##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2006
 o
    
    Transition Report Under Section 13 or 15(d) of the Exchange Act
 For the transition period from  to
 Commission File No. 000-32915
 EVERGREENBANCORP, INC.
  WASHINGTON
    
    91-2097262(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)
 301 Eastlake Avenue East
Seattle, Washington 98109-5407
 (206) 628-4250
  þ o
  o o þ
  o þ




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##### 



PART IFINANCIAL INFORMATIONItem 1.
    
    Unaudited Consolidated Financial Statements.Unaudited Consolidated Balance Sheets  March 31, 2006 and December 31, 2005.Unaudited Consolidated Statements of Income  For the three months ended March 31,
2006 and 2005.Unaudited Consolidated Statements of Stockholders Equity  For the three months
ended March 31, 2006 and 2005.Unaudited Consolidated Statements of Comprehensive Income  For the three months
ended March 31, 2006 and 2005.Unaudited Consolidated Statements of Cash Flows  For the three months ended March
31, 2006 and 2005.Notes to Unaudited Consolidated Financial Information.Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.Item 4.
    
    Controls and Procedures.PART IIOTHER INFORMATIONItem 1.
    
    Legal Proceedings.Item 1A.
    
    Risk Factors.Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.Item 3.
    
    Defaults Upon Senior Securities.Item 4.
    
    Submission of Matters to a Vote of Security Holders.Item 5.
    
    Other Information.Item 6.
    
    Exhibits.EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  
    March 31,
    
    
    December 31,2006
    
    
    2005AssetsCash and due from banks
    
    $
    6,766
    
    
    $
    12,379Federal funds sold
    
    
    4,269
    
    
    
    2,112Interest-bearing deposits in financial institutions
    
    
    3,766
    
    
    
    2,811Total cash and cash equivalents
    
    
    14,801
    
    
    
    17,302Securities available-for-sale
    
    
    33,431
    
    
    
    33,550Loans
    
    
    211,752
    
    
    
    189,188Allowance for loan losses
    
    
    (2,229
    )
    
    
    (2,056
    )Net loans
    
    
    209,523
    
    
    
    187,132Premises and equipment
    
    
    2,993
    
    
    
    3,179Cash surrender value of bank owned life insurance
    
    
    5,146
    
    
    
    5,090Accrued interest and other assets
    
    
    2,851
    
    
    
    2,939Total assets
    
    $
    268,745
    
    
    $
    249,192LiabilitiesDepositsNoninterest-bearing
    
    
    58,631
    
    
    
    64,635Interest-bearing
    
    
    150,899
    
    
    
    135,255Total deposits
    
    
    209,530
    
    
    
    199,890Federal Home Loan Bank advances
    
    
    33,633
    
    
    
    23,849Junior subordinated debt
    
    
    5,000
    
    
    
    5,000Accrued expenses and other liabilities
    
    
    2,654
    
    
    
    2,717Total liabilities
    
    
    250,817
    
    
    
    231,456Stockholders equityPreferred stock; no par value; 100,000 shares authorized; none
issued
    
    
    
    
    
    
    Common stock and surplus; no par value; 15,000,000 shares
authorized; 2,000,467 shares issued at March 31, 2006; 2,000,467
shares at issued at December 31, 2005
    
    
    16,039
    
    
    
    16,005Retained earnings
    
    
    2,385
    
    
    
    2,187Accumulated other comprehensive loss
    
    
    (496
    )
    
    
    (456
    )Total stockholders equity
    
    
    17,928
    
    
    
    17,736Total liabilities and stockholders equity
    
    $
    268,745
    
    
    $
    249,192
 See accompanying notes to unaudited consolidated financial statements.
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##### Table of Contents



March 31,
    
    
    March 31,2006
    
    
    2005Interest incomeLoans, including fees
    
    $
    3,921
    
    
    $
    2,878Taxable securities
    
    
    275
    
    
    
    251Tax exempt securities
    
    
    34
    
    
    
    26Federal funds sold and other
    
    
    23
    
    
    
    24Total interest income
    
    
    4,253
    
    
    
    3,179Interest expenseDeposits
    
    
    926
    
    
    
    519Federal funds purchased
    
    
    21
    
    
    
    4Federal Home Loan Bank advances
    
    
    405
    
    
    
    119Junior subordinated debt
    
    
    100
    
    
    
    76Total interest expense
    
    
    1,452
    
    
    
    718Net interest income
    
    
    2,801
    
    
    
    2,461Provision for loan losses
    
    
    168
    
    
    
    81Net interest income after provision for loan losses
    
    
    2,633
    
    
    
    2,380Noninterest incomeService charges on deposit accounts
    
    
    255
    
    
    
    322Merchant credit card processing
    
    
    33
    
    
    
    39Other commissions and fees
    
    
    34
    
    
    
    26Net earnings on bank owned life insurance
    
    
    56
    
    
    
    Other noninterest income
    
    
    32
    
    
    
    41Total noninterest income
    
    
    410
    
    
    
    428Noninterest expenseSalaries and employee benefits
    
    
    1,356
    
    
    
    1,134Occupancy and equipment
    
    
    435
    
    
    
    390Data processing
    
    
    203
    
    
    
    189Professional fees
    
    
    51
    
    
    
    111Marketing
    
    
    75
    
    
    
    94State revenue and sales tax expense
    
    
    77
    
    
    
    100Other noninterest expense
    
    
    398
    
    
    
    344Total noninterest expense
    
    
    2,595
    
    
    
    2,362Income before income taxes
    
    
    448
    
    
    
    446Income tax expense
    
    
    130
    
    
    
    147Net income
    
    $
    318
    
    
    $
    299Basic earnings per share
    
    $
    0.16
    
    
    $
    0.15Diluted earnings per share
    
    $
    0.16
    
    
    $
    0.15
 See accompanying notes to unaudited consolidated financial statements.
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##### Table of Contents



AccumulatedCommon
    
    
    
    
    
    
    otherCommon
    
    
    stock
    
    
    
    
    
    
    comprehen-
    
    
    Total stock-stock
    
    
    and
    
    
    Retained
    
    
    sive
    
    
    holdersshares
    
    
    surplus
    
    
    earnings
    
    
    income/(loss)
    
    
    equityBalance at January 1, 2005
    
    
    1,992,428
    
    
    $
    15,927
    
    
    $
    1,678
    
    
    $
    (120
    )
    
    $
    17,485Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    299
    
    
    
    
    
    
    
    299Change in net unrealized
gain (loss) on securities
available for sale, net of
reclassification and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (195
    )
    
    
    (195
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104Cash dividends ($.056 per
share)
    
    
    
    
    
    
    
    
    
    
    (113
    )
    
    
    
    
    
    
    (113
    )Exercise of stock options
    
    
    2,333
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16Tax benefit from stock
related compensation
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Balance at March 31, 2005
    
    
    1,994,761
    
    
    $
    15,948
    
    
    $
    1,864
    
    
    $
    (315
    )
    
    $
    17,497
 AccumulatedCommon
    
    
    
    
    
    
    otherCommon
    
    
    stock
    
    
    
    
    
    
    comprehen-
    
    
    Total stock-stock
    
    
    and
    
    
    Retained
    
    
    sive
    
    
    holdersshares
    
    
    surplus
    
    
    earnings
    
    
    income/(loss)
    
    
    equityBalance at January 1, 2006
    
    
    2,000,467
    
    
    $
    16,005
    
    
    $
    2,187
    
    
    $
    (456
    )
    
    $
    17,736Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    318
    
    
    
    
    
    
    
    318Change in net unrealized gain
(loss) on securities
available for sale, net of
reclassification and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40
    )
    
    
    (40
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    278Cash dividends ($.060 per share)
    
    
    
    
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    (120
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options earned
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34Balance at March 31, 2006
    
    
    2,000,467
    
    
    $
    16,039
    
    
    $
    2,385
    
    
    $
    (496
    )
    
    $
    17,928
 See accompanying notes to unaudited consolidated financial statements.
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March 31,
    
    
    March 31,2006
    
    
    2005Net income
    
    $
    318
    
    
    $
    299Other comprehensive income:Change in unrealized gain (loss) on securities available
for sale
    
    
    (61
    )
    
    
    (295
    )Reclassification adjustment for gains included in net income
    
    
    
    
    
    
    Net unrealized gains (losses)
    
    
    (61
    )
    
    
    (295
    )Tax effect
    
    
    21
    
    
    
    100Total other comprehensive income (loss)
    
    
    (40
    )
    
    
    (195
    )Total comprehensive income
    
    $
    278
    
    
    $
    104
 See accompanying notes to unaudited consolidated financial statements
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March 31,
    
    
    March 31,2006
    
    
    2005Cash flows from operating activitiesNet income
    

$
    318
    
    
    $
    299Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    219
    
    
    
    182Provision for loan losses
    
    
    168
    
    
    
    81Amortization of premiums and discounts on securities
    
    
    11
    
    
    
    15Federal Home Loan Bank stock dividends
    
    
    
    
    
    
    (6
    )Dividends reinvested
    
    
    
    
    
    
    (108
    )Net earnings on bank owned life insurance
    
    
    (56
    )
    
    
    Stock option compensation expense
    
    
    34
    
    
    
    Other changes, net
    
    
    47
    
    
    
    (324
    )Net cash provided by operating activities
    
    
    741
    
    
    
    139Cash flows from investing activitiesProceeds from sales,
maturities and principal payments on securities available
for sale
    
    
    179
    
    
    
    372Net (increase) decrease in loans
    
    
    (22,559
    )
    
    
    3,041Purchases of securities available for sale
    
    
    (133
    )
    
    
    Purchases of premises and equipment
    
    
    (33
    )
    
    
    (51
    )Net cash provided by investing activities
    
    
    (22,546
    )
    
    
    3,362Cash flows from financing activitiesNet increase in deposits
    
    
    9,640
    
    
    
    1,030Proceeds (repayments) from Federal Home Loan Bank advances
    
    
    9,784
    
    
    
    (716
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    16Dividends paid
    
    
    (120
    )
    
    
    (113
    )Net cash provided by financing activities
    
    
    19,304
    
    
    
    217Net increase in cash and cash equivalents
    
    
    (2,501
    )
    
    
    3,718Cash and cash equivalents at beginning of period
    
    
    17,302
    
    
    
    12,145Cash and cash equivalents at end of period
    
    $
    14,801
    
    
    $
    15,863
 See accompanying notes to unaudited consolidated financial statements
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EVERGREENBANCORP, INC.
 
 NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL INFORMATION
 Note 1: Summary of Significant Accounting Policies
 Organization.
   Operating Segments
 Principles of consolidation.
 Critical accounting policies and use of estimates.
 Note 2: Stock split
  Note 3: Stock options
 Stock option plan.
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Three Months Ended
    
    
    Twelve Months EndedMarch 31, 2006
    
    
    December 31, 2005Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at the beginning of the period
    
    
    228,250
    
    
    $
    9.32
    
    
    
    191,440
    
    
    $
    8.15Granted
    
    
    
    
    
    
    
    
    
    
    45,334
    
    
    
    13.72Exercised
    
    
    
    
    
    
    
    
    
    
    (8,524
    )
    
    
    6.29Forfeited
    
    
    (10,184
    )
    
    
    10.48
    
    
    
    
    
    
    
    Outstanding at the end of the period
    
    
    218,066
    
    
    $
    9.27
    
    
    
    228,250
    
    
    $
    9.32
  Outstanding
    
    
    
    
    
    
    ExercisableWeighted-
    
    
    
    
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    Weighted-
    
    
    AverageYear of
    
    
    
    
    
    
    Remaining
    
    
    
    
    
    
    Average
    
    
    RemainingExercise Price
    
    Grant
    
    
    Number
    
    
    Contractual Life
    
    
    Number
    
    
    Exercise Price
    
    
    Contractual Life$13.72
    
    
    2005
    
    
    
    42,660
    
    
    7.37 years
    
    
    534
    
    
    $
    13.72
    
    
    8.81 years10.65
    
    
    2004
    
    
    
    28,443
    
    
    7.84 years
    
    
    6,125
    
    
    
    10.65
    
    
    7.99 years8.90
    
    
    2003
    
    
    
    38,193
    
    
    5.91 years
    
    
    26,109
    
    
    
    8.90
    
    
    5.41 years8.02
    
    
    2002
    
    
    
    31,424
    
    
    6.04 years
    
    
    23,422
    
    
    
    8.02
    
    
    6.04 years7.01
    
    
    2001
    
    
    
    42,664
    
    
    5.03 years
    
    
    37,304
    
    
    
    7.01
    
    
    5.00 years6.84
    
    
    2000
    
    
    
    34,682
    
    
    4.57 years
    
    
    34,682
    
    
    
    6.84
    
    
    4.57 yearsOutstanding at the end of the period
    
    
    
    
    
    
    218,066
    
    
    6.08 years
    
    
    128,176
    
    
    $
    7.73
    
    
    5.32 years
  Stock based compensation.
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.
 Three MonthsEndedMarch 31,(in thousands, except per share data)
    
    2005Net income as reported
    
    $
    299Deduct: Stock-based compensation expense determined
under fair value based method
    
    
    9Pro forma net income
    
    $
    290Basic earnings per share as reported
    
    $
    0.15Pro forma basic earnings per share
    
    
    0.15Diluted earnings per share as reported
    
    
    0.15Pro forma diluted earnings per share
    
    
    0.14
  2005Risk-free interest rate
    
    
    3.73
    %Expected option life
    
    7.5 yearsExpected stock price volatility
    
    
    16
    %Dividend yield
    
    
    1.8
    %
  Note 4: Securities available for sale
   - 10 -




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Less than 12 Months
    
    
    12 Months or More
    
    

    Total(in thousands)
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS agencies
    
    $
    
    
    
    $
    
    
    
    $
    7,387
    
    
    $
    (122
    )
    
    $
    7,387
    
    
    $
    (122
    )State and political subdivisions
    
    
    2,166
    
    
    
    (28
    )
    
    
    2,270
    
    
    
    (38
    )
    
    
    4,436
    
    
    
    (66
    )Mortgage-backed securities
    
    
    433
    
    
    
    (4
    )
    
    
    4,572
    
    
    
    (147
    )
    
    
    5,005
    
    
    
    (151
    )AMF Ultra Short Mortgage Fund
    
    
    81
    
    
    
    (1
    )
    
    
    14,712
    
    
    
    (412
    )
    
    
    14,793
    
    
    
    (413
    )Total temporarily impaired
    
    $
    2,680
    
    
    $
    (33
    )
    
    $
    28,941
    
    
    $
    (719
    )
    
    $
    31,621
    
    
    $
    (752
    )
     Less than 12 Months
    
    
    12 Months or More
    
    

    Total(in thousands)
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS agencies
    
    $
    496
    
    
    $
    (4
    )
    
    $
    6,898
    
    
    $
    (112
    )
    
    $
    7,394
    
    
    $
    (116
    )State and political subdivisions
    
    
    3,278
    
    
    
    (41
    )
    
    
    694
    
    
    
    (11
    )
    
    
    3,972
    
    
    
    (52
    )Mortgage-backed securities
    
    
    436
    
    
    
    (3
    )
    
    
    4,755
    
    
    
    (141
    )
    
    
    5,191
    
    
    
    (144
    )AMF Ultra Short Mortgage Fund
    
    
    188
    
    
    
    (2
    )
    
    
    14,635
    
    
    
    (381
    )
    
    
    14,823
    
    
    
    (383
    )Total temporarily impaired
    
    $
    4,398
    
    
    $
    (50
    )
    
    $
    26,982
    
    
    $
    (645
    )
    
    $
    31,380
    
    
    $
    (695
    )
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Note 5: Earnings per share
    Three months ended March 31,2006
    
    
    2005Income (numerator):Net income
    
    $
    318
    
    
    $
    299Income (denominator):Weighted average number of common
stock shares outstanding  basic
    
    
    2,000,467
    
    
    
    1,994,657Dilutive effect of outstanding employee
and director stock options
    
    
    32,139
    
    
    
    44,880Weighted average number of common
stock shares outstanding and
assumed conversion  diluted
    
    
    2,032,606
    
    
    
    2,039,537Basic earnings per share of common stock
    
    $
    0.16
    
    
    $
    0.15Diluted earnings per share of common stock
    
    $
    0.16
    
    
    $
    0.15
 Note 6: Retirement Benefits
   - 12 -




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Components of net periodic benefit cost
 Three Months EndedMarch 31,(in thousands)
    
    2006
    
    
    2005Service cost
    
    $
    41
    
    
    $
    22Interest cost
    
    
    28
    
    
    
    23Amortization of transition obligation
    
    
    
    
    
    
    10Amortization of prior service cost
    
    
    (1
    )
    
    
    Recognized net actuarial (gain) loss
    
    
    8
    
    
    
    Net periodic benefit cost
    
    $
    76
    
    
    $
    55
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    RESULTS OF OPERATIONS
 Net Income
 Three months ended March 31, 2006 and 2005
     Net Interest Income and Net Interest Margin
  - 13 -




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Noninterest Income/Expense
   Income tax expense
  Provision and Allowance for Loan Losses
    - 14 -




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##### Table of Contents



FINANCIAL CONDITION
 Loans
    Types of Loans
 March 31,
    
    
    December 31,(in thousands)
    
    2006
    
    
    2005Commercial
    
    $
    64,559
    
    
    $
    61,921Real estate:Commercial
    
    
    80,652
    
    
    
    76,902Construction
    
    
    14,366
    
    
    
    6,953Residential 1-4 family*
    
    
    35,863
    
    
    
    28,195Consumer and other
    
    
    16,312
    
    
    
    15,217Total
    
    $
    211,752
    
    
    $
    189,188
 
 *
    
    Residential 1-4 family includes loans purchased from a mortgage broker of $5,753,000 in the first
quarter of 2006 and $13,882,000 in the fourth quarter of 2005. Allocation of the Allowance for Loan Losses
  March 31,
    
    
    % of Loans in
    
    
    December 31,
    
    
    % of Loans in2006
    
    
    Each Category
    
    
    2005
    
    
    Each Category(in thousands)
    
    Amount
    
    
    to Total Loans
    
    
    Amount
    
    
    to Total LoansCommercial
    
    $
    1,051
    
    
    
    30
    
    
    $
    987
    
    
    
    33Real estate:Commercial
    
    
    687
    
    
    
    38
    
    
    
    651
    
    
    
    40Construction
    
    
    126
    
    
    
    7
    
    
    
    72
    
    
    
    4Residential 1-4 family
    
    
    135
    
    
    
    17
    
    
    
    106
    
    
    
    15Consumer and other
    
    
    230
    
    
    
    8
    
    
    
    240
    
    
    
    8Total
    
    $
    2,229
    
    
    
    100
    
    
    $
    2,056
    
    
    
    100% of Loan portfolio
    
    
    1.05
    %
    
    
    
    
    
    
    1.09
    %
 - 15 -




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##### Table of Contents



Analysis of Allowance for Loan Losses
  Three Months Ended
    
    
    Three Months Ended(in thousands)
    
    March 31, 2006
    
    
    March 31, 2005Beginning Balance
    
    $
    2,056
    
    
    $
    1,887Chargeoffs:Commercial
    
    
    
    
    
    
    115Real estate:Commercial
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    Residential 1-4 family
    
    
    
    
    
    
    Consumer and other
    
    
    
    
    
    
    8Total chargeoffs
    
    
    
    
    
    
    123Recoveries:Commercial
    
    
    2
    
    
    
    2Real estate:Commercial
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    Residential 1-4 family
    
    
    
    
    
    
    Consumer and other
    
    
    3
    
    
    
    1Total Recoveries
    
    
    5
    
    
    
    3Net chargeoffs/(recoveries)
    
    
    (5
    )
    
    
    120Provision
    
    
    168
    
    
    
    81Ending balance
    
    $
    2,229
    
    
    $
    1,848
 Investments
   Deposits
  - 16 -




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##### Table of Contents



Borrowings and Junior Subordinated Debt
    Stockholders Equity and Capital Resources
    Minimum to BeWell CapitalizedMinimum for
    
    Under the PromptCapital Adequacy
    
    Corrective ActionActual
    
    Purposes
    
    Provisions(in thousands)
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioMarch 31, 2006Total capital (to
risk-weighted
assets)Consolidated
    
    $
    25,379
    
    
    
    11.59
    %
    
    $
    17,512
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    25,134
    
    
    
    11.50
    
    
    
    17,488
    
    
    
    8.00
    
    
    $
    21,860
    
    
    
    10.00
    %Tier 1 capital (to
risk-weighted
assets)Consolidated
    
    
    23,150
    
    
    
    10.58
    
    
    
    8,756
    
    
    
    4.00
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    22,905
    
    
    
    10.48
    
    
    
    8,744
    
    
    
    4.00
    
    
    
    13,116
    
    
    
    6.00Tier 1 capital (to
average
assets)(1)Consolidated
    
    
    23,150
    
    
    
    9.29
    
    
    
    9,969
    
    
    
    4.00
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    22,905
    
    
    
    9.19
    
    
    
    9,969
    
    
    
    4.00
    
    
    
    12,461
    
    
    
    5.00December 31, 2005Total capital (to
risk-weighted
assets)Consolidated
    
    $
    24,997
    
    
    
    12.55
    %
    
    $
    15,939
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    24,626
    
    
    
    12.39
    
    
    
    15,898
    
    
    
    8.00
    
    
    $
    19,873
    
    
    
    10.00
    %Tier 1 capital (to
risk-weighted
assets)Consolidated
    
    
    22,941
    
    
    
    11.51
    
    
    
    7,953
    
    
    
    4.00
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    22,570
    
    
    
    11.36
    
    
    
    7,949
    
    
    
    4.00
    
    
    
    11,924
    
    
    
    6.00Tier 1 capital (to
average
assets)(1)Consolidated
    
    
    22,941
    
    
    
    10.25
    
    
    
    8,952
    
    
    
    4.00
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    22,570
    
    
    
    10.10
    
    
    
    8,935
    
    
    
    4.00
    
    
    
    11,169
    
    
    
    5.00
 
 (1)
    
    Also referred to as the leverage ratio - 17 -




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##### Table of Contents



Contractual Obligations and Commitments
     Within
    
    
    
    
    
    
    
    
    
    
    After(in thousands)
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years
    
    
    TotalFederal Home Loan
Bank advances
    
    $
    16,616
    
    
    $
    6,017
    
    
    $
    5,000
    
    
    $
    6,000
    
    
    $
    33,633Junior subordinated debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    5,000Time deposits
    
    
    69,666
    
    
    
    14,446
    
    
    
    60
    
    
    
    
    
    
    
    84,172Operating leases
    
    
    687
    
    
    
    786
    
    
    
    700
    
    
    
    1,026
    
    
    
    3,199Total
    
    $
    86,969
    
    
    $
    21,249
    
    
    $
    5,760
    
    
    $
    12,026
    
    
    $
    126,004
 Liquidity
    
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  - 18 -




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##### Table of Contents



Net interest income analysis as of December 31, 2005:
  ANNUALIZED DOLLAR CHANGEIMMEDIATE RATE CHANGE
    
    IN NET INTEREST INCOME
    
    PERCENT CHANGE+200bp
    
    $
    252
    
    
    
    2.31
    %+100bp
    
    
    94
    
    
    
    0.86+ 50bp
    
    
    47
    
    
    
    0.43- 50bp
    
    
    (122
    )
    
    
    (1.11
    )-100bp
    
    
    (243
    )
    
    
    (2.22
    )-200bp
    
    
    (750
    )
    
    
    (6.87
    )
    
 ITEM 4. CONTROLS AND PROCEDURES
   Forward-Looking Information Statement
  - 19 -




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  - 20 -




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##### Table of Contents



ITEM 6. EXHIBITS
 (a) Exhibits
 Exhibit 31.1 
 Exhibit 31.2 
 Exhibit 32.1 
 Exhibit 32.2 
 
     /s/ William G. Filer IIWilliam G. Filer IIExecutive Vice President and Chief Financial Officer(Authorized Officer and Principal Financial Officer)
 - 21 -