividends Paid (4,869) (3,979) (2,126)
Net Cash Used by Financing Activities (9,757) (9,460) (3,680)
Net Change in Cash and Cash Equivalents -- -- (1,273)
Cash and Cash Equivalents Beginning of Year 50 50 1,323
Cash and Cash Equivalents End of Year $ 50 $50 $50
Cash and Cash Equivalents are cash in demand deposit accounts at the subsidiary bank.
Supplemental disclosure of Cash Flows:
Interest Paid $ 62 $186 $242
</TABLE>
Supplemental Schedule of Non-Cash Financing Activities: Payments were made on
the Company's ESOP loan in the amount of $168,000, $159,000, and $153,000 in
1997, 1996 and 1995, respectively.
Basis of Presentation
Investments in subsidiaries are recorded using the equity method of
accounting and represent 100% ownership of Evergreen Bank, N.A. and Evergreen
Venture Capital Corp. The Parent Company recognizes income and expenses using
the accrual method of accounting.
The Statement of Changes in Stockholders' Equity and the specifics of the
Stockholders' Equity section of the Statement of Condition are not included
since such amounts would be repetitive of those presented in the Consolidated
Financial Statements.
<TABLE>
NOTE 19 UNAUDITED INTERIM FINANCIAL INFORMATION
<CAPTION>
The following is a summary of unaudited quarterly financial information for each
quarter of 1997 and 1996:
($000 Omitted)
(Except Per Share Data)
1997 Quarters Ended 1996 Quarters Ended
12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $19,611 $19,504 $19,060 $18,301 $18,151 $17,887 $17,296 $17,199
Net Interest Income 10,736 10,792 10,482 10,381 10,406 10,665 10,180 9,933
Provision for Loan Losses 450 450 450 360 360 360 360 360
Income Before Income Taxes 4,486 4,310 3,966 4,033 4,161 4,200 3,854 3,773
Net Income 3,088 2,885 2,672 2,682 2,721 2,694 2,519 2,379
Basic Earnings Per Share .35 .32 .30 .30 .30 .29 .27 .26
Diluted Earnings Per Share .34 .32 .29 .29 .29 .29 .27 .25
</TABLE>
INDEPENDENT AUDITORS' REPORT
KPMG Peat Marwick LLP
Certified Public Accountants
515 Broadway
Albany, New York 12207
The Board of Directors and Stockholders
Evergreen Bancorp, Inc.:
We have audited the accompanying consolidated statements of condition of
Evergreen Bancorp, Inc. and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Evergreen
Bancorp, Inc. and subsidiaries at December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
January 23, 1998
EXHIBIT 21
[Annual Report on Form 10-K]
EVERGREEN BANCORP, INC.
1997 ANNUAL REPORT ON FORM 10-K
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Name of Significant Subsidiary<F1> % Owned Jurisdiction of Incorporation
<S> <C> <C>
Evergreen Bank, National Association 100 United States
Evergreen Realty Funding Corp.<F2> 100 New York
<FN>
<F1> Subsidiaries of the Registrant that are inactive have been omitted.
<F2> Entity is a Subsidiary of Evergreen Bank, National association.
</FN>
</TABLE>
Exhibit 23
[Annual Report on Form 10-K]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Evergreen Bancorp, Inc.:
We consent to incorporation by reference in the Registration Statements
on Form S-8 (No. 333-36303) Form S-8 (No. 33-27062), Form S-8 (No.
2-71111) and Form S-8 (No. 33-4488) of Evergreen Bancorp, Inc. of
our report dated January 23, 1998, relating to the consolidated statements
of condition of Evergreen Bancorp, Inc. and subsidiaries as December
31, 1997 and 1996, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1997 which report appears
in the December 31, 1997 Annual Report on Form 10-K of Evergreen Bancorp,
Inc.
/S/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
March 25, 1998
Albany, NY
<TABLE> <S> <C>
<ARTICLE> 9
<CAPTION>
EVERGREEN BANCORP, INC.
FINANCIAL DATA SCHEDULE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 26,434
<INT-BEARING-DEPOSITS> 162
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 248,245
<INVESTMENTS-CARRYING> 34,655
<INVESTMENTS-MARKET> 35,586
<LOANS> 679,039
<ALLOWANCE> 12,831
<TOTAL-ASSETS> 1,010,161
<DEPOSITS> 853,676
<SHORT-TERM> 27,208
<LIABILITIES-OTHER> 15,311
<LONG-TERM> 25,710
<COMMON> 38,900
0
0
<OTHER-SE> 49,356
<TOTAL-LIABILITIES-AND-EQUITY> 1,010,161
<INTEREST-LOAN> 58,692
<INTEREST-INVEST> 16,522
<INTEREST-OTHER> 1,262
<INTEREST-TOTAL> 76,476
<INTEREST-DEPOSIT> 32,126
<INTEREST-EXPENSE> 34,085
<INTEREST-INCOME-NET> 42,391
<LOAN-LOSSES> 1,710
<SECURITIES-GAINS> 9
<EXPENSE-OTHER> 30,917
<INCOME-PRETAX> 16,795
<INCOME-PRE-EXTRAORDINARY> 16,795
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,327
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.24
<YIELD-ACTUAL> 4.63
<LOANS-NON> 4,838
<LOANS-PAST> 951
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,393
<CHARGE-OFFS> 2,213
<RECOVERIES> 941
<ALLOWANCE-CLOSE> 12,831
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 12,831
</TABLE>
